***UPDATE – 7/15/2016***
The Court of Appeals’ decision in in Cemex Construction Materials South, LLC v. Falcone Bros. & Assoc., Inc., 237 Ariz. 236 (App. 2015), which is the subject of this post from May 2015, will cease being good law on August 6, 2016. The case was legislatively overruled by HB 2268, which was signed into law by Governor Ducey on May 12, 2016 and will become effective on August 6, 2016. My post on the effects of HB 2268 and its overruling of the Cemex decision can be found here.
It is well-established that the primary purpose of Arizona’s mechanics’ lien statutes is to protect laborers and materialmen by insuring payment of their accounts. United Metro Materials, Inc. v. Pena Blanca Properties, L.L.C., 197 Ariz. 479, 484, 4 P.3d 1022, 1027 (App. 2000). But not all laborers and materialmen are protected under the statutes.
A “cardinal change” has nothing to do with the football team, the baseball team, or, for that matter, the bird. It is, instead, an important legal concept for contractors to understand. Where applicable, the cardinal change doctrine puts limits on the amount of changed work or extra work that can be ordered under the changes clause of a construction contract. I recently dealt with the doctrine in connection with my practice. Here are the basics.
Not too long ago, I litigated a case that turned on the enforceability of a pay-if-paid clause. The very good attorneys on the other side argued that the clause at issue was enforceable, such that it excused their general contractor client’s failure to pay. I argued, on behalf of my subcontractor client, that the provision was unenforceable. The trial court agreed with me on summary judgment, which led to a very favorable settlement for my client.
I will preface this post by saying that I am neither an accountant nor a tax attorney. If you have specific questions or concerns about Arizona’s new transaction privilege tax laws, please talk to your accountant.