"BEST PRACTICES" FOR SURVIVAL IN TODAY’S HYPER-LEGAL ENVIRONMENT

By Henry L. Goldberg

This month's "Legal Log" will take a different tack.

We can all agree that matters such as recent court cases, legislative proposals and enactments, and other topical developments are always of value to informed contractors and subcontractors. This has never been more so than it is today. Construction contract terms and other legal developments now have an out-sized impact on a construction company's success, if not survival.

However..., this month we will be listing many of the most frequently reoccurring, necessary legal actions we repeatedly see participants in the construction industry either inadequately address or simply ignore. Frankly, I'm tired of seeing good people getting hurt.

The following is neither an exhaustive list nor a David Letterman-type "Top Ten". There are far too many other neglected actions to choose from. However, it is a practical compilation about which you should be absolutely certain your company is fully cognizant, as well as prepared to consistently implement, as standard operating procedure.

As 'best practices", keep in mind that:

1. Subcontractors, at every tier, must, for every project, and without exception, obtain and fully digest the prime contract.

  • It is truly amazing how often we see this "rule" violated. We are no less shocked by this than if we observed you driving while blindfolded. It makes about as much sense.

2. Know cold, and strictly comply with, all contractual notice requirements applicable to extra work, delay and/or claims generally.

  • In other words, beware of the land mines I commonly refer to as COFEDs - "Contractor Forfeiture Enhancement Devices".

3. Know the subcontract you are signing.

  • Some of the one-sided subcontract provisions we see today would have been shocking just a few years ago. As a result, we have seen many situations where an extreme, over-reaching form is used with the expectation that there would be some "pushback", but none is forthcoming. Make your case for modifications!
  • Which leads to the next recommended practice:

4. Negotiate the subcontracts you are signing.

  • Why do general contractors and subs think these are not negotiable in any respect just because someone doesn't want to assume the responsibility for being more fair?

5. Never submit to demands for a waiver of your rights.

  • And a close corollary... :

6. Always avoid "stealth" claim releases hidden in mechanic's lien waiver forms, change order forms, requisition forms, extension of time requests, even those presented by public agencies.

7. Avoid one-sided liquidating agreements.

  • They are not all the same.

8. Preserve all of your Mechanic's Lien Law rights.

  • These are powerful investigatory tools, particularly where the finances of a general contractor become questioned.

9. Utilize the disclosure provisions in the New York Lien Law.

  • As well as the other anti-"trust-fund" diversion provisions of the Lien Law.

10. Pursue your payment bond rights on time, particularly second tier subs and materialmen.

  • Subs that are not first tier have a 90 or 120 day notice period (depending if a Federal or local project), in addition to statutes of limitations on the time to sue.

Which leads me to a last "bonus" point, for GC's and subs alike:

11. Dare to be independent! You don't have to accept a bad contract or a bad deal.

G&C Commentary:

We've heard all the excuses. Do not run like a lemming off a cliff. Do not delay getting competent legal advice until your options and resources are seriously compromised. If you are not strictly complying when appropriate with each and every one of these items, you will have only yourself to thank. We have seen the readily avoidable harm in which failure to do so often results. It's not pretty. Give your attorney a fair chance to be of significant help.

What is interesting about "The List," is that some items are to be effected before a job begins, some, routinely, during a project, and some, only when storm clouds appear on the horizon. At the appropriate time, and in the appropriate circumstances, they all should be routinely implemented. Later may be just that, too late.

There are many reasons, as most in the industry would agree, why contracting today has become so "legalistic." None of them good. It shouldn't be that way. In many respects this trend feeds on itself. But that's a topic for future articles. For now, the foregoing items are about surviving and prospering today. Ignore any of them, when needed, at your own peril.

Henry L. Goldberg may be contacted by email, hlgoldberg@goldbergconnolly.com or by telephone, 516-764-2800.

©Goldberg & Connolly 2015

This article has been prepared for informational purposes only. It is not a substitute for legal advice addressed to particular circumstances. You should not take or refrain from taking any legal action based upon the information contained herein without first seeking professional, individualized counsel based upon your own circumstances. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you written information about our qualifications and experience