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Construction Contracts, Change Orders, and Limitation-Of-Liability Clauses in Georgia

Poole Huffman, LLC

Construction contracts can often end up in disputes and, subsequently, litigation. There are many ways that construction contracts (and parties’ contractual rights and obligations) can become complicated and/or disputed. If you’re a party to a construction contract and you’ve been hauled into court — or the other side has failed to live up to their obligations and you need to take them to court — make sure you have the right representation from an experienced Atlanta commercial contracts lawyer.

The construction contract at the heart of one recent breach of contract case filed in federal court here in Atlanta is a good example. The parties were a general contractor and a subcontractor working on a boiler replacement project in Louisiana.

One way a construction contract situation can go awry occurs as a result of “change orders,” which is the industry term for amendments to the original contract. In this case, there were no fewer than six such amendments.

Additionally, many commercial contracts come with provisions that limit one or more of the parties’ legal liability. (These parties had a clause that said that “neither party shall be liable to the other for any indirect, incidental, consequential, special, exemplary or punitive damages arising from or related to this Subcontract Agreement, its performance, enforcement, breach or termination.”

The subcontractor’s lawsuit asserted not only that the general contractor failed to pay it for the work it did, but also failed to compensate it for hitting the deadline for an “Early Completion Bonus.”

As is true in so many commercial contract disputes, success comes down to understanding what your legal rights and responsibilities are under the specific terms of the contract. For example, in this case, the general contractor argued in its motion for judgment on the pleadings that the “Limitation of Liability” clause barred the subcontractor’s claims for breach-of-contract damages.

The court rejected that argument, using the language in the agreement itself to reach its decision. The contract provided a non-exhaustive list of specific examples of the types of damages that fell under the limitation. They included things like lost revenue, lost business, and anticipated profits. As the subcontractor sought compensation for types of harm not “exemplified in the Subcontract” and its non-exhaustive list, the limitation did not bar the subcontractor’s claim.

What Does (and Doesn’t) Establish Unequivocal Acceptance of an Offer

Additionally, the court resolved a dispute specific to one change order and, in so doing, indirectly reminded entities of the importance of proper documentation of both sides’ assenting to all amendments and modifications. In this dispute, the general contractor required the subcontractor to sign and submit an “acknowledgment and acceptance” of a change order within five days, which the subcontractor did not do. The notification also declared that “failure by [the subcontractor] to return order acknowledgment within said timeframe shall constitute complete acceptance of this Order as transmitted.”

The problem for the general contractor was that this isn’t the way Georgia contract law works. In this state, the law requires proof that the recipient accepted unequivocally. Simply failing to act before a deadline imposed by an offeror does not constitute proof that you unequivocally accepted the offeror’s offer. In other words, the general contractor did not have proof of unequivocal acceptance as the law demands, so it lost on that point.

When you need to protect your rights under your construction contract, the knowledgeable Atlanta commercial contracts attorneys at Poole Huffman, LLC are here to help. Whether your case requires resolution through mediation or litigation, we have the skills and experience to help you get to a fair and appropriate outcome. Contact our attorneys online or by calling 404-373-4008 to schedule your confidential consultation today.

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