Construction contractors necessarily rely on the creditworthiness of project owners. Construction requires considerable capital. A contractor needs to know the owner will be able to make progress payments. On private projects, much of the construction capital is borrowed. This raises a question: Does a construction lender have an obligation to keep a contractor informed of the project owner’s financial condition?

Unfortunately for contractors, the general answer to this question is negative. This was illustrated in a recent case involving a residential development. The project owner defaulted on a separate construction loan on an unrelated project. This material change in the owner’s financial condition caused the lender to stop advancing funds for the residential project. Neither the owner nor the lender informed the contractor. The contractor continued working for another month, to its considerable financial detriment.

Other cases this week involved a consultant’s exaggerated lien filing and a surety’s right to pursue the delay claim of its defaulted contractor. The consultant’s lien was fraudulently exaggerated because it included nonlienable items such as lost profit, even if the consultant believed in good faith it was owed the fee. And the surety could not seek delay damages from the government because the government had not consented to the assignment of the claim.