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Latest Articles from ConsensusDocs!

What You Need to Know About “Ipso Facto” Clauses and Their Impact on Termination of a Contractor or Subcontractor in a Bankruptcy

By: Martha B. Chovanes, Partner, and Laurie A. Stanziale, Partner, Fox Rothschild LLP.

While contractor bankruptcies have long been an issue in the construction industry, in the aftermath of COVID-19 and the resultant labor, material and supply-chain delays, contractor bankruptcies are of even greater concern. Many construction contracts attempt to protect the upstream party from a bankruptcy filing of its contractor or subcontractor by providing for an automatic right to terminate a contract, referred to as “ipso facto” clauses. However, such clauses are generally unenforceable as bankruptcy laws, specifically Section 365(e) of Title 11 of the United States Code, protect the party filing for bankruptcy (the “Debtor”) from unilateral termination of the contract by the non-Debtor party.

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Indemnity: What You Don’t Know Can Hurt You!

By: Caitlin Kicklighter, Emory Law Student (2024 Graduate), Bill Shaughnessy, Partner, Jones Walker LLP.

Risk allocation between the parties is a critical component of any construction contract. Indemnity obligations can be some of the important risk-shifting provisions of any design or construction contract. Indemnity provisions typically require one party, the Indemnitor, to agree to “hold harmless,” and/or reimburse another party, the indemnitee, from claims and liability arising out of the party’s work. Considering the financial consequences that an indemnity provision can have on a construction project, it is critical that all parties to a construction contract know the legal implications of the contract indemnity provisions and understand any limitations in enforcing the indemnity provisions depending on the controlling jurisdiction. While most indemnity clauses and obligations are enforceable, many states have enacted anti-indemnity statutes prohibiting or restricting specific indemnification provisions. These anti-indemnity statutes afford protection to contractors and subcontractors not generally in a position to protect themselves from overly extensive indemnity obligations.

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Anticipating Material Supply Chain Issues in Construction Projects

By: Matthew Cox, Partner, Smith Currie & Hancock LLP.

Recent news related to construction material escalation has been sobering. Today, general contractors face increased risks related to cost escalation of numerous construction materials, and it is expected that increased costs will be passed on to owners in the form of increased bid prices.

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Setting a Standard for Good Faith and Ethics in Construction Contracts

Trusting that your fellow contracting party will act ethically and in good faith is essential. Aligning the parties’ interests with the project’s success creates the right foundation to build successfully. Setting the right tone and expectations between party relationships is one of the reasons that ConsensusDocs contracts have been used on construction projects worth more than $50 billion but have yet to be the subject of a reported court decision.

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You Are on Notice: Failure to Comply With Contractual Notice Provisions Can Be Fatal to Your Claim

By: Jenifer B. Minsky, Esq. Senior Counsel, Peckar & Abramson, P.C.

Imagine your firm is the construction manager on a multi-million-dollar project. At the end of the project you are five million dollars out-of-pocket. You have a stack of claims for additional and extended work which led to the overrun, payment for which will easily cover the shortfall. However, the owner refuses to compensate you until you can satisfactorily answer their inquiry: “Where are the notices that are expressly required under the terms of the contract?” You had a good relationship with the owner’s field representative who was aware you were performing the work and understood that your company was compiling claims. The once cooperative owner, now suffering financial restraints of their own, is resolute in their refusal leaving you no choice but to expend substantial sums of money to litigate the claims, the success of which is far from assured.

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