On June 2, 2023, Partners Henry C. Chan and Jeffrey L. Wilson successfully settled a $1.8 million mechanic’s lien bond claim for a construction contractor client who was wrongfully terminated under the AIA A401 contract with the owner/developer of a $100+ million construction project in Brooklyn, New York.
The case, which began in 2020, concerned the new construction of 121 units in two seven-story buildings in Brooklyn. The owner/developer terminated its contract with the contractor, alleging it neglected to perform work and abandoned the Project in accordance with the contract. Wilson & Chan argued the default termination was wrongful pursuant to AIA A401 contract terms and filed a mechanic’s lien bond foreclosure action seeking payment for the contractor. The case was settled in our client’s favor, thereby avoiding the uncertainty of a jury trial and appeal, escalation of legal fees, further trial date delays, and closes the mechanic’s lien bond for the surety.
Henry Chan notes, “The widely used AIA documents should be considered a starting point, not a final destination.” Contractors should work with qualified construction attorneys to customize the AIA documents to include variables unique to the work they are performing, including pre-conditions, notice provisions, payment terms like time and material, unit price, lump sum, design build, and so forth. For Chan, “Customization is key, otherwise the AIA terms can actually favor the other party.”
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