Articles Posted in Construction Law

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One of the most difficult problems in New Jersey construction law for contractors and subcontractors is getting paid.  Fortunately, a powerful remedy exists in the New Jersey Prompt Payment Act.  A recent appellate court decision examined frameup-225x300the New Jersey Prompt Payment Act in the case of Jo-Med Contracting Corp. vs. City of Linden.

Background

The City of Linden contacted Jo-Med to submit a bid for emergency repair work on approximately 20 feet of sewer repair, together with approximately 30 feet of related curb replacement.  Jo-Med submitted a bid for $25,000 based on the job description provided by the City engineer; the bid stated that the cost would be higher if Jo-Med ran into unforeseen problems not apparent in the City’s description, in which case it would bill the City on a time and materials basis.  Jo-Med was awarded the contract.  The City’s engineer told Jo-Med’s owner that he would “work with him for additional charges to finish the work.”

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Independent Contractors versus Employees Under New Jersey Employment Law

Under New Jersey employment law, the classification of a worker as an employee or independent contractor has significant ramifications for both the employer and employee, including the ability of the employer to shift the cost of insurance, payroll taxes and benefits to the employee, and relieving it from having to pay time and a half for overtime.  The New Jersey Supreme Court explained in the seminal case ofbuilding-home-construction-contractor-blueprint-architecture-300x200 Hargrove vs. Speepy’s LLC, that there are different, fact sensitive tests for this determination depending on the context, such as for wage issues, workers compensation and unemployment.  More recently, the Supreme Court addressed this issue in the context of whether an employer must make contributions for disability and unemployment in the case of East Bay Drywall, LLC vs. New Jersey Department of Labor and Workforce Development.

Background: East Bay’s Business Model

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New Jersey construction law involves many complex issues.  However, one of the most common is also the most basic: Contractors and subcontractors getting paid for their work.  The Appellate Division recently issued a published opinion on this topic in the case of JHC Industrial Services, Inc. vs. Centurion Companies, Inc., exploring one of the most potent tools which contractors and subcontractors can useconstruction to get paid: New Jersey’s Prompt Payment Act.

Background: The JHC Case

JHC Industrial Services, Inc. subcontracted to do demolition work on a project for Centurion Companies, Inc., which had in turn subcontracted with the general contractor to perform the work.  JHC performed the work in full, and the general contractor accepted the work and paid Centurion in full.  However, Centurion withheld $30,500 from JHC for no apparent reason other than not wanting to pay.  JHC therefore filed a construction lien against the property and sued Centurion in the Superior Court of New Jersey for violation of the New Jersey Prompt Payment Act.  The matter took two years reach conclusion.  A trial was held, and JHC prevailed on all its claims.  JHC won and received judgment against Centurion for $30,500, the full amount it claimed was owed.  JHC requested $104,670.51 in “reasonable costs and attorney fees” pursuant to the fee shifting provisions of the Prompt Payment Act.  The trial judge, however, awarded only $12,250.40 in attorneys fees and $4,125.33 in litigations costs for a total award of $16,375.73.  The judge explained that he did not believe he could “grant over $100,000 in fees on a judgment that could not have exceeded $30,500.”

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The Problem: Getting Paid

One of the most important considerations for construction contractors and subcontractors is getting paid for the work they perform.  A recent construction law opinion examined some of the issues which contractors and subcontractors face under New Jersey construction law whenconstruction seeking to get paid for their work.

The J&M Interiors Case

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The New Jersey construction law opinion in Site Enterprises Inc. vs. NRG Rema, LLC highlighted several important areas of the New Jersey Construction Lien Law.

 

The New Jersey Construction Lien Law

The New Jersey Construction Lien Law replaced the Mechanic’s Lien law, and made it easier for contractors, subcontractors and suppliersconstruction-machine-3412240__340-300x202 to use construction liens to enforce payment for  their contract work on construction projects.

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The Appellate Division of the State Superior Court recently issued an opinion on New Jersey construction law in the case of In re Protest Of Contract Award For Project A1150-08, N.J. Executive State House Comprehensive Renovation And Restoration which has troubling NJ_State_House-300x200implications for contractors.  The decision is published, so it is precedent for future cases in which contractors challenge the award of New Jersey construction contracts by state and local governments.  In this post I won’t dwell on the details of which contractor was right and which was wrong, but rather I’ll focus on the Appellate Division’s examination of the procedures followed, which is a cautionary tale about the ability of New Jersey construction contractors to meaningfully object to the award of public contracts.

Background

On November 15, 2019, the New Jersey Division of Management and Construction (“DPMC”) awarded a contract for renovation and restoration of the New Jersey State House to Daniel J. Keating Company, the lowest bidder at $199,498,000.  Hall Construction Co., Inc., which had bid $205,777,000, was the second lowest bidder.

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The Appellate Division of the Superior Court recently issued an opinion illustrating several important points regarding construction liens under the New Jersey Construction Lien Law and collection of payment under the New Jersey Prompt Payment Act.

Background

In that case, Prime Time Construction, LLC vs. Vimco, Incorporated, , Prime Time Construction, LLC was the general contractor on three construction projects inconstruction-machine-3412240__340-300x202 Paterson.  The properties were owned by three limited liability companies which were related to Prime Time.  Prime Time executed written subcontracts with Build Logistics, Inc. (“BL”) to do the masonry and excavation work on the projects.  BL executed a written contract with Vimco to provide materials for two of the projects.  Vimco provided the materials directly to BL; it had no contract with Prime Time or the owners.  Prime Time paid BL the full amount under the contract for all the work it performed and materials it provided.  However, BL abandoned the project and failed to pay Vimco.

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Construction Arbitration

Complex New Jersey construction law cases can be extremely expensive to litigate in court because of the amount of documents involved, the number of witnesses, and the need for experts.  Therefore, many construction contracts contain arbitration provisions.  The view is that arbitration can save money in the 352099_construction_3-002-300x225litigation process, but still provide an enforceable dispute resolution process.

However, it would not be accurate to call construction arbitration “cheap” or “inexpensive.”  Essentially, arbitration is a private litigation process with limited discovery and appeal rights.   By limiting discovery, particularly depositions, a significant source of expense is eliminated, and by limiting appeal rights, arbitration can provide more finality.  However, there is still discovery.   Documents are generally exchanged before the hearing, so there is still expense, but costs are saved because arbitration rarely involves depositions.  Likewise, while experts are not normally deposed, they are still required and must prepare pre-hearing reports about their expected testimony.  All of this entails significant expense.  In addition, while there are minimal filing fees and the services of courts are generally free, the use of an arbitration forum in construction law disputes entails significant fees, and in addition the parties have to pay the arbitrator for all his or her time.

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Hi.  My name is Rob Chewning.  I am one of the attorneys here at McLaughlin & Nardi, LLC, who practices in the field of construction law.   We receive a lot of questions about construction liens.

Constructions liens are a way in which to obtain a security interest in a property in which you might be owed money either as a contractors/subcontractor or supplier for a particular construction project.  It can be used as a way to compel payment from the contractor if they owe you money if you are a subcontractor, or if you are the general contractor and the owner owes you money, because that security interest will prevent the owner from selling that property without paying the construction lien that you might be able to obtain.

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A recent New Jersey construction law opinion by the Appellate Division in the case of CNJ Construction Corporation vs. Autobuilders General Contracting Services, Inc. illustrates just how important the precise language in a construction contracts is, and just how important itconstruction-9-10-300x225 is to have a well-written contract.

The Case of CNJ v. Autobuilders

Autobuilders General Contracting Services, Inc. was general contractor on a project for the construction of a Maserati dealership in Morris County.  Autobuilders entered into four subcontracts with CNJ Construction Corporation for demolition, concrete, steel and site work on the project.  Each of the subcontracts contained a provision that Autobuilders could terminate the contracts for cause if CNJ failed to perform, but had to give CNJ three days written notice prior to termination, during which time CNJ could cure the default and avoid termination.  The notices had to be delivered by certain specified means, which did not include regular mail.  No notice was required if CNJ abandoned the job.  The contract provided that if CNJ was terminated for cause, it would be liable for any increased cost incurred by Autobuilders for completing its work on the project with other subcontractors.

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