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

No. 1: Identifying the Work

Every construction contract is about building something: the "Work". You can have a construction contract without many of the other nine things on this top ten list, but you can't have one without the Work. That's why identifying the Work tops the list at No.1.

The Work is what the owner pays the prime contractor for, the prime contractor pays their subcontractors for, subcontractors pay their sub-subcontractors for, etc., etc. It's the most important thing one side wants out of the contract. When the contract doesn't identify the Work very well, controversy abounds. At best those controversies stress relationships among the those involved in the project. At worst, as Sir Topham Hatt says, they cause "confusion and delay!" And confusion and delay often lead to claims and disputes.

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In the last bank failure post I promised a recap and wrap up on the D'Oench, Duhme doctrine and Section 13(e) of the Federal Deposit Insurance Act. Well, here it is:

• A recap of the D'Oench rule
   
• A brief explanation why federal judges and Congress created, expanded, and maintain the rule
   
• Practical observations on how to avoid trouble

Rule Recap

The best recap of the rule in D'Oench, Duhme and Section 13(e) is this paraphrase from Judge Phyllis Kravitch's decision in Baumann v. Savers Federal & Loan Association:

In a lawsuit over the enforcement of an "agreement" originally between a bank and a private party, the private party can't enforce against the bank's receiver any obligation that's isn't specifically memorialized in a written document that the bank's primary regulator would be aware of when examining the bank's records

Interested in more details of how this rule works? Just go to the TOPICS on the right sidebar of this page and click on D'Oench, Duhme.

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The Top 5 Reasons to follow Construction Law Today on Twitter:

1. You're away from where you get your RSS feed and want to know when new topics get posted here. Not familiar with RSS feeds? Watch this video to get started. Then come back and subscribe for an RSS feed to this blog
2. You want new links to news and information about construction contracts, disputes, and financing
3. You want unexpected and interesting content that I "retweet" from other Twitter users you haven't yet met
4. You want to join the conversation. You can converse on a blog like this by leaving comments below. But Twitter's a different kind of conversation. It's less like a stage presentation with Q& A, and more like a giant dinner party. Read something here you want to talk about? Direct a quick remark to me: @joshuaglazov. Or ask a question. Chances are I'll respond faster, and, you'll also probably get responses from plenty of others too. But remember to be careful and comply with the Terms of Use and Disclaimer before tweeting about what you see here. And never put anything confidential on Twitter; it's a worldwide billboard. Everyone with an internet connection can see what you tweet!!
5. You want to be the first to know whether the FDIC took over the bank with the construction loan on your project this Friday. Each Friday afternoon and evening I closely follow FDIC bank takeovers and tweet the names of each bank that failed and which bought their deposits and assets

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This past week the Chicago Tribune reported that resuming work on the Chicago Spire is one step closers. The Spire is a 150-story mixed use tower in Chicago designed by Spanish architect Santiago Calatrava that, when complete, will be the tallest building in North America. The Great Recession forced the Spire's developer, Dublin, Ireland based Shelbourne Development Ltd., to temporarily suspend work on the project.

But Shelbourne recently announced new tentative financing in the form of bridge and mezzanine loans. This financing will become active if Shelbourne can secure about $170M more that's necessary to restart work.

Additional financing candidates include Union Labor Life Insurance Co. and two trusts of the AFL-CIO union pension funds. They could each benefit directly from on return on investments in the project, and indirectly from mobilizing their members to erect the remainder of the project too.

Shelbourne also reports that about 30% of the Spire's 1,200 residential condominium units are already under contract for sale.

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Indulge me sometimes for drifting off topic, there's only so much one person can write about construction law and bank failures.

I haven't followed much of the scandal surrounding Tiger Woods and Elin Nordegren. I guess I'm afflicted with a perverse indifference to tabloid news about celebrities, whether they be athletes, entertainers, politicians, or some combination thereof.

But every Wednesday I listen to Frank Deford's Sweetness and Light on National Public Radio. And today's broadcast is about Tiger and Elin. Mr. Deford always gives a unique perspective and I felt compelled to mention it here. Regardless of whether you agree with anything he says, he's among the few eloquent voices to chime-in. Scroll down, click play, and listen closely. Is Mr. Deford's commentary more about Tiger and Elin, or more about us?

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In the last bank insolvency post I promised to tell you about the Federal Deposit Insurance Corporation's (the "FDIC") policy restricting use of the D'Oench, Duhme doctrine and Section 13(e) of the Federal Deposit Insurance Act (the "FDI Act"). That's our topic today. The D'Oench, Duhme Policy As the last banking failure crisis progressed through the early 1990s, it became obvious that although the FDIC had the right to use D'Oench and Section 13(e), it wasn't always the right thing to do. In some cases the outcome, at the very least, looked unfair or inequitable to whomever got D'Oenched. And sometimes it really was.

The FDIC recognized this problem and responded in 1997 with a policy officially known as the: 

But here we just call it the "Policy". Under the Policy, FDIC personnel must use extra care when deciding whether to D'Oench someone.  And even more critically, in select situations, the Policy requires FDIC personnel to get approval from headquarters in Washington, DC before D'Oenching a borrower, a guarantor, or someone else with a claim against a failed bank's receivership estate. The message: be careful with this stuff. Don't do something that might make us look like Mr. Scrooge.

The message from headquarters: Be judicious about using D'Oench, Duhme and Section 13(e).  Just because we have the right to do it, doesn't mean it will always be the right thing for us to do. 

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This afternoon I had the opportunity to present Fortifying Your Work-Out Against Future Bank Failure to Chicago's South Side Business Association (SSBA). The Grand Ballroom at 6351 South Cottage Grove Avenue in Chicago hosted the event. The SSBA is composed of many south side business owners, professionals, real estate developers, architects, engineers, contractors, and lenders. The seats were filled and the audience asked a lot of questions, most about how a bank failure could affect their business and how they could find opportunities from bank failures too.

If you'd like copies of the handouts from this presentation, just click here.

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