Construction Law Today : Construction Lawyer & Attorney : Joshua Glazov : Design Build Contracts, Construction Bankruptcy

Interest Rates You'll Usually Find

Under most architects agreements and construction contracts, interest gets added onto late payments. I can't remember the last time I saw one of these contracts that didn't add interest to late payments and identify the rate of that interest. But almost as often I notice problems with how the rates are set. The two most frequent problems:

• Fixed interest rates. They could turn out to be too high. Or too low.
• Floating interest rates where the floating rate index is difficult, or impossible, to identify.

Whether fixed or floating, the interest rate you find in architects agreements and construction contracts is usually simple interest, not the more complex, and suspect, compound interest. In most cases it's better to stick with simple interest.

Fixed Interest Rates - The Virtue of Simplicity

Today we'll focus on fixed interest rates. In the next post we'll focus on floating rates.

Fixed rates offer a simple solution. It's easy to identify, never changes, and it's easy to calculate how much interest to add. Simple is usually good. But Albert Einstein said "everything should be made as simple as possible, but not one bit simpler." Sometimes the simplicity of a fixed interest rate is just too simple. When?

• When the amounts of money are large - $250,000 and up.
• When there is a long time between when (1) you set the interest rate and (2) interest starts getting added to a late payment.

Continue Reading...

• Email This
• Print
• Comments
• Share Link

In the last post we talked about how a judge decides who's the "prevailing party" that's entitled gets their attorneys fees and costs under the attorneys fee and cost provision in a contract (an "F&C provision").  Today we pick-up on the next issue - if you are the prevailing party, how much of your fees and costs do you get from the loser?

Both the contract and the statue exceptions to the American Rule mentioned in the last post limit what the prevailing party may get.  You're usually limited to "reasonable" before attorneys fees and costs.  So if you pass the hurdle of being the prevailing party, you're on to the next.  Proving:

• How much you spent on attorneys fees and in costs.
• The amount you spent is reasonable.

I assure you the other, non-prevailing, side will oppose this at least as obstinately as they did original issues in your dispute.  Odds are they'll say you spent too much on attorneys fees and costs; what you spent was not just unreasonable, it was excessive, profligate, and scattergood. 

Also, when it comes to "costs", don't expect that all the expenses you paid will qualify as a costs that the other side must pay.  The world of costs is often smaller than you think.

Continue Reading...

• Email This
• Print
• Comments (1)
• Share Link

Construction contracts and architects agreement often include attorney fee and cost provisions. These are those sections saying that if there is a dispute, the losing side must pay for the winning side's attorneys fees and costs. Sounds pretty simple. But it isn't. There's a lot of before getting the other side to pay for your attorneys fees and costs. Most hurdles fall into one of the following categories:

• Deciding who is the winner.
• Deciding how much should the winner get from the loser.

But before we start looking closer at these issues, you need to understand some legal history.

The American Rule

Traditionally, the "default rule" in the United States is that the loser of a lawsuit does not have to pay the winner's attorneys fees or costs. For over a century, lawyers and judges have called this the "American Rule". But in other Anglo-American countries (e.g., Great Britain, Australia), the default rule is that the loser does pay the winner's attorneys fees and costs.  Lawyers and judges call this the "British Rule".

Like nearly all rules, the American Rule has exceptions. When one of the exceptions applies, the loser must pay the winner's attorneys fees and costs. So what are the exceptions? The one's you see most often are..... Continue Reading...

• Email This
• Print
• Comments
• Share Link

In yesterday's post we talked about the recent case of Federal Insurance Company v. Konstant. That's the recent Illinois case upholding the section of an American Institute of Architects (the "AIA") architects agreement that imposes an early start to the statute of limitations on owner design defect claims. Today we'll talk about how that case could affect you if you're:

• An architect, other design professional, or one of their insurers.
• A prime contractor, subcontractor, one of their insurers, or a subcontractor default insurer.
• An Owner.

How Could This Case Affect You?

• If you're an Architect or other design professional. Those sections in your architects agreement imposing an early start on statutes of limitations will probably work. This is a big benefit because the Illinois statute of repose on design and construction defects is 10 years after the defective act or omission. But if those sections of your agreement work you turn the 4 year statute of limitations into a 4 year statute of repose. With only the most extraordinary exceptions, once 4 years passes after substantial completion, you're scott free. There's no compelling reason to think this would not apply to other design professionals like engineers. And because cases like this reduce the time that their insureds can be sued, this case benefits design professional errors and omissions liability insurers too.

Continue Reading...

• Email This
• Print
• Comments
• Share Link