Construction Law Insights

With the COVID-19 virus (Coronavirus) impacting everyday life, you may have heard people in the construction industry asking “has anyone reviewed the force majeure provision in our contract?” But what does “force majeure” mean and what impact does it have on your contract?

Fluor Fed. Sols., LLC v. PAE Applied Techs., LLC, 2018 U.S. App. LEXIS 9148 (4th Cir. Apr. 12, 2018)

In 2000, PAE Applied Technologies, LLC (“PAE”) prepared a bid for an Air Force contract. To make its bid competitive, PAE requested that Fluor Federal Solutions, LLC (“Fluor”) and other subcontractors cap the rate of their General and Administration (“G&A”) costs at 2.3 percent of direct costs. PAE contended that Fluor agreed to do so, but Fluor asserted that it never agreed the 2.3 percent cap. Regardless, PAE submitted its final bid to the Air Force, using the reduced 2.3 percent G&A rate, and won the Air Force contract. Thereafter, PAE and Fluor entered into a subcontract (the “Subcontract”), which required Fluor to submit invoices every two weeks and for PAE to pay Fluor’s invoices within 30 days. In October of 2002, Fluor began billing PAE for work completed under the Subcontract. In January of 2004, Fluor began submitting invoices to PAE with G&A costs exceeding the 2.3 percent cap. PAE rejected the increased rate and continued to pay Fluor the amount due under the Subcontract rate. Intermittently over the years, Fluor complained about the G&A cap, but PAE continued to pay, and Fluor continued to accept, payment at the Subcontract G&A rate.

Allegheny Cas. Co. v. River City Roofing, LLC, 2018 U.S. Dist. LEXIS 63142, 2018 WL 1785478 (E.D. Va. Apr. 13, 2018)

In 2014, Allegheny Casualty Company (“Allegheny”) issued performance and payment bonds (“P&P Bonds”) on behalf of River City Roofing, LLC, (“River City Roofing”), as principal, for three construction projects that River City Roofing, Rodney G. Young, Karen R. Young, and Sterling Young (the “Defendants”) subcontracted with Branch & Associates, Inc. (“Branch”) to perform. In November of 2014, Allegheny and the Defendants entered into a general indemnity agreement (“GIA”) in which the Defendants agreed to be jointly and severally liable to Allegheny in the event of any loss on the P&P Bonds. Rodney G. Young, Karen R. Young, and Sterling Young executed the GIA as individual indemnitors and Rodney G. Young executed the GIA on behalf of River City Roofing. In February of 2017, Allegheny received a $27,312.01 payment bond claim from American Builders & Contractors Supply Co. (“ABC Supply”), which is supplier of River City Roofing. Allegheny paid $16,440.17 to ABC Supply. In May of 2017, Allegheny received a $105,333.47 performance bond claim from Branch, which Allegheny expended $13,388.94 investigating. In September of 2017, Allegheny received a $5,189.40 payment bond claim from Brock Associates, LLC (“Brock”), which is another supplier of River City Roofing. Thereafter, Allegheny demanded that the Defendants post collateral sufficient to protect Allegheny as required by the GIA. On October 3, 2017, Allegheny filed a complaint against the Defendants to enforce the GIA, and then filed a Motion for Summary Judgment. 

United States ex rel. Harbor Constr. Co. v. T.H.R. Enters., 2018 U.S. Dist. LEXIS 72502 (E.D. Va. Apr. 26, 2018)

The United States government awarded T.H.R. Enterprises, Inc. (“THR”) a contract for construction and building repairs at the Langley Air Force Base (the “Project”). The Hanover Insurance Co. (“Hanover”) issued a Miller Act payment bond for the Project. On October 19, 2011, THR and Harbor Construction Company, Inc. (“Harbor”) entered into a subcontract regarding the Project (the “Subcontract”). Harbor last performed work under the Subcontract in September of 2017. Harbor made a demand for payment, but THR failed to pay $269,056.86 allegedly owed to Harbor under the Subcontract. On December 15, 2017, Harbor filed a complaint against THR and Hanover, asserting causes of action on the Miller Act payment bond, breach of contract, and unjust enrichment. On April 12, 2018, with the leave of the court, THR filed a Motion to Compel Arbitration and a Motion to Stay.

Comm’r of Hwys v. Karverly, Inc., 813 S.E.2d 322 (Va. 2018)

In 2014, the Commissioner of Highways (“Commissioner”) filed a certificate of take and later a petition for condemnation to acquire a 0.115 acre strip of property owned in fee simple by Kaverly, Inc. (“Kaverly”) to create a multi-use trail and for the reconstruction of Route 5 in Henrico County. Kaverly operates a child daycare center on the remainder of the property, which is approximately 5.17 acres. The strip of property taken includes a buffer between a fence and Route 5. Kaverly argued that it would need to move the fence inward in order to create a new buffer for privacy and security. Both of these changes, Kaverly concluded, would in turn require the relocation of the “playscapes” within the playground area. The new buffer and relocation of the fence and playscapes were the basis for Kaverly’s claim for damages to the fair market value of the remainder. On appeal, the Commission argued that the trial court abused its discretion by excluding its expert’s testimony on the ground that it offended settled valuation law governing damages to the remainder. The Supreme Court of Virginia agreed. 

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