A couple of years ago I blogged (#101) on “pay-if-paid” clauses, which make a general contractor’s receipt of payment from the owner a prerequisite – a “condition precedent,” in legal terms – to its obligation to pay subcontractors.  The main purpose of such clauses is to shift the risk of owner nonpayment, whether due to owner insolvency or owner breach, from the contractor to the subcontractors.  But while pay-if-paid clauses can take various forms and include various qualifications, many such clauses are open-ended, not confined to any particular reason for the owner’s failure to ..read more

As I write this on the centennial of the New Hampshire Supreme Court’s decision in Osgood Construction Co. v. Claremont, 81 N.H. 29 (1923), it remains one of the most interesting contract decisions I have yet encountered.  (Coincidentally the losing defendant, Town of Claremont, was represented by a prior iteration of my law firm – which of course has nothing to do with my musings today!)  Here’s what happened:   The case involved a water system improvement project that included constructing a concrete dam.  The concrete specifications provided that “Sand, broken stone or g ..read more

When a general contractor or lower tier subcontractor or supplier records a mechanic’s lien attachment on property, security for the lienor’s hoped-for judgment is achieved – but often something more, and perhaps unintended, is achieved.   The resulting cloud on the owner’s title prevents a sale or refinancing of the property, and ties it up in a way that usually impacts the flow of funds needed for project completion.  Draws on a construction loan may halt.  Sales of units in multi-unit projects needed to raise funds for completion may cease.     This impact on t ..read more

A common feature of residential construction loans is the requirement for periodic inspections of the progress of work, usually by an independent inspection company hired by the bank, before disbursements are made.  The idea is that the loan disbursements should pay only for properly completed work (or suitably stored materials on site), and the inspector better able than the homeowner/borrower to gauge this.  Banks insist on this as a way to ensure that the mortgages securing their construction loans are supported by enough value on the ground to collateralize repayment.  Owner ..read more

In New Hampshire, an owner generally owes no duty to subcontractors to see that they get paid.  A few years back I blogged (#19) that RSA 447:8 might be an exception to this general rule, imposing a trust in favor of subcontractors on money that an owner owes to a general contractor if the proper notices are given by the subcontractors.  And this month, a court has finally agreed.   The case is In re The Prospect-Woodward Home, 2023 BNH 001 (Jan. 6, 2023), decided by New Hampshire’s bankruptcy court.  A Chapter 11 proceeding was commenced by a continuing care retirement fac ..read more

It is common in construction litigation for contractors suing owners to assert a right to recover damages for more than just a breach of contract.  Two of the most popular legal theories beyond breach of contract claims are “unjust enrichment” and “quantum meruit.”  Although distinct, they share some elements, which often leads to confusion between them.  As our federal court has noted, “New Hampshire cases do not clearly differentiate between theories of unjust enrichment and quantum meruit.”  Eastern Electric Corp. v. FERD Construction Inc., 2005 WL 3447957 at *3 n.1 (D.N ..read more

It is not uncommon for owners/developers who solicit proposals from general contractors, and general contractors who solicit proposals from subcontractors, to send out a Notice of Intent or Letter of Intent to a GC or sub in advance of signing a formal contract, announcing that the proposal has been accepted.  Depending on the wording of the notice, a contract may well be enforceable between the parties even if the contemplated formal document is never signed. Although the word “intent” may suggest a mere expression of what the writer expects to happen, the LOI's wording will occasionall ..read more

Over the past decade, Building Information Modeling (“BIM”) – computerized 3D portrayal of integrated building elements that allows a project or project subset to be built virtually before being built in the field – has become prolific in commercial construction.  Visit any project trailer on a major construction site today, and you are as likely to see managers and superintendents poring over BIM images on their tablets and smartphones as over a set of traditional paper plans rolled out on a table.  With a keystroke or a touch pad swipe, any part of the model and any trade’s work ca ..read more

Many performance bonds (the popular AIA A312 is an example) state that the surety’s obligation is not triggered unless the principal’s contract has been terminated.  This can put the obligee, whether an owner holding its general contractor’s performance bond or a general contractor holding its subcontractor’s performance bond, in a difficult spot.  Wrongful termination will not only be a breach of contract giving the principal a claim for damages against the obligee, but it will forfeit the protection of the bond.  Conversely, not terminating also forgoes the protection of the b ..read more