If you are a contractor, subcontractor or other entity offering construction goods and services, you probably know that the ability to place a lien on property for the unpaid value of labor and materials provided is a great piece of leverage. Conversely, if you are a property owner, you have likely had to take steps to avoid the title of your property becoming clouded by liens. This is typically required by most loan agreements.

One of the ways both parties ensure payment and avoid risk on a project is by using lien waivers. A lien waiver is a written instrument by which a contractor, subcontractor, material supplier or other potential lien claimant fully or partially relinquishes its right to assert a lien against another’s property.

While lien waivers are a routine aspect of most construction projects, they should not be taken lightly. It is important for construction entities and property owners to thoroughly review and understand the lien waiver process on each project and even more important to give them proper attention during their execution.

Many owners mistakenly believe that a subcontractor or supplier’s lien can be defeated by showing evidence of payment to the prime contractor. This is simply not the case. In fact, Missouri courts have repeatedly held that an owner’s payment to a general contractor will not serve as a defense to a lien enforcement action brought by a subcontractor or supplier.

Enforcement

A lien waiver is only valid if it a) is supported by consideration; or b) has induced the receiving party to detrimentally change its position in reliance upon the waiver. The enforceability of a lien waiver can be summarized as follows:

(1)  The waiver will be enforced as written if the language is plain and unambiguous;

(2)  Lawful consideration must be given for the waiver; and

(3)  The courts will not determine whether the consideration is fair or adequate.

Types of lien waivers

There are four typical types of lien waivers: pre-contract, conditional, partial and final. Each is addressed below.

Pre-Contract Lien Waivers: A party may waive its future lien rights if its intention to do so is clearly manifested. However, the Missouri Mechanic’s Lien Act does not allow agreements to waive lien rights, when such agreements are made in anticipation and consideration of the award of a contract. This restriction, however, does not apply to contractual provisions that require lien waivers as a condition for payment.

Conditional Lien Waivers: A conditional lien waiver is not effective and cannot be relied upon by anyone until the condition stated in the lien waiver has been satisfied. A situation might arise where a subcontractor or material supplier provides a lien waiver with its pay application to the contractor, but then does not receive payment from the contractor after the owner makes payment to the contractor. In this instance, the owner might argue that it relied upon the lien waiver to its detriment by making payment to the contractor; and, therefore, the waiver should be given full effect despite the fact that the subcontractor or supplier did not receive full consideration for its lien waiver. To prevent this scenario, subcontractors or material suppliers should consider adding language to lien waivers expressly conditioning the waiver upon actual receipt of funds from the contractor’s payment. Conditional language prevents the owner from reasonably relying upon a lien waiver without further investigation as to whether actual payment has occurred.

Partial Lien Waivers: Partial lien waivers are usually submitted with payment applications during the course of a project. Typically, a partial, or qualified, lien waiver will waive lien rights for 1) work performed to date; 2) work performed to a stated dollar amount; or 3) a combination of the two.

• To Date Lien Waivers: A partial lien waiver that waives a claimant’s lien rights for all work performed “to date” may waive that claimant’s lien rights for pending, unapproved claims for extra work and the amount of retention withheld through the particular date. Potential lien claimants should exercise extreme caution when reviewing “to date” lien waivers, as the waiver might be construed against you in a manner you hadn’t envisioned. In many cases, a contracting entity may have been paid for progress payments through a certain date, but it still could be owed money for held retention, disputed extra work or other potential claims. By agreeing to a lien waiver through a date certain, the lien claimant is essentially acknowledging payment for all of the work it performed through the effective date. As a result, it could potentially be waiving its right to a lien for these types of issues.
• Stated Dollar Amount: Preferably, a partial lien waiver will recite a specific dollar amount being waived by the claimant. A lien waiver that states a specific dollar amount does not contain the same pitfalls as a “to date” lien waiver, as the exact amount being waived is clear. Again, counsel representing construction entities should add conditional language to the face of the lien waiver requiring actual receipt of funds.

Final Lien Waivers: Final lien waivers are typically required by owners before final payment will be issued. A final lien waiver constitutes a waiver of all lien rights that may have accrued during the course of a project up to the date of the waiver. Owners will typically demand much stricter language in a final lien waiver. As such, usually an owner will not accept “conditional” language in a final lien waiver. However, a prudent lien claimant will refrain from executing an unconditional final lien waiver where it has claims for additional compensation. In such a situation, the prudent lien claimant will either refuse to execute a final lien waiver, carve out the disputed claims or condition it upon a reservation of rights to assert a future claim for the additional money.

Fraudulent Lien Waivers

Individuals with construction entities that submit fraudulent lien waivers can be subject to criminal and/or personal liability. Under the Missouri Mechanic’s Lien Act, any contractor who knowingly issues a fraudulent lien waiver or a false affidavit shall be guilty of a class D felony. Mo. Rev. Stat. § 429.100 (3) (2017).

Lien waivers are an important tool for the payment process on construction projects. Unfortunately, they are often executed without much thought regarding their implications. It is important to make sure you are aware of these nuances and the corresponding risks.

Last year, the Federal Aviation Administration (FAA) codified regulations governing the operation of unmanned small aircrafts or drones. The regulations, which took effect August 29, 2016, are 23 pages long as published on the federal register online, and the FAA commentary is even longer. Highlights are as follows:

• The regulations apply to a drone and its cargo weighing less than 55 pounds. A drone may only be operated by one holding a remote pilot certificate with a small UAS (Unmanned Aircraft System) rating. A test is required to obtain this special remote pilot certificate. The training to take the test is far less rigorous than to obtain an aircraft pilot’s license. The FAA estimates the cost for a training seminar will be around $150, but that remains to be seen.
• The remote pilot in command must make a pre-flight inspection, and 100 percent visual line-of-sight operation of the drone is required. The regulations authorize a visual observer when the remote pilot cannot maintain 100 percent visual operation. An onboard camera does not satisfy this visual requirement. A constant means of communication between the visual observer and remote pilot is necessary. The remote pilot cannot operate from an aircraft or, in general, from a moving vehicle.
• Various planning and safety measures are mandated. The drone cannot be operated at night, and twilight operation is subject to limitations. No operation may occur over a human unless he or she is participating in the operation or is under a structure or inside a stationary vehicle that provides reasonable protection. A drone must give way to aircraft, and the operation cannot interfere with airport operations. The drone’s maximum altitude is 400 feet. Minimum weather visibility is 3 miles. Operations in certain airspaces are prohibited or severely restricted.
• One may petition to waive certain restrictions or rules. However, the rule requiring a certified remote pilot is not among the list of rules for which a waiver may be sought.

If you have questions about the rules summarized above and the other rules and exceptions found in the new FAA regulations, please contact our Construction Industry Group.

Effective Aug. 28, 2017, public entities in Missouri will no longer be permitted to require a project labor agreement (PLA) on a public works project. A PLA typically is signed by the contractor, subcontractor and trade labor unions and sets forth the terms and conditions affecting the employment of labor on a construction project covered by that agreement, including the requirement to utilize labor furnished by the signatory trade unions.

Senate Bill No. 182 was passed by the legislature during the most recent session and signed by the governor.

The act applies to the state of Missouri, each Missouri state agency, each political subdivision (which includes counties, municipalities, public school districts and special districts), and each instrumentality of the state. The new section 34.209.1(1) prevents the public entity from requiring or prohibiting “bidders, offerors, contractors, or subcontractors to enter into or adhere to agreements with one or more labor organizations on the same or related projects.” While worded in a neutral fashion, this statutory language is clearly designed to preclude public entities in Missouri from mandating a PLA. Section 34.209.1 applies to the construction, repair, remodeling or demolition of a public works facility.

Section 34.212 of the new act extends the scope of section 34.209 to grants, tax abatements and tax credits awarded by a Missouri public entity. So, for example, once the law is in effect, a public entity may not, as a condition to a grant of public funds or a grant of a tax abatement, require the adoption of a PLA.

The law does not, however, prohibit contractors or subcontractors from voluntarily entering into a collective bargaining agreement or a PLA.

Drug-testing implications

While the news media was quick to focus on the effect of the law on the use of PLAs, another provision of the act deals directly with drugs. In this regard, a subsection clarifies that a public entity may nevertheless require contractors and subcontractors to perform drug testing. Section 34.209.2 specifically states that: “Nothing in this section shall be construed to prohibit the state, any agency of the state, any political subdivision thereof from requiring bidders, offerors, contractors, or subcontractors, as a condition of receiving work or submitting a bid, to test its workers and employees for the presence of illegal drugs.”

Authorizing a public entity to adopt as a “condition” to bidding that the bidder complies with prescribed drug testing requirements of the public entity is novel. The full implications of this subsection are unknown. An issue not clearly addressed is whether any such public entity’s drug-testing requirement would override terms in a collective bargaining agreement (CBA) that restrict drug testing — or whether the bidder/contractor needs to bargain a modification to the CBA. Another issue left unanswered under Missouri law is whether any such public entity requirement for drug testing would be impacted by an individual worker’s claim of privacy concerns. Can the public entity require the bidder or contractor to turn over drug test results, or is it contemplated that the public entity would simply require a certification of drug-testing compliance by the bidder or contractor?

What happens if a violation occurs?

One who violates the new law is subject to equitable relief, such as a temporary restraining order and an injunction. In addition, the violator is liable for attorneys’ fees of the party filing suit.

Furthermore, a public entity that violates the act is not eligible for state funding or state-issued tax credits for two years.

Finally, the prosecuting attorney or circuit attorney for the jurisdiction where the violation occurs (presumably a reference to county prosecutors and the St. Louis city circuit attorney) as well as the Missouri attorney general’s office “shall investigate complaints of violation of such sections, and use all means at their command to ensure the effective enforcement of this section.”

Should you have any questions about this new law, please contact any of the attorneys in Greensfelder’s Construction Practice Group.

In a recent ruling, the U.S. Supreme Court sustained the well-established principle that the Federal Arbitration Act pre-empts state laws that specifically disfavor arbitration agreements.

In Kindred Nursing Centers, L.P. v. Clark, et al, 16-32 (May 15, 2017), the U.S. Supreme Court overruled a Kentucky Supreme Court decision not to enforce arbitration agreements between a nursing home and residents that had been signed by family members on behalf of the residents pursuant to powers of attorney. In the underlying case, two family members each held a power of attorney that designated the family member as an “attorney-in-fact” providing broad authority to manage the affairs of the residents. Notably, one power of attorney provided for the family member to institute legal proceedings and to enter into contracts, and the other power of attorney provided “full power” to the family member to transact, handle and dispose of all matters including entering into contracts. The family members used their powers of attorney on behalf of the residents to sign contracts with the nursing home that contained broad arbitration agreements.

When the residents died, their estates brought suit against the nursing home in Kentucky state court alleging substandard care had caused the deaths. The nursing home moved to dismiss the lawsuits because the arbitration agreements prohibited the claims from being brought in court. The Kentucky trial court and appellate court denied the nursing home’s motions and refused to enforce the arbitration agreements.

The Kentucky Supreme Court consolidated the two cases and ultimately affirmed the trial court and appellate court decisions denying the nursing home’s motions and refusing to enforce the arbitration agreements. The Kentucky Supreme Court found that, despite the broad powers and authority provided to the family members to act on behalf of the residents, the powers of attorneys did not specifically grant the family members express authority to enter into an arbitration agreement. The Kentucky Supreme Court looked to Kentucky’s Constitution, which protects its citizens’ rights to access to the court and trial by jury, to determine that a power of attorney would need to expressly provide for an agent to deprive the principal of adjudication by judge or jury. Hence, without such a clear statement in the powers of attorney to specifically allow for the family members to enter into arbitration agreements on behalf of the residents, the Kentucky Supreme Court determined the nursing home arbitration agreements to be invalid.

The U.S. Supreme Court found the Kentucky Supreme Court’s “clear statement” requirement violated the Federal Arbitration Act because it discriminated against arbitration agreements. Citing to the Federal Arbitration Act and well-established prior U.S. Supreme Court opinions, the court started by recognizing the equal-treatment principle that arbitration agreements are to be treated no differently than other contracts. That is, a court may invalidate an arbitration agreement based upon “generally applicable contract defenses,” but a court may not invalidate an arbitration agreement based on legal rules that only apply to arbitration or only have the effect of applying to arbitration agreements. In this case, the court found that the Kentucky Supreme Court’s clear-statement rule failed to treat arbitration agreements equally with other contracts, and further, the court rejected any contention that the clear-statement rule could be applied more broadly to protect other rights not directly associated with arbitration.

The court also rejected an argument advanced by the respondents that the clear-statement rule only applies to contract formation issues (as opposed to contract enforcement issues) and the Federal Arbitration Act does not apply to contract formation issues. The court rejected any distinction between contract formation and enforcement with respect to application of the Federal Arbitration Act. In the court’s view, the Federal Arbitration Act applies not only to enforcement of an arbitration agreement but also to the initial validity of the arbitration agreement.

Arbitration continues to be the chosen dispute resolution process for many in the construction industry. Most projects and construction contracts containing arbitration agreements are likely to be subject to the Federal Arbitration Act, which generally requires a finding that “interstate commerce” is involved, such as the parties involved with or the materials used in the project are from different states. As demonstrated by this recent decision, under the Federal Arbitration Act, the question of the validity and enforcement of arbitration agreements should be no different than contracts in general.

An unpaid contractor’s best friend is often the mechanic’s lien statutes, which provide an avenue for the unpaid contractor to apply pressure to the owner or higher-tier contractor for payment. A mechanic’s lien will likely attract attention from the owner’s lenders and potentially motivate the owner to pay the contractor’s unpaid balance. Additionally, in Illinois, a mechanic’s lien can even allow the contractor to foreclose on the property if the lien is left unsatisfied.

This powerful remedy, however, can be lost if proper care is not taken to provide the appropriate notices and meet the required deadlines. Illinois courts strictly construe the requirements for perfecting a mechanic’s lien, and in some instances, a seemingly harmless mistake or omission can render a mechanic’s lien invalid and unenforceable. This article focuses on the most common notice requirements and deadlines applicable to contractors and subcontractors on private commercial construction projects. This is not a comprehensive list of all the requirements for every situation, however, and consultation with an attorney is highly recommended to ensure preservation of mechanic’s lien rights.

Deadline to File a Statement of Mechanic’s Lien

The deadline for contractors and subcontractors to file their statement of mechanic’s lien is four months (not 120 days) from the last date of work (exclusive of warranty work or other work performed free of charge), or from the last date that materials were supplied to the project. The mechanic’s lien must be filed in the office of the recorder of the county in which the project is located.  Failure to file within four months’ time will render the lien ineffective against any lenders, future owners or other third parties.  The mechanic’s lien will still be effective against the owner’s interest if filed within two years after the last date of work, but the lien may be subordinated to other claims against the owner.

As discussed below, there are certain notices that must be provided to the owner before a mechanic’s lien is filed.

Required Notices

Sworn Statement Required of Original Contractors

Contractors having a direct contract with the owner are required to provide a sworn, written statement listing the names and addresses of all subcontractors and the subcontract amount for each. This sworn list must be submitted to the owner prior to the contractor’s receipt of its first payment.

Subcontractors’ 90-Day Notice

If not yet paid in full, subcontractors must provide the owner a separate written notice within 90 days’ of the subcontractors’ last date of work. The subcontractor’s written notice must state the amount due or to become due, and the notice should be provided to the owner of record and each known lender holding a mortgage on the property. The suggested content of the notice is provided by the applicable statute:

To (name of owner): You are hereby notified that I have been employed by (the name of contractor) to (state here what was the contract or what was done, or what the claim is for) under his or her contract with you, on your property at (here give substantial description of the property) and that there was due to me, or is to become due (as the case may be) therefor, the sum of $ __________________.

Dated at ______ this _____ day of _______

Signature ____________________________

The subcontractor’s 90-day notice must be provided to the owner at least 10 days prior to filing the mechanic’s lien.

Note that, if the original contractor has provided the sworn statement discussed above, and has properly listed the subcontractor’s name and the correct amount that will be due to the subcontractor, and there is no defect in the contractor’s sworn statement, then a subcontractor may be excused from failing to provide this 90-day notice. Practically, however, subcontractors will rarely have this assurance. For this reason, it is best practice to provide this 90-day notice to ensure that the subcontractor’s mechanic’s lien will not be invalidated in part or in full.

Note that Illinois has additional notice requirements for work involving owner-occupied single family residences.  In addition, mechanics liens asserted against condominium units have unique requirements that may necessitate special considerations.

Filing Suit to Enforce a Mechanic’s Lien

Contractors and subcontractors must file suit to enforce a mechanic’s lien within two years of the last date of work.

Note that the owner has the option to accelerate this deadline if the owner disputes the contractor’s or subcontractor’s entitlement to additional payment.  Under the applicable statute, the owner has the option to demand that suit be filed on the mechanic’s lien within 30 days of the owner’s demand.

How long should a party to a construction project retain its project documents after completion? The good news: not forever. The bad news: longer than expected.

After completion of a construction project, the likelihood of becoming a party to a lawsuit should lessen over time. Claims regarding such issues as non-payment, delay and scope of work disputes are typically raised and pursued soon after completion of the project. These types of claims are usually recognized by the claimant sometime during or after completion of construction and soon acted upon for economic reasons.

However, a claim for negligent professional services or for defective construction work may not become apparent to an owner until years after the completion of construction. This is particularly true regarding unseen or “latent” defects discovered through resulting damages to exterior wall assemblies, roofs and mechanical systems, often years after completion of a project. Investigating the extent and cause of damages often takes considerable time, sometimes up to a year, before an opinion is reached and the potentially liable parties are notified by the owner. Altogether, the time from project completion to notification to the designer or engineer of alleged professional negligence or to the contractor for alleged defective construction may be many years.

Statutes of limitations

The applicable state’s statute of limitations creates a deadline for filing an action. For example, under Missouri law, a suit must be filed within five years from the time the party bringing the action knew or should reasonably have known of the act or omission supporting an action in tort or contract.

Statutes of repose

To protect architects, engineers and contractors from unending liability to owners, many states, including Missouri and Illinois, have enacted a statute of repose. Many such state statutes of repose, including those in Missouri and Illinois, create a time limit for the commencement of litigation or mandatory arbitration at 10 years from the date of the act or omission comprising a breach of contract or negligence.

In Missouri, this 10-year date draws a bright line for bringing such an action. If the owner discovers a latent defect in the design or construction just days before the 10-year tolling period expires but fails to file an action on or before that date, the action is barred by the statute of repose. However, under the Illinois statute of repose, the owner would have the full time afforded by the Illinois statute of limitations, four years, in which to bring such an action, from the date of discovery of the latent defect. Therefore, in Illinois, the 10-year statute of repose could be extended another four years to accommodate the Illinois statute of limitations using the same scenario.

How long should project records be retained?

Storing and maintaining project documents can be a costly burden on a company of any size. Large projects can generate enormous amounts of paper and electronic documents. Unfortunately, due to the possible discovery of latent defects in the design or the construction work, all parties in a construction project, including the owner, should retain project documents for a predetermined period of years after project completion.

Under state and federal law, many types of documents created and kept in the normal course of business can qualify under the business records exception to the hearsay rule. This business records exception can be very important particularly if several years have passed and the person(s) who created a business record either cannot be later found to testify or has died. It is important to keep and maintain project records such as: 1) drawings and specifications, 2) design/engineering calculations, 3) project diaries, 4) reports, 5) requests for information (RFI) and responses, 6) meeting notes and minutes, 7) contracts and purchase orders, 8) change orders, 9) all versions of shop drawings and other submittals, 10) construction progress photographs, 11) site progress/field reports, 12) certificates of insurance, and 13) emails and other correspondence.

Any of these documents may contain key information that affects the outcome of a dispute regarding allegations of defective design and/or construction. Even if the witness who created a document is available to testify, these types of project records will likely be persuasive and will refresh recollections of important events that may have taken place many years before. In these types of suits, evidence of a directive or an approved alternative (or not) to the specified material, equipment or construction detail can be dispositive proof supporting one of the parties in a trial or arbitration.

The following recommendations apply to only construction project documents, not to other types of company records.

Missouri projects: If Missouri is the governing law, project records should be maintained and preserved for a minimum of 11 years after the project completion date, (one year beyond the statute of repose date of 10 years).

Illinois projects: For projects governed by Illinois law, project records should be maintained and preserved a minimum of 15 years (one year beyond the four-year statute of limitations period plus the 10-year statute of repose date).

However, if the party is aware at any time prior to the destruction of any project documents of defective design and/or construction issues, the project records must be retained until the issues are resolved. A “litigation hold” should be issued within the company advising everyone to not destroy or discard any project-related documents.

Other states: If another state’s law is governing, it is necessary to determine whether that state has a statute of repose, the length of the repose and the length of that state’s applicable statute of limitations. An analysis should be done to determine whether that state’s statute of limitations can extend the time to file a suit or other action beyond the statute of repose (as it does in Illinois). Although many states have a 10-year statute of repose, there are notable exceptions (i.e., Florida – 15 years, Alabama – 13 years, Pennsylvania – 12 years, Arkansas – eight years, Colorado – six years, Kentucky – none). These and other states’ statutes should be verified for each project.

Public projects under federal or state law and contract requirements: For all projects, private or public, check the contract to see whether record retention is addressed and mandated. In both federal contracts and federally assisted contracts, such a provision is commonly included. For example, by incorporating 24 CFR 85.42, a federally assisted construction contract contains a requirement that certain kinds of records shall be retained by the contractor for a minimum of five years (or longer if any litigation, claim, negotiation, audit or other action is initiated before expiration of the five-year deadline). Otherwise, Federal Acquisition Regulation (FAR) 4.7 is applicable to all contractors working on most federal projects (with several exceptions). FAR 4.7 identifies categories of documents to be retained and the minimum of years (either two years or four years from the end of the contractor’s fiscal year in which it allocated a cost to a government contract). However, a newly enacted FAR 4.805 sets internal record retention minimums for the federal government’s departments and agencies that are longer than the minimum retention requirement imposed upon federal contractors.

Develop and follow a company document retention protocol

All design and engineering firms and construction companies should develop and follow a written document retention protocol for all project documents. The company’s protocol will state that project documents can be destroyed after a stated period of time following final completion unless there is pending or threatened litigation or arbitration.

If there are actions that could lead to actual litigation or arbitration or if such a dispute resolution proceeding has been initiated, a designated person within the company should issue a written “litigation hold” to all employees and officers of the company in order to prevent the destruction of any project documents. Failing to preserve such records when a company is or should be aware of a pending dispute may lead to the imposition of sanctions against the company by a court or arbitrator for the company’s illegal spoliation of evidence. Such sanctions can be serious and impair a company’s ability to protect its interests in an action.

However, if a company has followed a reasonable document retention protocol and destroys project documents in accordance with its protocol while not aware of any dispute or claim against the company that could lead to litigation or arbitration, the company should not face sanctions for destroying evidence if such an action is later commenced by the owner. If the document destruction takes place after the statute of repose period (or the combined statute of repose/statute of limitations period) has passed, there should be no issue of spoliation of evidence because the action would be time barred as a matter of law.

Many legal battles in the construction industry revolve around contract interpretation disputes. Care in contract drafting is a valuable way to avoid disputes.

A fundamental principle of contract interpretation is to ascertain and give effect to the parties’ objectively expressed intent. What a party was trying to say, without accurately expressing it, does not count. Contract terms are usually given their ordinary (i.e., dictionary) meaning unless the contract specially defines them or the industry has adopted a special meaning known to both parties.

Identifying and interpreting ambiguity

Ambiguity exists in a contract when the pertinent terms are subject to two or more reasonable constructions. When an ambiguity exists, a court (and presumably an arbitrator) will give great weight to how the parties contemporaneously construed the terms by conduct or otherwise. Other interpretive guides when an ambiguity exists include:

1. The specific controls over the general; and
2. The more recently drafted of two provisions controls.

The interpretative rule of last resort is to construe the ambiguity against the party that provided the language.

In federal government contracts, a patent or apparent ambiguity is construed against the contractor. To avoid this result, a contractor for a federal project is obligated, before bidding, to seek clarification.

Examples from case law of ambiguities include:

• Subcontract: “any other ancillary items required to provide a complete bridge structure.”
• Contract: Owner “shall not hold [contractor] liable for any alleged incorrect location of the pool.” (Query: Was the intent to cover owner misdirection or contractor mis-location?)
• Prime contract was silent on which party bore responsibility for the builder’s risk deductible amount.
• Contract: “Owner shall pay Builder … on a Cost/Plus basis to a Guaranteed Maximum Price of … The Contract Price shall include, without limitation, …” (The term “Cost,” without any definition, was ambiguous; the expression “without limitation” also created an ambiguity.)

Tools to improve a contract

Here are some simple tools to improve a contract:

• Use plain and straightforward terms and clauses. Avoid terms or clauses that are confusing or lend themselves to varying interpretations. The mantra should be precision and accuracy. Brevity without sufficient clarity is a problem. If doubt exists as to what is intended, add or modify terms to eliminate the doubt. A good illustration is: Add to a general scope of work description a listing of significant items included in, and major items excluded from, the scope of work.
• For a technical term, consider adding a definition since the technical understanding may vary from the common usage of the term. A party not familiar with technical usage may prevail on its interpretation based on common dictionary usage.
• Include contract language covering all points specifically negotiated. A written contract silent on what was orally agreed upon is ripe for a dispute. Worse yet, clearly written boilerplate or standard contract terms that are inconsistent with a point negotiated but not drafted into the contract will likely govern, unless a mutual mistake can be proven — which is an extremely difficult burden of proof.
• Add a reference, when applicable, to published standards or other available documents governing that particular subject. Incorporation by reference is a valid technique as long as the referenced document exists and is described, as one court put it, “in such terms that its identity may be ascertained beyond doubt.” In one case, the subcontract referenced a prime contract document that was prepared after the subcontract, and thus the attempted incorporation was ruled invalid. Beware of incorporated by reference terms that conflict with other terms. Language to reconcile the conflicts is needed.
• When two or more different contract documents address the same subject, make sure the contract language harmonizes those provisions or, alternatively, explains the priority among the clauses or documents. Construction contracts frequently consist of multiple contract documents such as the agreement, general conditions, plans, specifications, and special conditions. One good solution is to consolidate the key terms of two or more contract documents into one harmonized contract document, and in the process delete the unnecessary or conflicting terms. Another good tool to avoid conflict is to include an order of precedence clause identifying the priority among the contract documents.
• Carefully consider punctuation. Occasionally, a missing or misplaced punctuation mark alters the meaning.
• Do not leave fill-in-the-blank provisions blank.
• Mistakes happen.

Greensfelder’s Construction Practice Group is ready to assist in the preparation of contract documents and in providing practical and legal advice on contract issues.

Missouri law (R.S.Mo. 429.005.1, et seq.) grants general contractors, subcontractors, suppliers, and laborers the ability to assert a mechanic’s lien for labor and materials provided to a property, provided the lien is properly filed within six months of the last date of work (excluding warranty and corrective work).

In addition to addressing issues related to what work is lienable and the type of properties that may be liened, the statutes also include strict timelines with respect to notice that must be provided to the property’s owner prior to filing the lien. Providing correct and timely notice is the first step in preserving and maintaining valid mechanic’s lien rights in Missouri. This blog post focuses solely on the notice an original contractor and subcontractor must provide the owner prior to filing a mechanic’s lien and applies to privately owned commercial properties only.

Original contractors

An original or prime contractor is a contractor that enters into a contract to perform labor or furnish materials directly with the property’s owner. To preserve its ability to file a mechanic’s lien, an original contractor must provide the property owner with a written notice prior to payment and at one of the following junctures:

• when the contract is signed;
• when materials are first delivered;
• when work commences; or
• when the first invoice is delivered.

The notice must be written in 10-point bold font, and state:

NOTICE TO OWNER

FAILURE OF THIS CONTRACTOR TO PAY THOSE PERSONS SUPPLYING MATERIAL OR SERVICES TO COMPLETE THIS CONTRACT CAN RESULT IN THE FILING OF A MECHANIC’S LIEN ON THE PROPERTY WHICH IS THE SUBJECT OF THIS CONTRACT PURSUANT TO CHAPTER 429, RSMO. TO AVOID THIS RESULT YOU MAY ASK THIS CONTRACTOR FOR “LIEN WAIVERS” FROM ALL PERSONS SUPPLYING MATERIAL OR SERVICES FOR THE WORK DESCRIBED IN THIS CONTRACT. FAILURE TO SECURE LIEN WAIVERS MAY RESULT IN YOUR PAYING FOR LABOR AND MATERIAL TWICE

Compliance with this notice provision is a condition precedent to the creation of a valid mechanic’s lien by an original contractor.

Subcontractors or suppliers

A subcontractor or supplier not in privity of contract with a property’s owner must provide the owner with at least 10 days’ written notice prior to filing a lien statement. The notice must include the name of the claimant, the amount of the claim, from whom the money is due, and a description (preferably a legal description) of the property. Notice must be served upon the owner by the sheriff, a private process server or any “person who would be a competent witness.” This notice is a condition precedent to the creation of a valid lien. It is important that subcontractors and suppliers keep a careful eye on the six-month deadline within which to file the mechanic’s lien, to leave enough time to serve the 10-day pre-lien notice upon the owner.

A summary of the notice timeline is below: