Below is a link to a webinar I did with SunRay Construction Solutions, LLC a few months ago. As set forth in the title, this webinar focuses on what happens (or should happen) after a contractor or supplier records their mechanics’ and materialmen’s lien in Arizona. Among other things, it touches on the mechanics (no pun intended) of a lien foreclosure lawsuit in Arizona.
USING LIEN WAIVERS IN ARIZONA: PROCEED WITH CAUTION.
Below is a link to a webinar I did with SunRay Construction Solutions, LLC on using lien waivers in Arizona. I cover all four of Arizona’s statutory lien waivers and then discuss some general lien waiver do’s and don’ts. As I try to make clear in the webinar, be careful when signing lien waivers!
Arizona Preliminary 20-Day Notices, Mechanics’ Liens, and Bond Claims
It has been a while since my last blog post. But that does not mean that I haven’t been busy! Among other things, I have conducted a series of webinars with the good folks at SunRay Construction Solutions, LLC that have subsequently been uploaded to YouTube.
Below is one of the earlier installments in this series of webinars, which generally addresses preliminary twenty day notices, mechanics’ liens, and bond claims in Arizona.
Forced to Warp Speed: The Anatomy of a Constructive Acceleration Claim.
In the construction world, the term “acceleration” refers to speeding up the pace of work on a project. Accelerated performance often results in increased costs for those contractors whose work is affected. These increased costs, which can be substantial, often include overtime payments, hiring costs and salaries of additional workers, and extra material costs due to the shortened schedule.
Generally, a project (or portions of a project) can be accelerated in three ways: (1) voluntarily; (2) at the direction of another party; or (3) constructively. Voluntary acceleration occurs where the contractor unilaterally decides to quicken its pace. Directed acceleration, on the other hand, occurs when the contractor is ordered to expedite performance by either the owner or the general contractor. Not surprisingly, it is uncommon for disputes over acceleration costs to arise in either of these two contexts. If the acceleration is voluntary, the contractor typically bears the cost. If the acceleration is directed, the party directing the acceleration usually bears the costs.
The third category—constructive acceleration—occurs where the owner or general contractor refuses to give the contractor a time extension for an “excusable” delay. As explained here, excusable delays usually entitle contractors to at least additional time. The denial of a time extension in these circumstances necessarily forces the contractor into a precarious position—either accelerate performance to maintain the existing schedule or run the risk of facing delay claims from the upstream party (which can include liquidated damages). Disputes over entitlement to acceleration costs typically arise in constructive acceleration scenarios.
Although Arizona’s courts have not yet directly addressed constructive acceleration claims, courts in other jurisdictions have. For instance, the Ohio Court of Appeals held as follows in Sherman R. Smoot Co. v. Ohio Dept. of Adm. Serv., 736 N.E.2d 69, 78 (Ohio App. 2000) (citations omitted):
Constructive acceleration occurs when a contractor has a justified claim for an extension of time, but is required to incur additional expenses because the project owner refuses to grant the extension and requires the contractor to complete the project by the original completion date. In order to prevail on a claim for constructive acceleration, it must be established that (1) that the contractor experienced an excusable delay entitling it to a time extension, (2) that the contractor properly requested the extension, (3) that the project owner failed or refused to grant the requested extension, (4) that the project owner demanded that the project be completed by the original completion date despite the excusable delay, and (5) that the contractor actually accelerated the work in order to complete the project by the original completion date and incurred added costs as a result.
Construction in the Age of COVID-19: Contract Provisions that Merit Review in these Uncertain Times.
The nature and extent of COVID-19’s impacts on Arizona’s construction industry are currently unknown. It is, however, certain that there will be impacts. At the very least, many projects may be delayed. Thus, in order to prepare for what lies ahead, delay-related provisions in existing construction contracts and contemplated future contracts merit review and consideration. These include, but are not limited to, clauses covering the following:
Contract Time
The starting point for any delay claim is the contract provision specifying the performance period for the subject work. Typically, construction contracts will establish the performance period by: (1) specifying commencement and completion dates; or (2) setting forth a number of days within which the work must be completed after a notice to proceed is given.
Timing provisions may also declare that “time is of the essence.” For a more detailed analysis of the import of this language, please see my earlier post here. Generally speaking, however, it is aimed at making time a material element of the contract, which is an important consideration in a delay analysis.
Delays/Force Majeure
Construction delays can, at the most fundamental level, be categorized into two groups—nonexcusable delays and excusable delays. Contractors are usually not permitted to recover additional time or money for nonexcusable delays. Excusable delays, on the other hand, can be further broken down into the following two sub-groups—compensable excusable delays and noncompensable excusable delays. Compensable excusable delays typically entitle contractors to recover additional time and money, whereas noncompensable excusable delays generally only permit the recovery of time.
Where a particular delay, including a COVID-19 delay, falls on this spectrum will, for the most part, be dictated by the parties’ contract. It is, therefore, critical to find and analyze all contract provisions covering delay. In doing so, it is important to keep in mind that: (1) delay clauses come in different shapes and sizes; and (2) various types of contract provisions can touch on delay. For instance, some contracts address unforeseen delays (which may be applicable in the context of COVID-19) in what are identified as “force majeure” clauses. “Force majeure” is a French phrase that means “superior force,” and these provisions typically attempt to excuse parties from liability where contractual performance is rendered difficult or impossible by events beyond their control (i.e., war, acts of God, severe weather, and strikes and other labor related issues). Other contracts, like the AIA A201-2017, cover some of these same concepts in general “Delay” provisions, without any reference to the phrase “force majeure.” Generally, these types of delays are excusable but noncompensable.
Notice/Claims
It is also necessary to locate and understand notice and claims provisions in agreements. Most construction contracts mandate that contractors provide written notice of delay-causing events within a specified amount of time after occurrence. Written notice can be a prerequisite to asserting claims for additional time and/or compensation, and failure to timely provide notice can result in a waiver of rights. Moreover, notice provisions can place additional requirements on contractors. Among other things, these clauses may call for certain parties to be copied on notices and/or particular delivery methods. If, after notification, disagreement exist as to whether delay-causing events warrant additional time or money, claims provisions within construction contracts may also attempt to impose time limitations and other conditions on seeking such relief.
Suspension of Work/Termination
Finally, clauses covering suspension of the project and/or termination should be reviewed. Construction contracts often give the owner the right to suspend work. But the effects of suspensions can vary. Typically, suspension is a compensable excusable delay, entitling the contractor to additional compensation and time, if the project resumes. If, however, a project remains dormant for a specified amount of time, these clauses may entitle a contractor to terminate the contract and recover additional compensation.
Conclusion
In sum, the uncertainty created by COVID-19 warrants careful scrutiny of existing and prospective construction contracts. Among other things, parties need to pay special attention to the above delay-related clauses. If a particular contract does not contain a force majeure clause or otherwise provide for such delays, parties may, nevertheless, have rights under the common law and should consult with an attorney. Having a clear understanding of their rights and obligations, will allow parties to best address and mitigate the impacts of COVID-19.