In 1997, misguided individuals initiated a practice of recording liens against the homes of public officials and other public figures. Every county in Oregon has a system for recording information about property ownership rights. A lien is a limitation on the property ownership rights. A mortgage is an example of a lien and so is a contractor’s lien. Both of those liens operate to secure payment by permitting the lien holder to force a sale of the property against which they are recorded.

The improperly recorded liens obviously created hardships, and the Oregon Legislature intervened to promptly address the misuse of the public recording system used to establish such liens. In so acting, the Legislature had to balance the rights of people with valid liens, such as unpaid construction contractors, with the rights of people wrongfully subjected to frivolous liens.

In so striking this balance, the Legislature chose to distinguish between public officials and the rest of the public. It first defined an improper lien as an “invalid claim of encumbrance.” It then provided that a public official can automatically remove an invalid claim of encumbrance by providing notice that the lien was invalid, consistently with a statutory notice procedure. This is a powerful tool that immediately addresses the politically motivated attacks that had been made on some public officials.

But the Legislature did not leave out the rest of the population. Although it required more than a mere notice, it provided a procedure allowing any person to promptly challenge an invalid claim of encumbrance. This challenge requires the person to go to court. But instead of being required to file and endure an entire lawsuit, a person who seeks to challenge an invalid lien through a rapid procedure essentially demands trial within a month of filing. For context, state courts typically aim to have cases go to trial within a year of filing.

Another area the Legislature sought to balance was the type of liens that could be challenged. For example, the Legislature provided that the procedure to rapidly challenge a lien could not be utilized against certain financial institutions and insurers. Likewise, the challenge is not permitted against government agencies that record liens.

These exceptions leave in play a large body of potential liens that might be challenged. A construction contractor’s lien can be challenged using this process. Construction liens are powerful tools that contractors can use to enforce their payment rights. However, those powerful rights are subject to strict requirements. Contractors must meet timing and notice obligations to properly record a lien against property. If a contractor fails to satisfy any of those deadlines and attempts to record a lien against property, such a lien is subject to the prompt process set forth by the Legislature to challenge invalid liens.

A notice of lis pendens can be challenged by the rapid process as well. A notice of lis pendens is a notice that is recorded against property to alert the world that a lawsuit involving an interest in real property is taking place. Anyone who buys the property subject to the notice of lis pendens does so subject to the ongoing lawsuit. Notices of lis pendens accordingly bind property to the lawsuit that is filed during the life of the lawsuit. That powerful tool can operate to harm a property owner because the owner may not be able to sell the property or use the equity in the property for financial benefit.

However, a notice of lis pendens is permitted only when an interest in real property is at issue in a lawsuit. So the notice cannot be used to alert the world to any lawsuit at all. When a person records a notice of lis pendens for any reason other than to signal a dispute over an interest in real property, the notice of lis pendens can be promptly discharged.

These powerful tools – construction liens and notices of lis pendens – are examples of liens that are subject to rapid challenge. These rapid challenges have not been utilized frequently, in part because they are not proper for every situation. Success challenging a construction lien or lis pendens does not typically make the underlying dispute go away. The contractor that loses its lien rights may still have the right to be paid. Likewise, if a notice of lis pendens is terminated, the underlying dispute may still remain.

Notwithstanding these limitations, the termination of a lien can shift the risks the parties face in the litigation and tilt the resolution posture in favor of one party or the other. Parties involved in disputes where a lien is implicated should consider whether rapidly challenging such a lien is strategically wise under the circumstances.

Dave Anderson is a shareholder with Schwabe, Williamson & Wyatt. He focuses his practice on real estate and construction. Contact him at 503-796-2456 or at danderson@schwabe.com.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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Construction contractors put safety first. They set policies requiring jobsite conditions to be safe, constantly track and improve upon processes to maintain safety during work, and collaborate with owners, subcontractors and consultants to consistently maintain jobsite safety requirements. Contractors maintain safe work practices for the sake of safety and not merely to avoid liability. However, the way in which contractors operate to maintain safety can also help them avoid potential liability.

The first and most obvious way for Oregon contractors to manage liability in connection with work accidents is to keep workers’ compensation insurance. This simple step is mandated by Oregon law and reflects a judgment made long ago by the Oregon Legislature that the workers’ compensation system is an effective way to equitably make an injured worker whole.

There are many opinions about the workers’ compensation system, but that is not the focus of this article. Instead, I’m looking at a much lesser known situation where a contractor can be sued for a jobsite injury under Oregon’s Employer Liability Law (ELL).

Such a scenario may surprise contractors who understand that the workers’ compensation system is the exclusive process in which injured workers can pursue compensation. The issue arises, however, where a worker is not directly employed by a contractor (or other entity) and is injured on a jobsite controlled by the contractor. In that situation, the injured worker would not be able to make a claim against the contractor’s workers’ compensation insurance because the worker is not employed by the contractor.

However, the ELL permits people who are not necessarily employees of a contractor to bring claims against contractors who are in control of a jobsite. As many contractors seek to achieve, the ELL requires employers that have control over dangerous work to use every device and precaution that is practicable to protect employees. And, as noted, courts have applied the ELL to “indirect employers.”

A contractor might be an indirect employer if a court concludes that the contractor’s conduct satisfies one of three standards: first, if the contractor was in a “common enterprise” with the worker’s employer; second, if the contractor had a right to control the way the dangerous work was performed; or third, if the contractor actually controlled the way the dangerous work was performed. Any one of those three factors could result in an employer being responsible to satisfy the ELL’s high standards.

This potential issue calls for contractors to consider the distribution of safety responsibilities frequently when approaching a jobsite. This is because construction sites will frequently be considered to require dangerous work and implicate the high standards set by the ELL.

Several common practices could potentially implicate ELL exposure. Sometimes on a jobsite workers will use equipment belonging to another contractor. Courts have held that when one contractor shares equipment with another contractor, the two are engaged in a “common enterprise” for the purpose of ELL liability. So if a worker is hurt using equipment belonging to another contractor, the worker may have a claim against that contractor.

Another event that implicates the ELL arises when a contractor implements a safety protocol but then does not follow through with the protocol. For example, a general contractor may instruct a subcontractor to cover a dangerous condition to maintain jobsite safety. If the subcontractor fails to do so and one of its employees is injured, that person may sue the general contractor under the ELL.

One last example arises when a prime contractor retains in its subcontracts the right to specify safety protocols. An employee of the subcontractor who is injured may subsequently claim that the prime contractor’s retention of the right to control safety protocols supports liability under the ELL. Indeed, when a prime contractor in fact directs a subcontractor to install a safety measure, such as fall protection, and that fall protection fails, the worker who is injured as a result may have an ELL claim against the prime contractor that directed the fall protection even though the prime contractor did not employ the worker.

Safety was the starting point in each of these examples. The failure that led to potential liability in each example is that the entity initiating the safety requirement did not see the issue through. For example, workers are not put on equipment until they can satisfy their employers that they can operate the equipment safely. By allowing another worker to use equipment without proper vetting, an employer can face ELL exposure, or a contractor that demands a safety measure should in fact see it through. Why demand a safety measure if it is not worth the effort of full implementation? Following up on safety meeting minutes is therefore important.

Indeed, contractors are very good at maintaining jobsite safety. By staying vigilant about safety practices and appropriately managing common practices at jobsites, contractors can keep jobsites safe and also limit ELL exposure.

David Anderson is a shareholder with Schwabe, Williamson & Wyatt. He focuses his practice on real estate and construction. Contact him at 503-796-2456 or at danderson@schwabe.com.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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Oregon and Washington decriminalized marijuana use several years ago. Government agencies now have public health data related to that change in law. Several questions remain, but the data suggests that managing the decriminalization of marijuana challenges contractors in the region.

The challenge is complicated by a shortage of skilled workers, particularly younger ones. Safety and workforce challenges are related in the context of marijuana because our knowledge of marijuana’s impacts is evolving at the same time younger people are evolving in their tolerance of the risks associated with marijuana use.

The federal Centers for Disease Control and Prevention reports () that younger people use marijuana at higher rates than older people. Meanwhile, younger people are in short supply for contractors because fewer such individuals are pursuing careers in the construction industry.

It is unsafe for workers under the influence of marijuana to operate construction equipment. This is supported by an AAA Foundation for Traffic report (). The study found that in the year marijuana was decriminalized in Washington, traffic fatalities involving THC (the psychoactive ingredient in marijuana) doubled. Similarly, the Oregon Health Authority reports () that monthly marijuana-involved emergency department visits doubled from October 2015 (when only limited early retail marijuana sales were permitted by the state) to November 2017.

Those reports of correlation do not prove that marijuana caused the accidents reported above. The time or duration of impairment due to marijuana use is difficult to measure.

Research published () by the University of Washington notes that the duration of effect after a dose of marijuana is still the subject of debate among scientists. But, the research notes, “some consensus exists on 2-4 hours of effects after smoking decreasing quickly after maximum impairment of 20-40 minutes.” Depending on the product and method of ingestion, “mild effects have been documented at six hours or more post dosage.”

As the CDC summarizes the issue in the context of traffic safety: “limitations related to roadside and toxicology testing, marijuana detection time, and co-use of substances contribute to uncertainty about risk.”

Against these uncertain risk parameters, younger people appear to be more tolerant of the risks marijuana presents. The Washington State Liquor and Cannabis Board reported data showing that in 2002, 22 percent of Washington 12th graders believed that regular use of marijuana had no risk or only a slight risk. By 2016, risk tolerance related to marijuana had changed enough to raise that number to 45 percent.

This data should not be extrapolated too far. The Washington 12th graders could have been answering the question regarding risk with a view toward long-term health impacts and not the riskiness of using marijuana while driving or working on a construction site.

The changing risk tolerance is also not surprising. People frequently discount well-known risks. For example, many more people fear flying with a commercial carrier than driving. Flying with a commercial carrier is statistically safer than driving. The irrational confidence in driving is probably because more people are familiar with how to drive than how to fly an airplane or simply drive more than fly.

With decriminalization, marijuana has become more common. Risk perceptions among people who come of age in a time that marijuana is more common will differ from older generations. As the Washington State Liquor and Cannabis Board data indicates, people who are completing high school today are more comfortable with marijuana than their peers in the past. This could suggest that the younger people whom contractors hope to recruit are more likely than older generations to be marijuana users.

Other data indicates that the people who are attracted to construction work use marijuana at greater rates than the general population. The CDC reports that 16.5 percent of construction workers reported using marijuana in the past 30 days. That rate of use exceeded the general population rate of 14.6 percent. And, among “safety-sensitive occupations,” construction workers reported the highest rate of marijuana use in the past 30 days of the date surveyed.

Construction workers are also unique in that they are less influenced by drug testing. The CDC reports that the reported “current use of marijuana was lower in industries that are known to perform routine drug testing on employees.” But, although the CDC acknowledged that construction workers are subjected to drug testing, they still reported a higher-than-average usage rate.

Therefore, contractors interested in managing safety face at least four challenges. First, the duration of impairment associated with marijuana use is uncertain, so evaluating whether a person is safe to work is an uncertain endeavor. Second, younger workers whom contractors are interested in recruiting are potentially more tolerant of risks associated with marijuana use than older workers, which suggests (but does not necessarily mean) that they may be less vigilant with respect to the risks associated with marijuana use. Third, construction workers are generally more likely to use marijuana than people who work in other safety-sensitive occupations, so marijuana safety is an issue that contractors must take seriously. Fourth, drug testing does not appear to deter construction workers from using marijuana to the same extent as drug testing does in other fields.

These challenges are manageable. Different people can work together with different perspectives regarding marijuana use. Construction teams can be unified in a quest to achieve the highest safety standards. Given that both knowledge about marijuana’s impacts and attitudes toward marijuana use are evolving, the key is to recognize that changes related to marijuana safety will occur frequently. Re-evaluate marijuana policies on a regular basis to ensure that policies and practices are delivering on safety objectives.

David Anderson is a shareholder with Schwabe, Williamson & Wyatt. He focuses his practice on real estate and construction. Contact him at 503-796-2456 or at danderson@schwabe.com.

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Significantly more than 90 percent of disputes are resolved by a negotiated settlement rather than a court decision. Also, 100 percent of contracts are entered following some sort of negotiation process. Likewise, every change order or contractual adjustment follows a negotiation.

Businesses do not wind up in bet-the-company litigation all the time, but they do wind up in bet-the-company negotiations frequently. Some just do not recognize their own peril. Consider a few thoughts on the negotiation process.

Parties frequently wind up in disputes larger than necessary when they realize belatedly that they were involved in a negotiation. Additional, out-of-scope work is often required to complete construction projects. Many parties do not realize that their contracts provide guidance for the conduct of the negotiation. Notice provisions, change orders and dispute resolution procedures are all ways to structure a negotiation. Contractors that do not recognize the implementation of these mandatory provisions as the beginning of a negotiation place themselves in peril.

Recognizing that a negotiation is afoot does not open the door to opportunism. The negotiation opens the door to considering options. A change order process is not an invitation to fleece a partner on the construction project. It is a process to identify conflicting interests and resolve them in a way that both sides find agreeable. The negotiation thus opens the door to considering options.

Contractual obligations that can be enforced in court should be considered (to ignore such a provision can invite disaster). Likewise, relationships should be considered. A legal right to fleece a business partner tomorrow can be an opportunity lost the next day. Businesses will need to identify additional case-specific factors that inform their approach to a negotiation. Public perception may matter. Or a narrower subset, such as the construction community, should be considered.

A rigorous exploration of options can help prevent a hasty bargain. The discipline can also identify interests or values that must be protected even if such issues were not identified initially. This process of exploring options can be tailored to the appropriate set of issues or interests at stake. No one would recommend spending months evaluating options on a miniscule issue, but such time may be necessary for major subjects.

Substantive communication regarding a negotiation should begin only after a thorough analysis of options and interests is completed initially. There is substantial power to thoroughly understanding one’s own situation – many parties do not do this. And knowledge that there are alternatives to a negotiated agreement can aid in assessing a proposed agreement in the first place.

There is a debate among many folks over who should make the first move in a negotiation. Some would say that the person who makes the first move gets to frame the negotiation by establishing a starting point. Others note that the human impulse to compromise suggests that power lies in the second offer, which is where a person can establish a desirable midpoint for the parties to eventually land upon.

Either way, it’s more important to spend more time listening than speaking. This critical element is easier preached than practiced. The goal of a negotiation is to make a deal. If you have already identified your various options, you do not need to waste your time explaining your options to the other side. You want to learn what the other side considers its options to be. This critical knowledge is where the advantage in negotiation sits. In every negotiation, each side has the right to disagree. Knowledge about the cost of disagreement to yourself (your alternative to agreeing with the other side) and the cost of agreement with the other side (what it is offering) gives immense power.

Immense power comes from knowing the game that is being played. Too few people even realize that they are negotiating – they do not realize they are playing the game. More power comes from knowing the score of the game – the options that both sides are dealing with. All of this power can be had by first recognizing when you are in a negotiation, and then recognizing what the other side considers the score to be and what you consider the score to be. Negotiations happen all the time, and they can be won.

David Anderson is a commercial litigator with Schwabe, Williamson & Wyatt. He focuses his practice on real estate and construction. Contact him at 503-796-2456 or at danderson@schwabe.com.

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With the construction season winding down, contractors are going to discover whether contractual details were communicated properly. Change orders could be deemed ambiguous or delivered improperly on the one hand (if they were provided and accepted at all). On the other hand, a happy customer may be grateful to have been regularly updated regarding the status of a project. In this vein, many contractors are noticing that old legal rules regarding communications created in the days of pencils and paper do not always reflect reality at construction sites where most project managers now operate with a smartphone or tablet.

Those project managers keep getting younger and more adept with alternative communication devices. A dirty legal secret is that a contract can be changed or entered by text message, email, instant message or some other new form of communication. Where previous generations of contractors had better ability to control promises made by the company, communications from company-owned devices are harder to control but still capable of binding a company.

Contractors are beginning to recognize this reality. As but one example of the attention this issue is getting, the annual summer convention of Associated General Contractors’ Oregon-Columbia chapter offered strategies for managing the variances in the ways different generations communicate.

The strategy analysis begins with an understanding of agency law. All companies have agents, which is a legal word for the people who can make commitments or representations that are binding on the company. To determine the identity of a company’s agents, the law considers not only the company’s perspective, but also the perspective of third parties, such as customers or other contractors up and down the chain of construction delivery. If a customer reasonably believes that a company employee has authority to bind the company, the employee is an agent of the company even if the company does not want that to be the case.

As a result, company electronic devices are potential liabilities for the company. Employees should be aware that communications from those devices (text, voice, email, etc.) could carry consequences for the company, regardless of whether the employee’s intent is to legally bind his or her employer.

Another problem with the proliferation of electronic writings is that, in the event a dispute arises, the writings help reconstruct the events that led to the dispute. In that sense, accurate and clear writings are helpful; terse text messages or casually worded emails can be worthless, confusing or (worse) used to misconstrue the events that led to the dispute. So, prolific electronic communications present a risk.

However, the market now expects a greater level of communication from employees at all levels and from all generations. Younger people are not the problem. Electronic devices make communications fast and cheap. The problem is managing the risks associated with increased communication ability.

The first step is clear communication with customers about authority. Most construction contracts contain provisions governing how notices are to be provided. Those notice provisions can identify the individuals with authority to bind the parties, the form the notice must be made (electronic, paper, etc.), and the location where the notice must be sent.

Another step is training less experienced employees from the younger generations. Less experience means weaker judgment. Weaker judgment in this context means a lack of appreciation for dangers associated with lax communications that are incomplete, speculative or simply wrong. Any such communications can prove dangerous when a dispute arises and parties use writings to support competing versions of the disputed events.

Anyone with a device should be provided training on how a writing can be binding on the company – particularly if there is no contractual protection identifying the individuals who can bind the company. Training and feedback can help younger employees spot issues and communicate correctly to resolve those issues. Training should also help all employees remember that an underused response is, “I don’t know but will find out.” Rapid-fire guesses lead to misunderstandings at best and litigation at worst. If a guess is in writing, it may be hard to avoid during litigation.

Finally, contractors should also make sure that their contracts are up-to-date. Do the contracts that are being used contain a notice provision? That is a good start. The next question is whether the notice provision reflects current business realities. Does the contract require that notices are sent by fax? Do you have a fax machine? Technology can make notices much easier to manage and evaluate, but only if the technological uses are consistent with contractual obligations.

Technological and employee evolution requires constant diligence. Many developments can make existing legal rules appear old-fashioned or out-of-touch with common practice. But simple and careful management of new communication methods can help create an environment that maximizes the benefit of the new devices and old legal rules.

David Anderson is a commercial litigator with Schwabe, Williamson & Wyatt. He focuses his practice on real estate and construction. Contact him at 503-796-2456 or at danderson@schwabe.com.

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A contractor performing work on a federal project in Oregon could be sued or forced to sue in Hawaii over disputes arising out of work on that federal project within Oregon. Likewise, a contractor that agrees to a single contract requiring work on federal projects in multiple states could be forced to litigate claims that arise out of that single contract in multiple states.

The place where disputes are resolved will have a strong bearing on one’s resolution perspective. Litigation in one’s backyard is substantially easier to manage than litigation on the other side of the country. Litigation in numerous states could be crippling, where the same litigation in one state would make financial sense.

What’s more: states have different rules regarding interest that accrues on unpaid amounts, the types of claims a contractor might bring, and the sorts of witnesses that are available. You might not be in Kansas anymore; or, more precisely, you may have a problem because you are in Kansas. This strange situation makes it very important that an acceptable location for dispute resolution be chosen for contracts for federal construction projects.

The Oregon Legislature anticipated this potential issue and enacted a statute to ostensibly protect Oregon contractors. Under ORS 701.640, “a construction contract” may not include any clause that “requires any litigation, arbitration or other dispute resolution proceeding arising from the construction contract to be conducted in another state.”

Other states have enacted substantially similar statutes, which appear to be based on an assumption that the location of construction should also be the place where related litigation occurs. But those statutes fail to consider federal projects, which do not necessarily arise in any state and can involve work in multiple states.

For example, a federal court in Texas ruled in a case involving J-Crew Management Inc. and Atlantic Marine Construction Co. that a dispute arising out of work on a federal project in Texas could be litigated in Virginia because the parties’ contract chose Virginia as its dispute resolution state. The court explained that the state of Texas had no right to “exercise legislative jurisdiction over property located entirely within the federal enclave.”

So if an Oregon court were to follow the same reasoning, federal projects performed within the boundaries of Oregon could be subject to dispute resolution in far-flung locations.

Federal projects sometimes involve work in multiple states. Imagine a federal project with work in 10 states. A dispute arises over a payment of $500,000. Neither party wants to compromise on that amount of money. They have a forum selection clause for one state, but that state is more favorable to one of the parties. The other party might threaten to force litigation in all 10 of the states where the work was performed.

How could that be done? Statutes like ORS 701.640 arguably require that construction disputes be resolved in the state where the construction work occurred. If the construction work occurred in 10 different states, ORS 701.640, the argument goes, would require litigation in 10 different states. No legislature would have intended such an expensive and absurd result; these types of projects are unique and best governed by the dispute resolution provision in the parties’ contract, which could have been reviewed by both parties in advance of any dispute.

How should a contractor protect itself in this crazy environment? First, read the dispute resolution clause in the construction contract. Disputes arising out of work on federal projects could be subject to resolution in a far-flung location. Contractors should be aware of whether they are taking that risk.

Second, if a contractor is working on a federal project involving multiple states, that contractor would be well served to choose a single location for litigation. Your friendly lawyer would prefer that you choose Hawaii.

David Anderson is an associate attorney with Schwabe, Williamson & Wyatt. He focuses his practice on real estate and construction. Contact him at 503-796-2456 or at danderson@schwabe.com.

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Litigation costs drive dispute resolution for all litigants, including contractors. If a case is expensive to litigate, the parties’ negotiation positions will be affected by who bears the burden of proof on critical issues. One such critical issue common in construction is whether the plaintiff filed its claim in a timely manner. The well-established ground for this battle is the statute of limitations.

In the world of defending construction-defect claims, the statute of limitations issue presents a challenge because most owners will take advantage of a discovery rule that provides the owner additional time to file a claim if the owner did not “discover” the claim quickly. An untested theory of laches may be a useful approach to turn the tables on a plaintiff who makes such an argument.

The statute of limitations for negligent construction work is two years from date of discovery. Accordingly, claims can survive much longer than two years if a plaintiff claims that it did not realize there was a construction defect.

Contractors can use tools to prevent potential plaintiffs from asserting that they did not discover negligence. First, contractors can insist on contractual terms that limit the time period to bring claims based on construction work (this option works only for those that sign the agreement). Second, contractors can maintain documentation of critical steps in the construction process, such as substantial completion. That is because the Legislature and courts are willing to limit the time in which a plaintiff can bring a claim if the contractor obtains a valid certificate of substantial completion.

Those tools are not always utilized effectively. A pre-contractual negotiation to limit litigation remedies may not be practical from a business perspective. Human error can result in failure to obtain or maintain the certificate of substantial completion. An owner can sell the property on which work was performed, thereby potentially undermining any prior contractual time limitations. Even the best planning cannot perfect the legal defenses to subsequent litigation. And the difficulty of establishing a statute of limitations defense directly affects the parties’ resolution positions and the related cost of a litigated resolution.

A statute of limitations defense may be hampered because of a property sale, human error or some other reason, but the little-used defense of laches may provide help. Courts apply the doctrine of laches to reject a plaintiff’s claims when the plaintiff has unreasonably delayed asserting a claim, thereby causing prejudice to the defendant.

It may be time for contractors to start testing the extent to which laches can turn the tables. That is because the contractor-defendant bears the burden of proving the statute of limitations defense. In contrast, if the plaintiff brings a claim outside of the statute of limitations period in reliance on the discovery rule, the contractor-defendant may be able to persuade a court that laches should preclude the claim. That is because a contractor that is “prejudiced” (harmed because of the delay as a result of lost evidence due to the passage of time) might not be found to bear the burden of proving laches of stale claims. Instead, the plaintiff would bear the burden of disproving laches.

The shifting burden of proof may be enough to tip the scale on a timing issue. The theory is untested. And in that light, the theory can provide a contractor with a stronger negotiating position with a plaintiff who does not want to be on the wrong side of a novel theory. Moreover, the theory could work in the right circumstances, thereby providing a complete legal defense to the contractor. Laches may provide comfort to a contractor whose statute of limitations defense is hampered by a technical or practical barrier.

David Anderson is an associate attorney with Schwabe, Williamson & Wyatt. He focuses his practice on real estate and construction. Contact him at 503-796-2456 or at danderson@schwabe.com.

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Most non-lawyers are well-steeped in two legal principles: possession is nine-tenths of the law and an agreement that is not reduced to writing never happened. Neither principle is entirely accurate, but each provides helpful guidance for avoiding legal challenges or, if such challenges occur, creating the best environment for resolving those challenges.

As to the second trope involving writings, contractors face a critical question: “How much writing is the right amount?” Each day on a project can involve hundreds of modest agreements and judgment calls that cannot each be reduced to writing. The following principles can help businesses develop practices that yield the right amount of writing.

Anything people write can be used against them. In litigation, anything a party says or writes can be used in court. Writings can protect against an unscrupulous opponent who might be tempted to manufacture an oral agreement; but writings can also be taken out of context by the same unscrupulous opponent. Therefore, nothing should be reduced to writing without a brief pause to confirm that the circumstances described are being portrayed accurately.

Too much writing is a bad thing. Reducing every decision to writing is impractical. The writings cannot be organized to be revisited subsequently. Reducing so many things to writing so that nothing can be found in the future renders all writings useless: Why write something down if it’s not preserved anyways? Moreover, circumstances can change frequently. Florid writings are susceptible to being taken out of context.

Not enough is also bad. A partial writing can be worse than too much writing. Imagine, for example, a summary of a negotiation that does not include the final agreement. Such a summary can be taken out of context and treated as a summary of the final agreement and not the negotiation summary that it is. The summary is thus dangerously partial if it does not clearly state that it is part of a tentative – not final – agreement. It is also dangerously partial if it does not clearly state that it is a summary of some agreement terms, but not all.

Feelings are fleeting. Try not to reduce feelings to writing. Third parties, such as juries or judges, do not always share the righteous indignation that a person feels in the moment. On the flip side, happiness about perceived quality can give way to dismay if the initial perception of quality proves to be inaccurate.

Guesses are dangerous. Like feelings, guesses are dangerous. People have difficulty recording all of the data upon which they base a guess. Numerous psychological studies establish that humans render guesses based on misperceptions or shaky reasoning.

Facts are our friends. A summary of factual events can help to reduce repetition of factual investigation. Also, people often have plastic memories that tend to morph consistently with perceived self-interest. A cold summary of facts can provide a persuasive record of what, objectively, did happen.

Consistency is the key. A party that writes the same information down routinely finds it easy to continue to write down the same information. The recording of that same information also creates the impression that the written information is important (so it should be important).  Finally, once developed, habits can be easy to maintain.

Confirmation is king. Writings are most persuasive when they have been shared with an opposing party. In a litigation setting, writing carries particular punch when a party can ask its opponent: “If you disagree with the writing now, why didn’t you object the first time you received it?” That question is even harder for the opponent to avoid if the opponent in fact confirmed the writing.

Confirmation is also helpful to avoid conflict and litigation. A misunderstanding can be averted early if a writing highlights when there is still an opportunity to resolve it.

In sum, writings should be factual, consistent and confirmed to be helpful. Writings that are incomplete, indirect or steeped in temporary feelings can be misrepresented and lead to further disputes.

David Anderson is an attorney with the law firm of Schwabe, Williamson & Wyatt. He practices in the firm’s litigation and construction groups. Contact him at 503-796-2456 or at danderson@schwabe.com.

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The construction industry is entering an exciting new season with numerous projects hatching throughout the city. Those projects will begin with great enthusiasm, with many agreements made by merely a handshake and each party’s sincere commitment to the deal. A thoughtful written contract is nonetheless essential to these agreements between even the most ethical parties, because litigation is the product of ambiguity – what was really agreed upon? – and money.

Contracts are not solely defensive. They provide a road map so that parties can quickly resolve any misunderstandings or disputes that may arise. Construction contracts should contain essential terms that record each party’s promises and also terms that tell the parties what to do when the unexpected occurs. How should a change be handled? Who is responsible for what kinds of delays? How will the parties know when a contract has been performed fully? When is the right to payment earned? How will the parties communicate? And how will disputes be resolved between the parties?

Essential terms

If the parties cannot agree on the scope of work and the amount of money that is to be paid for that work, there is a problem. Although defining those two terms should be a basic component of a construction contract, parties do not always clearly define the amount of money that should be paid for the scope of work.

If those terms are not clearly defined, a dispute will arise. It should be self-evident that contracting parties should know the scope of work and amount to be paid for that work. But this frequently occurs when parties are accustomed to doing business with each other and are lulled into a sense of complacency. That informality has benefits, but it also carries risks.

Management terms

Management terms help to identify how to handle unexpected events over the course of the contract. Change order instructions and advance agreements regarding delays provide the parties with a process for knowing how the essential terms have been modified based on events or circumstances unforeseen at the time of contracting.

As with the essential terms of scope and payment, strictly complying with contractual change order procedures can seem unnecessarily cumbersome, particularly when the contracting parties know and are comfortable with each other. However, the gains associated with cutting corners on complying with a change order procedure can be quickly lost when the parties realize that they did not share an understanding with respect to a particular change order.

Payment processes defined in the contract provide additional help managing the contract. This is an area where statutory gap fillers respecting the timing for payment are mandatory. However, if the payment processes are reduced to writing, contractual management is easier. Plus, the parties can tailor the payment processes to their own business practices by directing payment to a specific office location, invoices to the attention of a specific person, and the necessary protections related to lien waivers.

Finally, an often litigated management issue is how the parties should know that the project is completed. It is not uncommon for a contractor or owner to dispute whether a project is completed. The parties in that event often sweep the dispute under the rug after some back and forth and then move on without agreeing that the project has been completed.

As a consequence, an owner may hold some retainage that is due and elect not to pursue a claim for incomplete performance. The contractor might elect not to seek retainage and simply walk away from the project. This is a problematic standoff between the owner and contractor.

The parties in such a problematic standoff may think that by simply walking away from the dispute, they saved headaches and money. But the date of completion triggers other deadlines, such as the time that a claim for defective performance can be asserted. By walking away from the project without identifying completion conclusively, a contractor may lose the benefit of protection of the applicable statutes of limitation and repose. A contractual term calling for a third party to decide when the project is complete can avoid the problematic standoff.

Dispute resolution terms

When there is no dispute, it can be easier for parties to accept a dispute resolution procedure that saves money and time. When the dispute has already popped up, parties are prone to focus on asserting their view of court-sanctioned rights. Therefore, dispute resolution terms selecting mandatory mediation or arbitration of disputes can lead to a more efficient dispute resolution between the parties in appropriate circumstances. Likewise, there is no presumed right for a prevailing party in litigation to recover attorney fees, but the parties can contract for such a right.

Whether to incorporate an attorney fee provision into a contract is, like all of the other optional contractual terms outlined, a case-specific decision that requires consultation with an expert. Planning in advance of a project can protect important rights and preserve business relationships by reaching agreements in advance of a dispute erupting if that planning is done with appropriate assistance.

David Anderson is an attorney with the law firm of Schwabe, Williamson & Wyatt. He practices in the firm’s litigation and construction groups. Contact him at 503-796-2456 or at danderson@schwabe.com.

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Most construction contracts contain clauses describing what happens in the event of a default. Subcontractors are protected by many such clauses, which provide an opportunity to cure the default before being liable for breach of contract. Prime contractors are protected as well because construction contracts provide a choice.

Prime contractors are often entitled to demand that the subcontractor cure a default and then recover any resulting damages. Alternatively, prime contractors can terminate a contract for convenience (to be clear, this is a contractual right that is contained in most construction contracts, but not all).

Therefore, if the subcontractor’s deficient performance continues to cause the prime contractor headaches, the prime contractor can choose to simply terminate the contract for convenience and find another way to perform the subcontractor’s work. Or the prime contractor can choose to demand that the subcontractor pay damages.

But those two rights granted to prime contractors to resolve a dispute on a construction project – termination for convenience or providing an opportunity to cure a default – cannot be used in tandem. For example, in the Oregon Court of Appeals’ recent decision in Shelter Products Inc. v. Steelwood Construction Co., the prime contractor concluded that the subcontractor’s performance was deficient and terminated the subcontract for convenience. So far, so good: The parties’ contract permitted such a termination.

However, the prime contractor then attempted to sue the subcontractor for damages. The Court of Appeals rejected that approach. It sternly noted that the contract “certainly does not . . . permit” the general contractor “to pursue two inconsistent paths simultaneously: both terminating the agreement for convenience and seeking damages against” the subcontractor as if it had given the subcontractor an opportunity to cure. The prime contractor had to choose which of two methods it wanted to use to resolve the dispute regarding the subcontractor’s performance; it could not eat its cake and have it too.

The choice between terminating the contract or giving a subcontractor an opportunity to cure a default can be frustrating. A prime contractor has already been harmed by a subcontractor’s deficient performance. By waiting for the subcontractor to correct that performance, the prime contractor is further harmed. Plus, the subcontractor’s credibility on the project is also harmed by the prior default.

Depending on the severity of the default, the prime contractor may not feel safe continuing to work with a subcontractor any further. But if it simply terminates the contract without providing an opportunity to cure, the prime contractor may not be able to recover damages caused by the subcontractor.

To resolve that problem, prime contractors should discuss contractual strategies with their lawyers before executing contracts on a project. Any strategy regarding subcontractor default and termination must be consistent with the terms of the prime contract. Disputes often arise out of ambiguity. If subcontracts and prime contracts are inconsistent, a prime contractor will be caught in an ambiguous situation at best or face conflicting contractual responsibilities at worst.

Three approaches are apparent and more are likely available based on the specifics of a project. First, the prime contractor includes a clause providing that if a prime contractor terminates a subcontract for convenience, the prime contractor can also sue for any damages it sustained from the subcontractor’s deficient performance.

A problem with that approach is that it may not be enforceable with certain contracts that require a prime contractor to provide the subcontractor an opportunity to cure defaults. Also, that is a heavy-handed approach that a subcontractor may not be willing to accept. Such a clause could also harm the relationship between the subcontractor and prime contractor if exercised. Accordingly, that first option should be exercised with care.

Second, the prime contractor could substantially limit the period that a subcontractor has to cure a default. That approach ensures that the default does not last very long before the contractor can terminate the contract and sue for damages if the subcontractor fails to cure the default. But that approach does not address the trust issues that may arise between a prime contractor and subcontractor following a default.

Third, the prime contractor could insist upon a graduated approach. The subcontractor could have more time to cure the first default than the second default. The third default could result in automatic termination without any opportunity to cure.

If the contract also contains a termination for convenience provision, the contractor would be able to terminate the contract or instead choose to give the subcontractor an opportunity to cure the default, albeit with a shorter leash. The problem with this approach is that a single default can wreak havoc on a project, so this middle-of-the-road approach may not make any meaningful change in the practice of a subcontractor or get the project back on track.

There is no single way to manage a default situation in a construction contract. The most expedient solution may require a party to sacrifice certain long-term interests, including the parties’ relationships. But patience with defaults can be ruinous. Because there is more than one way to manage such circumstances, contractors should seek assistance in drafting their contracts to appropriately plan for and manage a default situation for each specific project.

David Anderson is an attorney in the Portland office of Schwabe, Williamson & Wyatt. He focuses his practice on commercial litigation. Contact him at 503-796-2456 or at danderson@schwabe.com.

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