Texas Construction Contracts: Pay-When-Paid or Pay-If-Paid?

 There is a big difference between so-called “pay-when-paid” clauses and “pay-if-paid” clauses.

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No Tort Liability of Project Architect for Economic Damages Suffered by Contractor or Subcontractor

LAN/STV v. Martin K. Eby Const. Co., Inc., 11-0810, 2014 WL 2789097 (Tex. June 20, 2014).
 
The Eby opinion involves three parties: (1) the general contractor, (2) the architect, and (3) the Dallas Area Rapid Transportation Authority (“DART”).
 
DART contracted with the architect, LAN/STV, to create the plans, drawings, and specifications for light rail project in downtown Dallas. Martin K. Eby Construction Company (“Eby”) won the bid from DART with a bid for $25 million to construct the project. Almost immediately, Eby noticed that 80% of LAN/STV’s plans had errors. The massive amount of errors in the plans caused significant delays in construction and increased expenses for Eby, roughly $14 million according to Eby’s calculations.
 
Eby first sued DART for breach of contract, but the case was dismissed because Eby had not followed the administrative procedure illustrated in its contract with DART prior to filing suit. Eventually, DART settled with Eby for $4.7 million. During the course of the administrative proceedings, Eby also filed suit against LAN/STV for negligence and negligent misrepresentation.
 
In its opinion, the Texas Supreme Court emphasizes the importance of addressing the potential for economic risks in contractual negotiations.
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Texas Supreme Court Enforces "Differing Site Conditions" Clause

 In El Paso Field Services, LP v. MasTec North America, Inc., No. 10-0648, 2012 WL 6634023 (Tex. Dec. 21, 2012), MasTec entered into a lump sum contract with El Paso to construct a $3.6 million butane pipeline for El Paso.  The contract contained a “differing site conditions” clause, which shifted the risk for unanticipated conditions to MasTec. MasTec also assumed “full and complete responsibility for any such conditions pertaining to the Work, the site of the Work or its surroundings” notwithstanding “any representations, statements or information made or furnished by [El Paso].” However, the contract also provided that El Paso would exercise due diligence in locating foreign crossings in the pipeline route on the worksite premises.

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Fifth Circuit - Arbitration Panel May Determine Scope of Arbitration Clause

 Petrofac, Inc. (“Petrofac”) filed a lawsuit against DynMcDermott Petroleum Operations Company (“DM”). DM had agreed to design and build a mobile degasification facility for the removal of accumulated gas from crude oil stored at petroleum reserves sites. The parties’ contract contained an arbitration clause, governed by rules promulgated by the American Arbitration Association.

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Information Needed to Pursue Mechanic's Lien & Payment Bond Claims in Texas

Pursuing mechanic’s liens and payment bond claims in Texas is a very complex process—especially for subcontractors. The requirements to perfect a mechanic’s lien and payment bond claim vary depending on a variety of factors. For a great blog post that discusses the pitfalls of trying to file your own mechanic’s liens, click here.

 

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No Expert Testimony Needed to Establish Date of Injury in Construction Defect Coverage Case

The Dallas Court of Appeals, in Vines-Herrin Custom Holmes, LLC v. Great American Lloyds, No. 05-10-00007-CV, 2011 WL 6396473 (Tex. App.—Dallas Dec. 21, 2011, no pet. h.) handed down an opinion overturning a take-nothing judgment on behalf of an insurer of a construction company and remanding to the trial court for further proceedings.  In so doing, the court held that (1) the plaintiff/owners had pled sufficient facts supporting when the physical damage to the property occurred to trigger the duty to defend on behalf of the insurer, and (2) the duty to indemnify was also triggered where the actual damages manifested during the insurer's policy period.   

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No Private Cause of Action Under the Prompt Payment Statute

Grunley, a prime contractor on a public work project, entered into a design-build contract with the federal government.  In the performance of its work, Grunley subcontracted with IES.
 
Grunley experienced unanticipated changes and delays in the performance of its contract, and these changes and delays led to a dispute between Grunley and IES.  The dispute was not resolved, and IES filed a claim against Grunley’s payment bond sureties under the Miller Act (40. U.S.C. §§ 3131 et seq.). 
 
Grunley intervened in IES’ lawsuit and filed a breach of contract action against IES.  IES counterclaimed for breach of contract, alleging that Grunley violated the Prompt Payment Act (31 U.S.C.§§ 3901–3907).
 
At issue before the Court was Grunley’s motion to dismiss IES’ claim under the Prompt Payment Act.
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