Federal Circuit, Citing the Christian Doctrine, Holds That Performance and Payment Bonds Are Required for All Construction Contracts, Even When the Bonding Requirement Is Not Expressly Stated in the Contract

K-Con, Inc. v. Sec’y of the Army, 2018 U.S. App. LEXIS 31196 (Fed. Cir., November 5, 2018)

In September 2013 K-Con, Inc. (“K-Con”) entered into two contracts with the government to supply and construct pre-engineered metal buildings for a laundry facility and a communications equipment shelter.  The government issued both contracts using Standard Form 1449, entitled Solicitation/Contract/Order for Commercial Items.  The contracts’ terms did not contain any requirement to provide a performance or payment  bond.  Nor did they include FAR 52.228-15, which requires performance and payment bonds on construction contracts.

In October 2013 the government directed K-Con to supply performance and payment bonds before a notice to proceed could be issued.  K-Con initially refused but ultimately provided the bonds two years later.  The contracts were then adjusted to add the cost of the bonds.

K-Con submitted a claim under each contract for increases in costs for the two year delay, for a total value of $116,336.56.  The Contracting Officer denied the claim on the basis that the agreements were construction contracts, for which performance and payment bonds were mandatory pursuant to FAR 52.228-15, and that that provision was incorporated into the contracts pursuant to the Christian doctrine under which a court may insert a clause into a government contract by operation of law if that clause is required under applicable federal regulations.  G.L. Christian & Associates v. Unites States, 312 F.2d 418 (Ct. Cl. 1963).  K-Con appealed to the Armed Services Board, which affirmed the denial of the claims.  K-Con then appealed to the United States Court of Appeals for the Federal Circuit. Continue reading “Federal Circuit, Citing the Christian Doctrine, Holds That Performance and Payment Bonds Are Required for All Construction Contracts, Even When the Bonding Requirement Is Not Expressly Stated in the Contract”

Parties Must Proceed to Arbitration Despite Unavailability of Arbitration Forum Specifically Named in the Contract

Paulozzi v. Parkview Custom Homes, L.L.C., 2018 Ohio App. Lexis 4739 ( Nov. 1, 2018)  

 This case arose out of a dispute between homeowners and their contractor.  Dissatisfied with the work, the Paulozzis sued their contractor, Parkview Custom Homes, alleging, inter alia, breach of contract, unjust enrichment, and fraud.  In response, Parkview moved to stay the litigation and compel arbitration under the agreement’s arbitration provision.

The parties did not dispute that the contract required the Paulozzis to proceed through arbitration.  But the contract also specified that “the arbitration shall be conducted under the auspices of the Ohio Arbitration and Mediation Center in accordance with its rules, at Cleveland, Ohio.”  However, when the Paulozzis filed suit, the OAMC appeared to be defunct.

The Paulozzis argued that because the chosen forum no longer existed, the arbitration provision was unenforceable.  In response, Parkview maintained that the essential purpose of the arbitration provision was still capable of substantial accomplishment, and that the court should enforce it.  In the end, the trial court held that the original forum was defunct, and because the arbitration provision did not provide for an alternative forum, it was unenforceable under the doctrine of impossibility.  On appeal, the Ohio Court of Appeals reversed. Continue reading “Parties Must Proceed to Arbitration Despite Unavailability of Arbitration Forum Specifically Named in the Contract”

Federal Court Enjoins Owner From Withholding Payment of Disputed Invoices Based on Contract Provision Requiring Parties to “Diligently Proceed With Performance” Notwithstanding Any Dispute

Coalview Centralia, LLC v. Transalta Centralia Mining LLC, 2018 U.S. Dist. LEXIS 185914 (W.D. Wash. Oct. 30, 2018)

This case involves a dispute over Coalview Centralia, LLC’s (“Coalview”) performance of environmental cleanup work at a coal mine and associated power plant near Centralia, Washington.  TransAlta Central Mining (“TCM”) hired Coalview to remediate and restore three waste coal slurry impoundment ponds.  In general terms, Coalview agreed to dredge the ponds, extract the coal fines for use in the power plant, and deliver the remaining slurry for final disposal.  Coalview was to submit monthly invoices – and to be paid – based on the weight of slurry removed or the weight of usable coal recovered, whichever is greater.

The Master Services Agreement (“MSA”) between TCM and Coalview provided, in pertinent part, that: (1) TCM had 30 days to “dispute” an invoice and explain the reasons for its dispute; (2) the parties had a one-year period to correct invoice “inaccuracies”; and (3) “[n]otwithstanding any disputes … contractor and owner shall diligently proceed with performance of this Agreement.” Continue reading “Federal Court Enjoins Owner From Withholding Payment of Disputed Invoices Based on Contract Provision Requiring Parties to “Diligently Proceed With Performance” Notwithstanding Any Dispute”