Working on a public project poses both benefits and drawbacks. On one hand, a contractor working with a government agency can expect a reliable property owner and some assurance of payment. On the other hand, contractors paid by public dollars may be subject to more public scrutiny, evidenced by the Fair Pay and Safe Workplaces Order (though it was recently enjoined). Perhaps the biggest difference, at least regarding construction payment, is that public projects are not subject to mechanics liens. While contractors on public projects must post performance and payment bonds to secure the position of the awarding authority as well as subcontractors and suppliers, contractors themselves must rely on contractual remedies when dealing with payment disputes a public project. In one such contract dispute, a New York contractor lost its ability to assert claims that it had not properly preserved.
The case in question is LAWS Construction Corp. v. the Contract Dispute Resolution Board. While LAWS’ dispute was with the city of New York, it was adjudicated with the Contract Dispute Resolution Board (CDRB) of New York and later appealed. The dispute arose over work done on a New York golf course.
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In the contract between LAWS and the City of New York, the New York contractor agreed to a contract that “waives all claims except for those delineated in the application, and the particulars of any claims which [petitioner] does not agree to waive.” When LAWS submitted its extension request, the CDRB found, LAWS did so too broadly. The board found that LAWS’ list of claims lacked the sufficient particularity to preserve the claims included in the extension request. As such, LAWS’ claims were waived under the contract.
LAWS appealed the CDRB’s decision, but the appellate court found no reason to overturn the judgment. Though LAWS pointed out that under the parties’ prior conduct similar extension requests were not dismissed for lack of particularity, the court stated that the terms of the contract prevented estoppel claims against the City. The court also pointed to the more general principal that estoppel claims are unavailable against public entities in New York.
This is a tough case for New York contractors. The contractor had made 5 prior extension requests before his dispute arose. As previously mentioned, LAWS’ submitted those requests with similar descriptions in the past with no objection. However, on the 6th request, the CDRB found, LAWS’ failure to properly describe the claims in detail proved fatal, and LAWS unintentionally waived its claims under the terms of its contract with the City of New York. As the appellate court pointed out, a governmental agency’s deviation from past behavior does not provide for a cause of action in New York. LAWS’ reliance on the past acceptance of its improperly described claims was no basis for relief.
It’s hard to reconcile the differences between a contractor’s lien rights on private projects and their rights to payment on public projects. On private projects in New York, lien rights may not be waived before receiving payment. Mechanics liens are not available on public projects, and their rough equivalent, surety bond claims, are not available to prime contractors. These contractors must rely on other legal claims, such as the one in this case. While not perfectly equivalent situations, it seems unbalanced to allow a contractor to unknowingly waive claims on a public project while a contractor (or sub or supplier) on a private project is statutorily barred from waiving lien rights before payment has been received.
In any event, this case shows that a contractor cannot let its guard down just because it is contracting with a public entity. New York contractors should also note that when dealing with governmental entities, relying on behaviors or promises not explicitly within the contract is a dangerous game.