Volume 5 - Number 31 | August 6, 2007 - Construction Claims Advisor

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You are here: Home » Volume 5 - Number 31 | August 6, 2007

Volume 5 - Number 31 | August 6, 2007

EDITOR'S NOTES | Issue 5-31: The federal Prompt Payment rule requires government agencies to issue timely payment for work or risk paying interest, currently at the rate of 5.75 percent. State prompt payment acts, which also govern private ventures, have similar requirements, with interest rates as high as 18 percent annually. When a private homeowner decided to withhold a progress payment from its contractor for allegedly defective work, a state appeals court ruled that the homeowner violated the state’s Prompt Payment Act.

The vast majority of contracts operate under a schedule. When a contractor failed to perform even a small fraction of its work after 40 percent of the time had expired and did not make efforts to accelerate the work, the ASBCA concluded that the contracting officer was justified in terminating the contract.

Contract language assigning safety liability to the contractor does not always provide a guarantee that the contractor will be held liable. In one case, the contractor is exempt from liability for an accident involving one of its subcontractors because it did not contribute to the accident.

This week’s final case, while not specific to construction, is instructive to the industry. The U.S. Supreme Court has clarified the requirements necessary to file a complaint in federal court. The plaintiff must be able to provide some element of proof when making allegations. A suit cannot be filed in an attempt to find or establish facts.

WITHHOLDING FOR DISPUTED WORK LIMITED TO SCOPE OF INVOICE: Withholding payment from a progress invoice on a residential project is not the way to recover costs for allegedly defective work. Homeowners’ rights are protected through civil remedies.

DEFAULT TERMINATION FOR INSUFFICIENT PROGRESS UPHELD: When a contractor fails to complete even five percent of a job after almost half of the performance period has expired, the contracting officer may be justified in canceling the contract for default.

CONTRACTOR NOT RESPONSIBLE FOR SUB’S SAFETY PRACTICES DESPITE CONTRACT LANGUAGE: Contract verbiage does not always guarantee liability. Despite language that places sole responsibility for all safety precautions and programs on the general contractor, it is not liable when a subcontractor’s employees are injured in a scaffolding collapse.