PENNSYLVANIA

 

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PENNSYLVANIA CONSTRUCTION LAW
 

 

TABLE OF CONTENTS

 

 

PREFACE......................................................................................... xvii

ABOUT THE AUTHORS.................................................................. xix

ACKNOWLEDGEMENTS.............................................................. xxiii

DEDICATION................................................................................... xxv

PART ONE:

CONTRACT FORMATION AND BIDDING....................................... 1

 

CHAPTER ONE:

PRIVATE CONTRACT FORMATION................................................ 1

1.1       ELEMENTS OF A BINDING CONTRACT................................ 1

            1.1.1    General Elements of a Contract (Common Law)............ 1

1.2       PROMISSORY ESTOPPEL AND SUBCONTRACTOR BIDS.... 4

1.3       THE UNIFORM COMMERCIAL CODE.................................... 6

            1.3.1    Applicability of the U.C.C.............................................. 7

            1.3.2    The “Battle of the Forms”............................................... 7

1.4       THIRD-PARTY BENEFICIARIES............................................ 10

            ENDNOTES............................................................................. 12

 

CHAPTER TWO:

PUBLIC CONTRACT FORMATION................................................ 15

2.1       INTRODUCTION..................................................................... 15

2.2       THE PROCUREMENT CODE.................................................. 15

            2.2.1    Applicability................................................................. 15

            2.2.2    Competitive Sealed Bidding.......................................... 16

            2.2.3    Bid Withdrawal............................................................. 16

                        2.2.3.1    Before Commonwealth Agencies.................. 16

                        2.2.3.2    Before Non-Commonwealth Agencies.......... 17

            2.2.4    Bid Opening, Award and Execution of the Contract..... 17

            2.2.5    Letters of Intent............................................................ 18

            2.2.6    Post-Bid Opening Negotiations..................................... 18

            2.2.7    Requests for Proposals and The Separations Act.......... 19

2.3       BID PROTESTS........................................................................ 20

            2.3.1    Protests Against a Commonwealth Agency Under the Procurement Code       20

            2.3.2    Protests by Taxpayers and Protests Against Non-Commonwealth Agencies    22

2.4       BIDDING STATUTES FOR NON-COMMONWEALTH AGENCIES 27

            2.4.1    Schools......................................................................... 27

                        2.4.1.1    Colleges......................................................... 27

                        2.4.1.2    Community Colleges..................................... 27

                        2.4.1.3    Public Schools............................................... 28

            2.4.2    Counties....................................................................... 28

                        2.4.2.1    Counties of the First Class............................. 28

                        2.4.2.2    Counties of the Second Class........................ 28

                        2.4.2.3    Counties of the Third Class........................... 29

            2.4.3    Cities............................................................................ 30

                        2.4.3.1    Cities of the First Class.................................. 30

                        2.4.3.2    Cities of the Second Class............................. 31

                        2.4.3.3    Cities of the Third Class................................ 31

            2.4.4    Incorporated Towns...................................................... 32

            2.4.5    Boroughs...................................................................... 32

            2.4.6    Townships.................................................................... 33

                        2.4.6.1    Townships of the First Class.......................... 33

                        2.4.6.2    Townships of the Second Class..................... 34

            2.4.7    Municipal Authorities................................................... 34

                        2.4.7.1    Contracts for Public Improvements, Utilities,
and Services.................................................. 34

                        2.4.7.2    Contracts Involving Metropolitan Transporta-
tion Authorities.............................................. 35

            ENDNOTES............................................................................. 36

 

CHAPTER THREE:

KEY CONTRACT CLAUSES............................................................ 45

3.1       INTRODUCTION..................................................................... 45

3.2       PAYMENT CLAUSE....................................................................       46

            3.2.1    Frequency and Timing.................................................. 46

            3.2.2    Amount of Payment..................................................... 46

            3.2.3    Conditions of Payment................................................. 47

                        3.2.3.1    “Pay-When-Paid” vs. “Pay-If-Paid” Clauses.. 47

                        3.2.3.2    Lien and Claim Waivers................................ 49

 

3.3       SCHEDULING AND TIME-RELATED PROVISIONS............. 49

            3.3.1    Time Extensions........................................................... 50

            3.3.2    Force Majeure and Excusable Delay............................. 50

            3.3.3    No Damages for Delay................................................. 51

            3.3.4    Liquidated Damages..................................................... 51

3.4       CHANGES CLAUSE................................................................ 52

3.5       DIFFERING SITE CONDITIONS CLAUSE............................. 53

3.6       DISPUTE RESOLUTION......................................................... 54

            3.6.1    Jury Trial Waiver.......................................................... 54

            3.6.2    Limitation of Liability................................................... 55

            3.6.3    Waiver of Consequential Damages............................... 55

3.7       ORDER OF PRECEDENCE CLAUSE...................................... 56

3.8       INSURANCE REQUIREMENTS.............................................. 56

3.9       BONDING REQUIREMENTS.................................................. 57

3.10     SUBCONTRACTORS.............................................................. 57

3.11     INDEMNITY................................................................................       58

3.12     TERMINATION....................................................................... 60

            3.12.1  Termination for Default................................................ 60

            3.12.2  Termination for Convenience....................................... 61

            ENDNOTES............................................................................. 62

 

CHAPTER FOUR:

LICENSING, CERTIFICATION, AND REGISTRATION REQUIREMENTS        65

4.1       STATE WIDE REQUIREMENTS............................................. 65

            4.1.1    Pennsylvania Does Not Have State-Wide Contractor “Licensing” Requirements         65

            4.1.2    Pennsylvania Requires “Certification” or “Prequalification”  For Three Specific Types of Contractors         65

            4.1.3    Pennsylvania Mandates an Architecture License For Furnishing Design-Build Services          66

            4.1.4    Pennsylvania Requires “Registration” of Home
Improvement Contractors, and Imposes Numerous Requirements on Home Improvement Contracts 67

4.2       MANY LOCAL PENNSYLVANIA JURISDICTIONS HAVE THEIR OWN LICENSING RULES      68

            4.2.1    Allegheny County......................................................... 69

            4.2.2    Altoona......................................................................... 69

            4.2.3    Bethlehem.................................................................... 69

            4.2.4    Lancaster...................................................................... 69

            4.2.5    Philadelphia.................................................................. 70

            4.2.6    Pittsburgh...................................................................... 70

            4.2.7    Scranton....................................................................... 70

4.3       CONSEQUENCES OF FAILING TO COMPLY WITH

            LICENSING, CERTIFICATION AND/OR REGISTRATION

            REQUIREMENTS.................................................................... 71

            ENDNOTES............................................................................. 74

 

PART TWO:

CHANGES AND CLAIMS................................................................. 77

 

CHAPTER FIVE:

CHANGES.......................................................................................... 77

5.1       INTRODUCTION……………................................................. .77     

5.2       CHANGES CLAUSE GENERALLY........................................ 78

5.3       CONSTRUCTION DIRECTIVES............................................. 79

5.4       CHANGE ORDERS.................................................................. 80

5.5       CHANGE-RELATED CLAIMS................................................ 81

            5.5.1    Cardinal Change........................................................... 82

                        5.5.1.1    Development of the Cardinal Change Doctrine 82

                        5.5.1.2    Pennsylvania State Courts.............................. 86

                        5.5.1.3    Pennsylvania Federal Courts.......................... 86

                        5.5.1.4    Summary....................................................... 87

            5.5.2    Cumulative Impact....................................................... 88

                        5.5.2.1    Cumulative Impact Claims Generally............ 88

                        5.5.2.2    Pennsylvania State Courts.............................. 89

                                       5.5.2.2.1    The Total Cost and Modified Total
Cost Methods as Ways to Compen-sate Cumulative Impact Expenses    89

                        5.5.2.3    Pennsylvania Federal Courts.......................... 91

                                       5.5.2.3.1    Lost Productivity Damages as a Means of Recovering Cumulative Impact Expenses.................................................... 92

                                       5.5.2.3.2    The Total Cost and Modified Total Cost Methods          93

                        5.5.2.4    Summary....................................................... 93

            5.6       CONTRACTUAL CLAIM PRESERVATION  

                        REQUIREMENTS AND EXCEPTIONS THERETO..... 94

                        5.6.1       Introduction................................................... 94

                        5.6.2       Waiver and Modification............................... 95

                        5.6.3       Hindrance/Impeded Compliance................... 97

                        5.6.4       Nether Providence and Strict Compliance..... 97

                        5.6.5       Estoppel......................................................... 98

                       

                        5.6.6       James Corp., Actual Notice, and Lack of

                                       Prejudice...................................................... 100

                        5.6.7       Conclusion.................................................. 101

            ENDNOTES........................................................................... 103

 

CHAPTER SIX:

DIFFERING AND UNFORESEEN SITE CONDITIONS................ 111

6.1       INTRODUCTION................................................................... 111

6.2       DIFFERING SITE CONDITION CLAUSES........................... 111

            6.2.1    Federal Acquisition Regulations (FAR)....................... 112

            6.2.2    AIA General Conditions............................................. 113

            6.2.3    PennDOT Publication 408.......................................... 114

6.3       CLAIMS FOR DIFFERING SITE CONDITIONS.................... 116

            6.3.1    Affirmative Misrepresentation of Site Conditions....... 116

            6.3.2    Constructive Fraud..................................................... 118

            6.3.3    Active Interference by Owner.................................... 122

            6.3.4    Negligent Misrepresentation........................................ 124

6.4       OWNER’S DEFENSES TO DIFFERING SITE CONDITIONS CLAIMS          126

            6.4.1    Exculpatory Contract Clauses..................................... 126

            6.4.2    Contractual Pre-Bid Site Investigation Requirements.. 128

                        6.4.2.1    Reasonableness Standard............................. 130

                        6.4.2.2    Contractor’s Actual Knowledge of Site

                                       Conditions................................................... 131

                        6.4.2.3    Necessity of Performing Subsurface

                                       Investigations............................................... 131

                        6.4.2.4    Time Available to Perform Investigation..... 133

6.5       THE PENNSYLVANIA ONE CALL ACT.............................. 133

            6.5.1    Duties Under the One Call Act................................... 134

                        6.5.1.1    Design Phase............................................... 134

                        6.5.1.2    Construction Phase...................................... 135

            6.5.2    Litigation Involving the One Call Act......................... 136

            ENDNOTES…........................................................................ 139

 

CHAPTER SEVEN:

TIME-RELATED CLAIMS............................................................... 145

7.1       INTRODUCTION……………................................................ 145

7.2       TIME-RELATED CONTRACT CLAUSES............................. 145

            7.2.1    Time Extensions and Excusable Delays...................... 145

            7.2.2    No Damages for Delay............................................... 148

            7.2.3    Liquidated Damages................................................... 149

7.3       TYPES OF TIME-RELATED CLAIMS................................... 150

            7.3.1    Delay Claims.............................................................. 150

            7.3.2    Acceleration Claims.................................................... 152

                        7.3.2.1    Directed Acceleration.................................. 152

                        7.3.2.2    Constructive Acceleration............................ 153

7.4       DAMAGES IN TIME-RELATED CLAIMS............................ 156

            7.4.1    Delay Damages........................................................... 156

                        7.4.1.1    Direct Costs................................................. 156

                        7.4.1.2    Indirect Costs............................................... 157

                                       7.4.1.2.1    Extended Home Office Overhead
and the Eichleay Formula.......... 157

                                       7.4.1.2.2    The Eichleay Formula in Pennsylvania   157

                                       7.4.1.2.3    Application of the Eichleay

                                                         Formula..................................... 158

                                       7.4.1.2.4    Contractual Limitations on Right to Recover Home Office Overhead    159

                        7.4.1.3    Availability of Lost Profits.......................... 160

                        7.4.1.4    Duty to Mitigate Damages............................ 160

                        7.4.1.5    Enforcement of “No Damages for Delay” Clauses……………        160

            7.4.2    Acceleration Damages – The “Measured Mile”
Approach.................................................................... 161

            7.4.3    Liquidated Damages................................................... 163

                        7.4.3.1    Enforceability of Liquidated Damages Clauses Generally    163

                        7.4.3.2    Challenging Liquidated Damages Clauses.... 166

                                       7.4.3.2.1    Liquidated Damages as a Penalty 166

                                       7.4.3.2.2    Owner’s Responsibility for Delays Triggering the Clause           169

                                       7.4.3.2.3    Vagueness or Indefiniteness of the Liquidated Damages Clause            170

                                       7.4.3.2.4    Inadequate Liquidated Damages 172

                                       7.4.3.2.5    Absence of Actual Damages...... 173

            ENDNOTES…........................................................................ 175

 

CHAPTER EIGHT:

PROMPT PAYMENT....................................................................... 185

8.1       INTRODUCTION................................................................... 185

8.2       COMMONWEALTH PROCUREMENT CODE...................... 185

            8.2.1    Statutory Overview..................................................... 186

                        8.2.1.1    Interest on Late Payments............................ 186

                        8.2.1.2    Penalty and Attorney Fees........................... 187

                        8.2.1.3    Defenses – Withholding of Payment for Good-Faith Claims            187

                        8.2.1.4    Enforceability of Choice of Law and Venue Provisions       187

            8.2.2    Case Law Interpreting the Prompt Pay Provisions of the Procurement Code    188

                        8.2.2.1    Interpretation in Light of the Parties’ Contract 188

                                       8.2.2.1.1    Contractual Payment Terms....... 188

                                       8.2.2.1.2    Requirement that Subcontractor
Sign Release in Exchange for Payment   190

                        8.2.2.2    Bad Faith in Administration of the Contract 192

                        8.2.2.3    Computation of Fee Award......................... 193

            8.2.3    Applicability to PennDot............................................ 194

8.3       THE CONTRACTOR AND SUBCONTRACTOR PAYMENT
ACT (CASPA)........................................................................ 194

            8.3.1    Statutory Overview..................................................... 195

                        8.3.1.1    Interest on Late Payment............................. 195

                        8.3.1.2    Penalty and Attorney Fees........................... 195

                        8.3.1.3    Defenses – Withholding of Payment for Good-Faith Claims            196

                        8.3.1.4    Enforceability of Choice of Law and Venue Provisions       196

            8.3.2    Case Law Interpreting CASPA.................................... 196

                        8.3.2.1    Applicability of CASPA.............................. 196

                        8.3.2.2    Contractual Waiver of CASPA ................... 199

                        8.3.2.3    “Unreasonably” or “Wrongfully” Withheld. 200

                        8.3.2.4    Determination of “Substantially Prevailing
Party”.......................................................... 201

            ENDNOTES........................................................................... 203

 

CHAPTER NINE:

CLAIMS AGAINST THE DESIGN PROFESSIONAL................... 209

9.1       INTRODUCTION................................................................... 209

9.2       NEGLIGENCE....................................................................... 209

            9.2.1    Ordinary Negligence................................................... 210

            9.2.2    Professional Negligence.............................................. 211

                        9.2.2.1    Standard of Care.......................................... 212

                        9.2.2.2    Statute of Repose......................................... 213

                        9.2.2.3    Certificate of Merit...................................... 214

                        9.2.2.4    Expert Testimony........................................ 216

            9.2.3    Gross Negligence........................................................ 216

9.3       NEGLIGENT MISREPRESENTATION.................................. 218

            9.3.1    Bilt-Rite Contractors, Inc. v. Architectural Studio....... 218

            9.3.2    Interpretations of Bilt-Rite........................................... 219

ENDNOTES....................................................................................... 222

 

CHAPTER TEN:

TERMINATION ............................................................................... 229

10.1     INTRODUCTION................................................................... 229

10.2     TERMINATION FOR DEFAULT........................................... 229

            10.2.1  Standard For Default.................................................. 230

            10.2.2  Procedures for Termination........................................ 232

                        10.2.2.1  Requirement of Notice................................ 232

                        10.2.2.2  Role of the Architect................................... 233

                        10.2.2.3  Waiver......................................................... 233

10.3     TERMINATION FOR CONVENIENCE................................. 234

            10.3.1  Requirement of Good Faith........................................ 234

            10.3.2  Constructive Termination for Convenience................ 236

10.4     CONCLUSION....................................................................... 237

            ENDNOTES........................................................................... 238

 

CHAPTER ELEVEN:

MECHANICS’ LIENS....................................................................... 245

11.1     WHAT IS A MECHANICS’ LIEN?........................................ 245

11.2     WHO HAS LIEN RIGHTS?.................................................... 245

11.3     WHEN MUST THE LIEN BE FILED?.................................... 247

11.4     WHAT NOTICE IS REQUIRED?........................................... 247

            11.4.1  Pre-filing Notice......................................................... 247

            11.4.2  Post-filing Notice........................................................ 249

11.5     HOW IS A LIEN ENFORCED?.............................................. 249

11.6     CAN LIEN RIGHTS BE WAIVED?....................................... 249

            11.6.1  “Contemporaneous” Lien Waivers............................. 250

            11.6.2  No-Lien Agreements on Residential  Property............ 250

            11.6.3  No-Lien Agreements on Nonresidential Work............ 251

11.7     CONCLUSION....................................................................... 251

            ENDNOTES........................................................................... 252

 

 

 

 

 

 

 

PART THREE:

BONDING AND SURETY ISSUES................................................. 255

 

CHAPTER TWELVE:

BONDING REQUIREMENTS ........................................................ 255

12.1     INTRODUCTION TO CONSTRUCTION BONDING IN PENNSYLVANIA 255

12.2     BID BONDS........................................................................... 255

            12.2.1  Introduction to Bid Bonds.......................................... 255

            12.2.2  No Statutory Mandate................................................. 256

            12.2.3  The Firm Bid Rule’s Affect on Bid Bonds.................. 256

            12.2.4  Surety’s Liability Limited to the Bid Bond Amount.... 257

            12.2.5  The Low Bid Rule’s Affect on Bid Bonds ................. 258

                        12.2.5.1  Overview of The Low Bid Rule................... 258

                        12.2.5.2  How Gaeta v. Ridley School District Affects the Low Bid Rule and Bid Bonds       259

                        12.2.5.3 A “Material” Limitation on Gaeta................ 260

                        12.2.5.4  Litigation in an Unclear Area of Law........... 261

12.3     PAYMENT BONDS............................................................... 261

            12.3.1  Introduction to Payment Bonds.................................. 261

            12.3.2  Pennsylvania Statutes Governing Payment Bonds...... 261

            12.3.3  Determining What Statute Applies.............................. 262

            12.3.4  Payment Bond Requirements of the Procurement Code 262

            12.3.5  Payment Bond Requirements of the Bond Law ......... 263

            12.3.6  Claimants Protected By Payment Bonds..................... 263

            12.3.7  Damages Recoverable on Payment Bonds.................. 264

            12.3.8  Governmental Failure to Comply with Statutory Bonding Requirements         266

12.4     PERFORMANCE BONDS...................................................... 268

            12.4.1  Introduction to Performance Bonds............................ 268

            12.4.2  Payment Bond and Performance Bond Case Law Should

                        Not be Conflated........................................................ 268

            12.4.3  Pennsylvania Statutes Governing Performance Bonds 269

            12.4.4  Performance Bond Requirements of the Procurement
Code........................................................................... 269

            12.4.5  Performance Bond Requirements of the Bond Law.... 270

            12.4.6  Surety Obligations and Rights..................................... 271

            12.4.7  Surety Liability Limited to Bonded Amount............... 272

12.5     MAINTENANCE BONDS...................................................... 273

            12.5.1  Introduction to Maintenance Bonds............................ 273

            12.5.2  Recovery for Defective Completion........................... 273

12.6     BONDING ALTERNATIVES................................................. 274

            12.6.1  Cashier’s Checks, Certified Checks and Cash Deposits 274

            12.6.2  Letters of Credit.......................................................... 274

            12.6.3  Contractor and Subcontractor Default Insurance........ 275

12.7     CONCLUSION....................................................................... 276

            ENDNOTES........................................................................... 277

 

CHAPTER THIRTEEN:

PAYMENT AND PERFORMANCE BOND CLAIMS..................... 289

13.1     PAYMENT BOND CLAIMS.................................................. 289

            13.1.1  General Limits to Payment Bond Claims.................... 289

            13.1.2  Federal Regulation of Payment Bonds Under the Miller
Act.............................................................................. 291

                        13.1.2.1  Coverage of the Miller Act.......................... 291

                                       13.1.2.1.1  When is a Miller Act Payment
Bond Required?......................... 291

                                       13.1.2.1.2  Who is Protected by a Miller Act Payment Bond?          292

                        13.1.2.2  Payment Bond Claims Process Under the
Miller Act.................................................... 294

                                       13.1.2.2.1  What Notice is Required for a
Miller Act Payment Bond Claim? 294

                                       13.1.2.2.2  Perfecting a Claim..................... 296

            13.1.3  Pennsylvania State Payment Bond Claims Under the
Public Works Contractors Bond Law (Pennsylvania
Little Miller Act)......................................................... 298

                        13.1.3.1  Coverage Under the Public Works Contractors Bond Law    298

                                       13.1.3.1.1  When is a Payment Bond
Required?.................................. 298

                                       13.1.3.1.2  Who is Protected by a Payment
Bond Under the Bond Law?...... 299

                        13.1.3.2  Payment Bond Claims Under the Bond Law 300

                                       13.1.3.2.1  What Notice is Required for a Payment Bond Claim Under the
Bond Law?................................ 300

                                       13.1.3.2.2  How is a Payment Bond Claim Perfected Under the Bond Law?            301

            13.1.4  Private Payment Bonds............................................... 302

                        13.1.4.1  Coverage of Private Payment Bonds............ 302

                        13.1.4.2  Private Payment Bond Claims...................... 302

                                       13.1.4.2.1  Notice Requirements................. 302

                                       13.1.4.2.2  Making a Claim......................... 303

 

            13.1.5  The Surety’s Additional Statutory Defense Against
Second-tier Claimants................................................. 303

13.2     PERFORMANCE BOND CLAIMS......................................... 303

            13.2.1  General Limits to Performance Bond Claims.............. 304

            13.2.2  Federal Regulation of Performance Bonds Under the
Miller Act................................................................... 305

                        13.2.2.1  Coverage of the Miller Act.......................... 305

                                       13.2.2.1.1  When is a Miller Act Performance Bond Required?       305

                                       13.2.2.1.2  Who is Protected by a Miller Act Performance Bond?    305

                        13.2.2.2  Performance Bond Claims Process Under the Miller Act      305

                                       13.2.2.2.1  What Notice is Required for a
Miller Act Performance Bond
Claim?....................................... 306

                                       13.2.2.2.2  Perfecting a Claim..................... 307

            13.2.3  Pennsylvania State Performance Bond Claims Under the Public Works Contractors Bond Law (Pennsylvania Little Miller Act).................................. 307

                        13.2.3.1  Coverage Under the Public Works Contractors Bond Law    307

                                       13.2.3.1.1  When is a Performance Bond Required?            307

                                       13.2.3.1.2  Who is Protected By a Performance Bond Under the Bond Law?          308

                        13.2.3.2  Performance Bond Claims Under the Bond
Law............................................................. 309

                                       13.2.3.2.1  Determining Default.................. 310

                                       13.2.3.2.2  Nullum Tempus Occurit Regi (Time Does Not Run Against the King)    310

            13.2.4  Private Performance Bonds........................................ 311

                        13.2.4.1  Coverage of Private Performance Bonds..... 311

                        13.2.4.2  Private Performance Bond Claims............... 312

                                       13.2.4.2.1  Notice Requirements................. 312

                                       13.2.4.2.2  Making a Claim......................... 312

            ENDNOTES........................................................................... 313

 

 

 

 

CHAPTER FOURTEEN:

COMMON SURETY ISSUES ......................................................... 325

14.1     WHAT ARE THE DIFFERENCES BETWEEN SURETYSHIP AND INSURANCE?   325

            14.1.1  Suretyship and Insurance Involve Two Different Types
of Relationships.......................................................... 325

            14.1.2  Suretyship and Insurance Serve Different Purposes... 325

            14.1.3  Pennsylvania Courts Have Identified Specific Factors  
to Differentiate Between Suretyship and Insurance.... 325

14.2     CAN THE PENNSYLVANIA BAD FAITH INSURANCE STATUTE BE APPLIED AGAINST A SURETY?............................................................................................... 326

            14.2.1  The Pennsylvania Legislature Passed the Bad Faith Insurance Statute After the Courts Declined to Allow
Bad Faith Claims Against Insurance Companies......... 327

            14.2.2  The Pennsylvania Bad Faith Insurance Statute Likely
Does Not Apply to Sureties........................................ 328

            14.2.3  Pennsylvania Courts Have Declined to Apply the Unfair Insurance Practice Act Definition of “Insurance Policy”
to the Bad Faith Insurance Statute............................... 330

14.3     UNDER WHAT CIRCUMSTANCES CAN IMPAIRMENT OF
A SURETY’S ABILITY TO CONTROL ITS RISK DISCHARGE THE SURETY FROM ITS OBLIGATIONS UNDER A
BOND?................................................................................... 331

14.4     WHAT IS THE DOCTRINE OF EQUITABLE SUBROGATION, AND HOW DOES IT APPLY TO SURETYSHIP?....................................................................... 334

            14.4.1  Equitable Subrogation Allows a Surety to Exercise a Principal’s Rights and Remedies Under Equity Once the Surety Has Performed on a Bond................ 334

                        14.4.1.1  Equitable Subrogation is a Right Arising From Equity, Not from Contract    334

                        14.4.1.2  Equitable Subrogation Will Only Be Applied When a Claim Meets Certain Criteria 335

                        14.4.1.3  Equitable Subrogation Claims Do Not Carry
Over From One Contract to Another............ 336

            14.4.2  A Surety Must Establish Certain Elements in Order to
Make a Claim for Equitable Subrogation.................... 337

                        14.4.2.1  There Are Four Prerequisites That Must be
Met for Equitable Subrogation to Apply...... 337

                                       14.4.2.1.1  If a Surety Acted as a “Volunteer” There Can be No Claim for
Equitable Subrogation................ 337

                                      

                                       14.4.2.1.2  There Can Be No Claim for Equitable Subrogation Against One Who Is Only Secondarily Liable..................... 338

            14.4.3  The Doctrine of Equitable Subrogation Also Applies to

            Public Construction Contracts..................................... 338

            14.4.4  A Surety Must Complete the Contractual Obligations
of the Principal Before It Can Claim Equitable
Subrogation................................................................ 339

            14.4.5  A Surety is Entitled to Claim Subrogation Regardless of Whether the Principal is Otherwise Indebted to the
Obligee....................................................................... 340

14.5     WHAT IS A GENERAL AGREEMENT OF INDEMNITY,
AND HOW DOES IT PROTECT A SURETY?....................... 341

            14.5.1  Sureties Use General Agreements of Indemnity to Protect Themselves from Loss      341

                        14.5.1.1  Indemnity Provisions Often Require the Indemnitor to Put Up Collateral to Cover the Indemnitee’s Expenses................................ 342

            14.5.2  Enforcement of Indemnity Provisions........................ 342

                        14.5.2.1  Standards for Enforcement Generally.......... 342

                        14.5.2.2  Pennsylvania Courts Have Only Held
Indemnity Provisions to be in Violation of
Public Policy in Select Circumstances.......... 343

                        14.5.2.3  Indemnity Agreements Sometimes Have
“Prima Facie Evidence” Clauses That Shift the Burden of Proof to the Indemnitor Once the Indemnitee Fulfills the Terms of the Clause 344

                        14.5.2.4  An Indemnitor May Escape Liability Under an Indemnity Agreement if the Indemnitee Fails
to Abide by the Controlling Language in the Agreement       345

14.6     CAN CLAIMANTS RECOVER ATTORNEY’S FEES,

            INTEREST AND PENALTIES FROM A SURETY UNDER A PAYMENT BOND?    346

            14.6.1  The Prompt Pay Remedies.......................................... 346

            14.6.2  What Sums Are “Justly Due” on the Underlying
Contract...................................................................... 347

                        14.6.2.1  Attorney’s Fees Are Not “Justly Due” Under a Payment Bond         347

                        14.6.2.2  Finance Charges Are Not “Justly Due” Under
a Payment Bond.......................................... 348

            ENDNOTES........................................................................... 350

PART FOUR:

DISPUTE RESOLUTION................................................................. 361

 

CHAPTER FIFTEEN:

TRADITIONAL COURT SYSTEMS............................................... 361

15.1     INTRODUCTION................................................................... 361

15.2     PENNSYLVANIA STATE COURTS...................................... 363

            15.2.2  The Magisterial District Courts.................................... 363

            15.2.3  Courts of Common Pleas............................................ 363

                        15.2.3.1  Judicial Arbitration...................................... 364

            15.2.4  The Superior Court and the Commonwealth Court..... 364

            15.2.5  The Supreme Court..................................................... 365

15.3     THE FEDERAL COURTS...................................................... 365

            15.3.1  The United States District Courts................................ 365

            15.3.2  The United States Court of Appeals for the Third Circuit 366

            15.3.3  The United States Supreme Court............................... 366

15.4     THE PENNSYLVANIA BOARD OF CLAIMS....................... 366

            ENDNOTES........................................................................... 367

 

CHAPTER SIXTEEN:

ALTERNATIVE DISPUTE RESOLUTION..................................... 369

16.1     NEGOTIATION..................................................................... 369

16.2     MEDIATION.......................................................................... 370

            16.2.1  Mediation Privilege..................................................... 371

16.3     ARBITRATION...................................................................... 372

            16.3.1  “Binding Arbitration” vs. “Non-Binding Arbitration”. 374

            ENDNOTES…………………................................................. 375

 

CHAPTER SEVENTEEN:

EXPERTS AND CONSULTANTS.................................................. 377

17.1     INTRODUCTION................................................................... 377

17.2     WHEN IS AN EXPERT NEEDED?........................................ 377

17.3     WHAT QUALIFIES A WITNESS TO BE DEEMED AN
EXPERT?............................................................................... 378

17.4     WHAT CAN AN EXPERT TESTIFY TO?.............................. 379

            17.4.1  Opinions, Facts, Scientific and Technical Principles
vs. Common Knowledge............................................ 379

            17.4.2  Ultimate Issue............................................................. 381

            17.4.3  Underlying Factual Assumptions................................ 381

            17.4.4  Hypothetical Questions............................................... 381

            17.4.5  Basis of Testimony..................................................... 382

                        17.4.5.1  Basis of Opinion Testimony by Experts...... 382

                        17.4.5.2  Personal Knowledge.................................... 382

                        17.4.5.2  Novel Scientific Evidence........................... 383

            ENDNOTES........................................................................... 384

 

 

 

 

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