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This is the third of a three-part series exploring the Texas Supreme Court’s decision in Zachry Construction Corp. v. Port of Houston Authority of Harris County. A summary of the case can be found at Part 1 of the series. Part 2 addressed the “no-damages-for-delay” aspects of the case and commented upon the current state of North Carolina jurisprudence on the enforcement of such contract clauses. This post explores the decision’s holding with respect to lien waivers and highlights some key issues contractors should bear in mind before executing these often-overlooked instruments.
What Zachry Says About Lien Waivers
By way of reminder, here’s the pertinent lien waiver language that gave rise to the dispute over whether Zachry waived its right to claim $2.36 million in liquidated damages (“LDs”) that had been withheld by the Port Authority:
[Zachry] hereby acknowledges and certifies that [the Port Authority] has made partial payment to [Zachry] on all sums owing on Payment Estimate Number [–––] and that it has no further claims against [the Port Authority] for the portion of the Work completed and listed on the Schedule of Costs in Payment Estimate Number [–––].
The Port Authority argued this language constituted a waiver of all claims for payment; Zachry argued it only applied to lien claims. The trial court saw it Zachry’s way, and the Texas Court of Appeals reversed.
The Texas Supreme Court thought the jury got it right.
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This is the second of a three-part series exploring the Texas Supreme Court’s decision in Zachry Construction Corp. v. Port of Houston Authority of Harris County. A summary of the case can be found at Part 1 of the series. Part 3 will address the lien waiver issues raised by the decision. This post considers the “no-damages-for-delay” aspects of the case, specifically exceptions to enforcement of such contract clauses.
What Zachry Says About No-Damages-for-Delay Clauses
The Texas Supreme Court began its analysis by noting that as a general rule, a contractor can assume the risk of, and not seek damages for, construction delays by agreeing to a no-damages-for-delay clause (“NDFD clause”) in a construction contract. The court, however, then went on to note five “generally recognized exceptions” to the enforcement of such clauses:
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Because my practice is focused almost exclusively on construction projects in North Carolina, I focus far more attention on local case law developments than on appellate decisions from other states. But every now and again, a decision from some far-flung jurisdiction gets published that is just too big, too fascinating and too important to overlook.
Zachry Construction Corp. v. Port of Houston Authority of Harris County, handed down by the Supreme Court of Texas (the “Texas Supreme Court”) on August 29, 2014, is just such a decision.
As set forth in the attached order, The Supreme Court of the United States will NOT review the decision of the Minnesota Supreme Court upholding legislation by the Minnesota state legislature that revives long-extinguished design defect liability arising from the 2007 collapse of a portion of the I-35W bridge in Minneapolis.Prior to the collapse, Minnesota’s “statute of repose” (a statute that limits the time during which an action can arise) for design defects was 15 years. Despite the fact that the design work for the bridge in question was performed in the mid-1960’s, and despite the fact that the designer of record — Sverdup & Parcel and Associates, Inc. — had been bought out by Jacobs Engineering in 1999, the Supreme Court’s denial of certiorari means that Minnesota is now free to pursue $37 million in indemnity claims against Jacobs Engineering that had expired under the 15-year statute no later than the early 1980’s.
This is a scary outcome for participants in the construction industry, with potential insurance, contract drafting and document retention repercussions. I’ll be back in the days ahead with additional analysis. In the interim, you can read AGC’s brief in favor of review here, which sets forth quite eloquently the reasons why the Supreme Court should have reviewed and reversed the Minnesota Supreme Court’s decision.
UPDATE (5/29/12 1:38 p.m.): Coverage from Engineering News & Record can be found here.