Lawyers often call other lawyers for advice. This kind of professional courtesy is no reflection on a lawyer’s ability. Sometimes the question is simply, “Does your state have any cases on point?” Or the questions may come from a unique set of facts and concerns about how best to present them in negotiations. Differences of opinion are always worth discussing. Recently, a colleague called and posed this question and background facts to me.

The question

The attorney’s client, an electrical subcontractor, was in a bind. The sub was fully occupied with its current projects when, out of thin air, it received a notice to proceed on a hotel job. That job had been awarded to the sub the previous year, but had been put on indefinite hold for reasons not relevant here. Just now, the hold had been released.

The sub could not mobilize for the revived hotel job for over a month, at least not until one of its current projects was completed. The sub’s primary concern, as expressed by her attorney, was a sizable liquidated damages clause in the hotel subcontract. The attorney suggested that the sub send an email to the general contractor explaining the dilemma and telling the general that the start date would have to be delayed. The question posed to me was whether this was a good idea.

What I was thinking and did not say

My first thoughts, which I kept to myself, were of what my own clients had done in similar situations. Here are some examples of the actions they took: 1) Send a polite email as suggested by my colleague and explain the dilemma; 2) Do nothing until the general calls and asks, “Where are you?” and then find a way to put him off; 3) “Tool box” the job by delivering some supplies and equipment to the new job site and then hold off sending in crews; 4) Call another electrical sub, a friend, and buy time by asking him or her to send a general foreman and skeleton crew to the job for preliminary work; and 5) Send an aggressive email to the general that the unexpected notice to proceed after such a long delay was a breach of contract and a meeting should be held to adjust the pricing before work can begin. What would you have done?

Analysis

Sometimes, the way a question is asked can make the answer very difficult to determine or can make the answer obvious. What I told my colleague was that she was asking the wrong question.

It was too early to be concerned about liquidated damages (LDs). LDs get applied for late completion, not late start. 

What the sub needed to know was whether the original job schedule for the hotel needed to be changed because of the late start. For example, had any work already been done that affected the sub’s work? Had the site conditions changed? Would the new start date push the job into bad weather? Had the prices for labor or materials escalated during the hold period? What was the status of the start dates for the other subcontractors?

The next question I raised was whether the subcontract had a no-damages-for-delay clause. If not, a long-postponed notice to proceed could be considered a breach of contract. If there were such a clause, however, the delayed start might not justify a claim for breach or extra costs as any damages for delay had been waived by contract.

Given the current uncertain lead times for delivery of electrical supplies and equipment, the general contractor might need to be alerted to the fact that any existing planned schedule could need substantial adjustment for start and completion dates. Another concern is whether all the specified supplies and equipment are still commercially available. The same questions should be raised about owner-supplied equipment. Purchase orders for chandeliers, vanity lighting, kitchen equipment, etc., would need to be reissued by the owner, with a real possibility of extended delivery times.

After hearing the concerns I expressed, the sub’s attorney decided to have the sub investigate and obtain answers to some of these issues and then set up a meeting with the general. The purpose of that meeting would be to discuss the time-related issues that may require a revised schedule, revised pricing and updated coordination with other subcontractors and suppliers on the project.

I strongly suggested that this may not be the time to tell the general contractor about her client’s unavailability. Instead, I recommended that the attorney review the subcontract terms and conditions. If there is a typical “changes” clause, or a time-extension provision (usually tied into the changes clause), the client may have a contract right to request time and money related to the prior suspension of the work and the recent notice to proceed.

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