Texas Court of Appeals Holds That Owner’s Change to Contractor’s Means and Methods Resulted in a “Breach,” Instead of a “Change” Subject to the Changes Clause

Port of Houston Auth. of Harris Cnty. v. Zachry Constr. Corp., 2016 Tex. App. LEXIS 13306 (Tex. App. Houston 14th Dist. Dec. 15, 2016)

This contract dispute dates back to 2004, when the Port of Houston Authority contracted with Zachry Construction to build a shipping wharf in Harris County, Texas. Zachry’s bid proposed, as part of its means and methods, building the wharf “in the dry” by using a frozen earthen wall to seal out water from the construction area. Several months into the project the Port Authority decided to extend the wharf. Zachry again proposed freeze-wall technology for the extension, and the parties entered into a change order.

The Port Authority then refused to approve Zachry’s frozen wall design, and directed Zachry to either present an alternative design or alternate means of mitigating risk. Unable to identify a viable alternative design, Zachry switched from the frozen wall design and completed the construction “in the wet”. Continue reading

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Virginia Supreme Court Holds That Subcontractors Did Not Waive Statute of Limitations, With The Result That The General Contractor Was Liable To Owner For Defective Work But With No Recourse Against Subcontractors Who Performed The Work

Hensel Phelps Constr. Co. v. Thompson Masonry Contractor, Inc., et. al., No. 151780, 2016 Va. LEXIS 166 (Va. Nov. 3, 2016)

The dispute arose from the construction of a student health and fitness center at Virginia Tech. The prime contractor, Hensel Phelps, and its subcontractors substantially completed their work in 1998, and Virginia Tech made final payment in 1999. In April 2012, Virginia Tech discovered defects in the work, elected to repair them, and then sought to recover the costs from Hensel Phelps. Despite the significant passage of time between completion of the work and Virginia Tech’s assertion of its claims, Hensel Phelps could not invoke the statute of limitations because under Virginia Code § 8.01-231, statutes of limitation do not apply to claims asserted by Commonwealth agencies such as Virginia Tech.  Ultimately, Hensel Phelps paid $3,000,000 to Virginia Tech to settle the defective work claims.

Hensel Phelps, in turn, sought to recover from the subcontractors that performed the defective work. When the subcontractors refused to pay, Hensel Phelps commenced an action alleging, among other things, breach of contract against the subcontractors and their sureties. All of the defendants argued that Hensel Phelps’ claims were barred by the applicable statute of limitations. The lower courts agreed. On appeal, the Virginia Supreme Court affirmed. Continue reading

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Texas Court of Appeals Holds That the Effect of a Failure to Meet a Specific Contractual Deadline for Arbitration is a Procedural Question for the Arbitrator, Not the Trial Court

Tilson Home Corp. v. Zepeda, No. 14-16-00075-CV, 2016 Tex. App. LEXIS 12022 (Tex. App. Nov. 8, 2016)

The Court of Appeals of Texas has held that an arbitrator—not a trial court—must determine whether a prerequisite to the obligation to arbitrate has been met. Thus, when faced with the procedural question of whether an arbitration demand was timely filed, Texas trial courts must compel arbitration, leaving the question to the arbitrator. 

In Tilson Home Corp., Jorge and Lisa Zepeda hired Tilson to build a home on their property.  The contract’s arbitration provision stated:

Any dispute or claim which arise[s] from or relates to this Agreement, the Work and/or the Home will be barred unless the claim is filed with the [AAA] by Owner or Contractor within two (2) years and one (1) day from the date the cause of action accrues. Continue reading

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Federal Court in Pennsylvania Analyzes Which Types of Damage are Barred by Contractual Waiver of Consequential Damages

Jay Jala, LLC v. DDG Construction, Inc., No. 15-3948, 2016 US Dist. LEXIS 150969 (E.D. Pa. Nov. 1, 2016)

Jay Jala, LLC was the owner of a motel construction project in Allentown, Pennsylvania. DDG Construction, Inc. was the contractor.  The project was delayed during construction and, four months after the specified completion date, DDG abandoned the project.  Jay Jala terminated DDG for default, completed the project, and initiated this action.

The contract provided that the parties “waive Claims against each other for consequential damages arising out of or relating to this Contract.” During litigation, DDG stipulated that it breached the contract but moved for partial summary judgment, arguing that Jay Jala’s damages were consequential, and thus waived. Continue reading

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Federal Court in Hawaii Holds that an Unlicensed Subcontractor May Pursue Contract Claims Against Contractor Notwithstanding Statute Precluding Unlicensed Contractors from Recovering in a Civil Action

U.S. Pipelining LLC v. Johnson Controls, Inc., No. 16-00132 HG-RLP, 2016 U.S. Dist. LEXIS 150767 (D. Haw. Oct. 31, 2016)

This action arose out of the renovation of a condominium complex on Maui (Project). Johnson Controls, Inc. (JCI) was the general contractor and U.S. Pipelining LLC (USP) was a subcontractor. While the parties disputed who was ultimately responsible for obtaining a license for the work, the Subcontract included a provision that required USP to “obtain[] all licenses and permits required for the prosecution of the Work.” Nonetheless, USP performed its work without obtaining a license from the State of Hawaii. During the Project, a dispute arose between the parties. USP filed a complaint alleging various claims against JCI and others, seeking payment for the additional work it allegedly performed.

Chapter 444 of the Hawaii Revised Statutes (the “Statute”) requires contractors to obtain a license before performing any renovation work on real property. Continue reading

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