You often hear of people claiming to give 110% effort. Whether someone can truly give more than a 100% effort is a philosophical question that is outside the scope of this blog. Arizona mechanics’ lien laws are, however, something in my wheelhouse. And, as many of you may know, 120% has historically been an important figure with respect to mechanics’ liens. This is because Arizona has long provided, and currently provides, claimants with lien rights of up to 120% of the estimated price stated in their preliminary twenty-day notices. Practically speaking, this means that those looking to preserve their lien rights need not provide additional preliminary notices unless and until the price for the labor and material furnished exceeds 120% of the amount in their original notice. But with the passing of SB 1304 earlier this year, this threshold for providing additional preliminary notices was increased to 130% of estimated total costs, and this increase applies to all projects where lienable activities are “first commenced to be furnished from and after December 31, 2019.” As a result, the effects of this change are right around the corner.
Back in April of this year, I authored this post concerning the Arizona Court of Appeals’ recent decision in SK Builders, Inc. v. Smith. In SK Builders, the court held that Arizona’s Prompt Pay Act (the “PPA”) did not apply to billings containing work furnished outside the preceding 30 days because the PPA stated that “billing[s] or estimate[s]” must be based on “work performed and…materials supplied during the preceding thirty day billing cycle.” In other words, the court found that payment applications submitted at the end of a billing cycle were limited to work performed or materials furnished within the preceding 30 days. But, as I briefly noted in a July update to my earlier post, the sun set on SK Builders rather quickly. The decision was legislatively overruled by an amendment to the PPA and is no longer good law.
It is hopefully no secret that the Occupational Safety and Health Administration (“OSHA”) regulations require employers to provide fall protection systems in certain circumstances. The type of protection required depends primarily on: (1) the nature of the work being performed; and (2) the environment in which it is performed. In Bergelectric Corp. v. Secretary of Labor, 925 F.3d 1167 (9th Cir. 2019), the 9th Circuit Court of Appeals was recently charged with deciding whether the installation of solar panels constituted “roofing work” for purposes of determining the applicable safety standards. The Court ultimately held that installing solar panels was not roofing work, and, as a result, affirmed a final order of the Occupational Safety and Health Review Commission (the “Commission”) that a contractor violated OSHA fall protection requirements by not complying “with the stricter safety standards governing work on unprotected sides and edges.” Given the growth of the solar industry, the decision in Bergelectric Corp. is significant.
It is typical for construction contracts to provide that “time is of the essence.” And while these clauses clearly signify that time is important, their practical impact on parties to an agreement may be less clear. Luckily, the Arizona Supreme Court addressed the effect of “time of the essence” provisions in this state in Foundation Development Corp., v. Loehmann’s, Inc., 163 Ariz. 438 (1990).
Time as a material element of a contract.
Before addressing the holding in Loehmann’s, it should be noted that the general aim of “time of the essence” clauses is to make time a material requirement of the parties’ performance under an agreement. Of course, even in the absence of a “time of the essence” provision, time can be rendered a material requirement of a contract if it is implied by the type of obligations assumed.
Many construction contracts contain indemnification provisions. Generally speaking, these provisions attempt to shift the risk of certain potential losses between the parties. Among other things, indemnification provisions can address the manner in which parties allocate the risks of losses, costs, and expenses resulting from: (a) bodily injury; (b) property damage; (c) lien claims; (d) hazardous materials; and (e) copyright or patent infringements.
Like many other states, Arizona has long had a statute on the books that limits the parties’ ability to shift particular risks through indemnification provisions in a construction setting. Specifically (as explained in this post from 2016), A.R.S. § 32-1159(A) provides that indemnification provisions “that purport to indemnify, to hold harmless or to defend the promisee from or against liability for loss or damage resulting from the sole negligence of the promisee or the promisee’s agents, employees or indemnity [are] against the public policy of this state and [are] void” in all private construction contracts and architect-engineer professional services contracts. (Emphasis added).