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© Hendrick, Phillips, Salzman & Flatt, P.C. – March 8, 2016

CONNECTICUT ROOFING CONTRACTORS ASSOCIATION

What Roofing Contractors Should Look Out For and Include in Contracts and Warranties

March 8, 2016Wallingford, Connecticut

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Negotiating More Equitable Construction Contracts: Key Provisions and Recommended Changes to Make in General Contractor and Owner-Drafted Contract Documents

© Hendrick, Phillips, Salzman & Flatt, P.C. – Nov. 2014

Stephen M. PhillipsHendrick, Phillips, Salzman & Flatt, P.C.230 Peachtree Street, Suite 2500Atlanta, GA 30303(404) 522-1410

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IndemnificationAdditional insuredCompliance with building codes, regulations, ordinances Rights and remediesFurnishing performance and payment bondsLien waivers

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KEY CONTRACT PROVISIONS

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Schedule, overtime and liquidated damagesInterest and Attorney’s fees Clearly defined scope of workRight to stop work Risk of loss and builder’s risk insuranceDispute ResolutionTermination for default 

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Key Contract Provisions

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Contingent payment clause One-sided attorney’s fees (i.e. Owner or General Contractor is entitled to recover attorneys fees if any attorneys fees are incurred by General Contractor due to any type of alleged breach by subcontractor) No damage for delay clauseNotices Termination for convenienceWaiver of Subrogation RightsAcceptance of Adjacent Work 

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Key Contract Provisions

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Condition Your Proposal

Look for and delete a provision included in bid documents stating that your submittal of a proposal constitutes your acceptance of the general contractor’s standard contract

Condition your proposal on use of AIA Document A401, Standard Form of Agreement Between Contractor and Subcontractor

If general contractor is unwilling to execute AIA A401 subcontract, propose to use ConsensusDOCS 750 subcontract which has been endorsed by AGC

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Indemnification

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Indemnification - limit to the extent that the claim, damage, injury or expense is due to a negligent act or omission of the indemnitor or someone for whose acts the indemnitor is liable.

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Try also to limit to bodily injury and property damage claims, which are covered by commercial general liability insurance. The AIA and ConsensusDOCS indemnification provisions are limited in this manner.

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Additional Insured

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Additional insured - if the contract references CG 20 10 11 85 or another ISO endorsement form that would obligate the named insured’s insurer to pay for claims that are not due to the fault of the named insurer, delete reference to CG 20 10 11 85 and other ISO forms so that your obligation is simply to make the general contractor and owner additional insureds. You can also add a sentence indicating intent is to provide coverage for claims against the additional insured that are due to the fault of the named insured.

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10. 07/04) and11. Naming Contractor, Owner and any other required parties (“Additional Insureds”) as additional insureds on Subcontractor’s liability insurance policy and making that coverage primary is intended to apply only to the extent that a negligent act or omission by Subcontractor causes a claim to be asserted or a loss to be sustained by Additional Insureds. This additional insured endorsement is not intended and shall not be construed to cause Subcontractor’s insurer to be liable either to defend or to indemnify Additional Insureds for claims against or losses sustained by Additional Insureds that are not due to the fault of Subcontractor.

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Contract Documents and Most Stringent Requirement

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Acceptance of adjacent work

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Subcontractor is not responsible for the structural sufficiency, quality of construction (including compliance with FMG criteria), undulations, fastening or moisture content of the roof deck or other trades’ work or design.

Deck Conditions

Include a contract provision along these lines:

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10. visible 11. known 12. If the Contractor encounters subsurface or otherwise concealed physical conditions which differ materially from what is indicated in the Contract Documents or unknown physical conditions of an unusual nature, which differ materially from those ordinarily found to exist and generally recognized as inherent in construction activities of the character provided for in the Contract, Contractor shall promptly provide notice to Dart before conditions are disturbed and in no event later than 10 days after observance of the conditions so that Dart and Architect can review the conditions. Contractor shall be entitled to additional compensation and/or time as a result of such unanticipated or unforeseen conditions. Contractor’s prosecution of the roof work indicates only that the surface of the deck appears satisfactory to the Contractor to attach roofing materials. Contractor is not responsible for the construction, moisture content, undulations or structural sufficiency of the roof deck or other trades’ work or design.

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Existing Conditions, Asbestos and Unforeseeable Conditions

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27. Contractor has not and will not be able to examine and determine all subsurface conditions under the existing roof until the existing roof is completely removed. If Contractor encounters conditions below the existing roof surface or otherwise concealed physical conditions which differ materially from what is indicated in the Agreement Documents or unknown physical conditions of an unusual nature, which differ materially from those ordinarily found to exist and generally recognized as inherent in construction activities of the character provided for in the Contract, Contractor shall promptly provide notice to Owner before conditions are disturbed and in no event later than 5 days after observance of the conditions so that the Owner and Architect can review the conditions. Contractor shall be entitled to additional compensation and/or time as a result of such unanticipated or unforeseen conditions. Contractor is not responsible for damages or leaks due to existing conditions or existing sources of leakage simply because Contractor started work.

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25. Contractor’s

price and this contract are based upon Contractor’s not coming into contact with asbestos or asbestos-containing or toxic materials at Owner’s building. If asbestos or asbestos-containing or toxic materials are encountered, the contract price and time to complete the contract will be adjusted based upon the additional costs and time resulting from the presence of asbestos or toxic materials in the building. Contractor is not responsible for damages or leaks due to existing conditions or existing sources of leakage simply because Contractor started work on a building or performed repair work.

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Compliance with building codes, regulations, ordinances

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Compliance with building codes, regulations, ordinances - limit by adding provision stating: “provided Contract Documents, plans and specifications are in compliance therewith.”

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provided

that the building, Contract Documents and plans and specifications are in compliance therewith. If Subcontractor discovers that the prescribed Work is not in accordance with codes, Subcontractor will promptly notify Contractor and await direction from Contractor and Design Professional. The Design Professional is responsible to design the Work to be in compliance with applicable codes and regulations and to specify or show the work that is to be performed. Subcontractor is not responsible for design, including design errors or omissions.15. except to the extent such injury is caused by the negligence of the Contractor or another party for whose acts Subcontractor is not responsible.

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Rights and Remedies

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Rights and remedies - provide the Subcontractor with the same rights and remedies towards the General Contractor that the General Contractor has toward the Owner.

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39. and

Subcontractor shall have the benefit of all rights and remedies toward the Contractor as the Contractor has toward the Owner.

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Furnishing performance and payment bonds

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Furnishing performance and payment bonds decision whether bond is required must be made no later than at the time of execution of the contract; use standard industry bond forms (vs. the general contractor’s bond forms); and include time limitation in bonds for suit to be instituted.

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27. standard

industry bond forms. 27a. The prevailing party 27b. This provision applies to all actions on bonds, including claims made by either McCarthy or Subcontractor.28. prior to execution of this Subcontract

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Waiver of Subrogation Rights

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Try to avoid waiving subrogation rights covered under your worker’s compensation, commercial general liability and automobile liability insurance. A mutual waiver of subrogation rights on claims covered by builder’s risk insurance is fine and desirable.

Waiver of Subrogation Rights

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Lien Waivers

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Lien waivers - add provision stating: “provided subcontractor has been paid.” Do not agree to release lien rights except to the extent you are paid. Reserve lien rights applicable to retainage and change order or extra work performed during a period covered under a partial (interim) lien waiver.

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19. provided Subcontractor has been paid.

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Schedule, overtime and liquidated damages

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Schedule, overtime and liquidated damages - add specific statement: Subcontractor shall have a minimum of ________ workdays with conditions suitable for roofing work to obtain substantial roof completion.

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Interest and Attorneys’ fees

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Interest and Attorneys fees –

add a provision entitling the contractor to obtain interest at a prescribed rate or a prime rate and costs of collection, including attorneys fees if not paid.

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If Subcontractor has performed its work but Owner does not make payment to Contractor for some reason unrelated to Subcontractor such as a problem or dispute with Contractor or another trade, Subcontractor shall be entitled to payment. If Subcontractor is not paid, Subcontractor shall be entitled to interest at the rate of 1% per month plus costs of collection, including attorney’s fees. Subcontractor shall not be required to continue to work if not paid.

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Clearly Defined Scope

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If the provision (it could be an exclusion, clarification or critical condition for the job to be successful for you) is in your proposal, check to see if the provision is in the contract. Your proposal is not part of the contract unless you expressly make it part of the Contract Documents.

Do not rely on oral representations; if it’s important to you, make sure the provision is included in the contract

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Right to stop work

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Right to stop work - add a sentence stating that contractor is not required to continue working if not paid.

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18. Subcontractor shall not be required to continue to work if not paid.

Subcontractor shall be entitled to interest at the rate of 1% per month plus costs of collection, including attorney’s fees.

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Risk of Loss

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Risk of loss and builder’s risk insurance. Owner or General Contractor to maintain builder’s risk insurance. Avoid bearing unlimited risk of loss until final acceptance.Seek to limit to losses due to your fault

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due

to fault of Subcontractor13. Contractor shall coordinate the Project so that the Project proceeds in an orderly and customary manner and so as to avoid newly installed roofing being used as a surface for on-going construction work. If Subcontractor’s work is damaged by other trades, Contractor agrees to backcharge the trades causing the damage. Contractor will purchase or arrange with Owner to maintain Builder’s Risk insurance.

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Dispute Resolution

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Dispute resolution - mediation, arbitration or litigation Where General Contractor’s office is in one location and the job is at another location, change the site of the dispute resolution procedure to the locality where the job is located.If contract gives General Contractor complete discretion to choose either litigation or arbitration, delete litigation. OK to add something along these lines: “unless the dispute with the subcontractor is the subject of litigation between the Owner and Contractor and Subcontractor is provided the same opportunity as Contractor to participate in the litigation.”

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39. With respect to dispute resolution, the Subcontractor agrees to participate in the same dispute resolution procedure as Contractor is bound by the General Contract provided Subcontractor had the same opportunity to participate in such proceeding as is available to Contractor. In the event of a dispute between the parties hereto, the parties shall seek to mediate the dispute. If mediation is not successful, arbitration shall be promptly conducted. In order not to cause any delay, Contractor shall follow Owner’s or Architect’s direction, subject to arbitration or the dispute resolution procedure governing Contractor.

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46.

in the vicinity of the Project.

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Termination for Default

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Termination for default – be sure there is reasonable opportunity to cure if the Owner or General Contractor believes or declares you in default.

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after providing Subcontractor with a reasonable opportunity to cure an alleged default35. 10%

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Contingent Payment Clause

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Contingent payment clause - depending upon the financial strength of the Owner and the applicable state law:Change to a time for payment provision; or Seek to limit to owner inability to pay by, for instance, adding: “provided that the reason for the Owner’s nonpayment to Contractor is not due to the fault of the Contractor”

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8. due to Owner’s insolvency. Subcontractor does not accept the risk of Owner nonpayment to Greystar due to the Greystar. If Subcontractor has performed its work but Owner does not make payment to Greystar for some reason unrelated to Subcontractor such as a problem or dispute with Greystar or another trade, Subcontractor shall be entitled to payment. If Subcontractor is not paid, Subcontractor shall be entitled to interest at the rate of 1% per month plus costs of collection, including attorney’s fees. Subcontractor shall not be required to continue to work if not paid.

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Attorneys’ fees

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One-sided attorneys fees (i.e. Owner or General Contractor is entitled to recover attorneys fees if any attorneys fees are incurred by General Contractor due to any type of alleged breach by subcontractor) - change to prevailing party.

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18. In the event either party is required to retain an attorney with respect to a dispute between the parties hereto, the prevailing party shall be entitled to recover from the losing party its attorney’s fees. All references in this contract to Contractor being able to recover its attorney’s fees shall apply equally to Subcontractor. This contract shall not be interpreted to mean that only the Contractor is entitled to recover attorney’s fees, but rather is intended to allow the prevailing party to recover attorney fees as part of its award or compensation.

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Damage for Delay

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No damage for delay clause - seek to modify by limiting to situations where the owner has caused the delay and general contractor is unable to recover from owner (i.e. add language stating: “provided that the Contractor is not the cause of the delay and is unable to recover from the Owner.” Look out for waivers of rights.

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Notices

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NoticesTime period should commence to run upon subcontractor’s knowledge or discovery of the delay; rather than commencement of the event causing the delay. Make reciprocal so that the general contractor is required to give notices of back charges in the same way that the subcontractor has to give notice of claims.

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13. Subcontractor’s

knowledge of

14. No

backcharge or claim for services rendered or equipment furnished by Contractor to Subcontractor shall be sought to be imposed by Contractor unless previously authorized in writing or unless written notice is given to Subcontractor within five (5) days of the event, act or omission that is the basis of the backcharge.

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Termination for Convenience

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Termination for convenience - provision applies only if the Owner terminates the General Contractor for convenience; in which case, same terms apply to subcontractor as apply to General Contractor.

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