Contact Information4121 Okemos Rd. Ste. 10Okemos, Michigan 48864Phone: (517) 381-2663Fax: (517) 381-9775Email: zac@jkylegal.com

Zacharia S. BonhamSenior Associate Attorney

 Zacharia S. Bonham, earned his J.D. from Thomas M. Cooley Law School in 2012, cum laude, and his B.A. from Albion College in 2009. Mr. Bonham initially joined JKY Legal Group, P.C., in 2012, as a law clerk before being hired as an associate attorney in 2013. Mr. Bonham has earned a reputation as a highly-skilled litigator. He has extensive experience regarding complex Commercial Litigation, Construction Law, Business Law, and Employment Law.  Mr. Bonham regularly counsels his business clients on legal matters including corporate formation, operating agreements/bylaws, buy/sell agreements, mergers and acquisitions, employment contracts, employment manuals, non-competition/non-solicitation agreements, independent contract agreements, negotiating business disputes, and compliance audits.

In regards to construction law, Mr. Bonham represents the interests of owners, architects, developers, contractors, subcontractors, and suppliers at every stage of the process, from drafting initial contracts to project completion, including any disputes.    

The Contractors’ Legal Guide:A Crash Course on Contracts and Construction Liens

Disclaimer: This presentation is not legal advice nor should it be considered a substitute for seeking legal advice. Each situation that arises is different and needs its own consultation with an attorney. You do not have an attorney-client relationship with JKY Legal Group, P.C.

Purpose of ContractsProtection: To make sure your rights and obligations are clarified.

Evidence: In the event of a lawsuit, or the threat of a lawsuit, you can use it to prove that you are in the right and that your opponent has no basis to deny your claims or defenses.

Necessity: Some contracts, due to their subject matter, are generally not enforceable unless they are in writing; e.g. sale of land, contracts that cannot be completed in 1 year, sale of goods over $1,000, etc.

Protection(Sword or Shield)

NecessityEvidence

TWO TYPES OF CONTRACTS

ORAL CONTRACTS

◦ Pro’s Completed quickly A handshake is your word People you know and trust

◦ Con’s No evidence of its terms Extremely difficult to enforce

your rights Depending on the subject

matter, it may not be enforceable

WRITTEN CONTRACTS

◦ Pro’s Your rights and obligations are

known Both parties sign the contract

to accept the terms and conditions

Easiest way to protect your rights

◦ Con’s Slower process than an oral

contract Content may be complicated or

technical Should be drafted and/or

reviewed by an attorney ($$)

Important Clauses to IncludeNot every contract has to be 15 pages, single-spaced, and 8 font

Important Clauses#1

• Methods of Payment• Paid in full at the time of

signing the contract• Installment payments

• Based on passage of time• Based on project

completion

• Paid in full upon completion

Payment

◦ Be as specific as possible: How much? When are payments to be

received?

◦ Statutory Rights to ensure payment.

◦ Keep written change-orders on file.

Important Clauses#2

CAUTION: Being too specific regarding what services or materials are being provided could cause you issues later if the customer has problems with your work. However, being too specific is often the lesser-of-two-evils as compared to being too vague.

Services

◦ Just like “payment,” be very clear about what you will and will not be doing.

◦ If applicable, include the specific materials being used.

◦ Ensure that the services and materials are approved by the customer before they sign the contract.

Important Clauses#3

Practice Tip: Generally, attorneys include a Force Majeure clause; meaning any act of God, fire, casualty, flood, war, strike, lockout, labor trouble, or any other circumstances beyond the reasonable control of the party asserting it that prevents or delays the performance of any of its obligations under the contract.

Duration

◦ Unless specifically requested, sometimes it is better to not put a set time to complete the project in the contract; no need to cause you any unnecessary hassles.

◦ Be aware of “time is of the essence” clauses. These often include monetary penalties for not completing the project on time.

Important Clauses#4

Violation of registered copyrighted materials may entitle the owner of the copyright to the following remedies: (1) civil action for copyright infringement; (2) injunctive relief; and (3) judgment for damages, including statutory damages of $150,000.00 per infringement, and recovery of attorney’s fees and court costs.

Copyright

◦ Copyright protection extends to registered and unregistered materials.

◦ Expressly state that the customer does not own the original copyright, derivative works, or any revisions of the original material.

◦ Expressly state this is not “work for hire”

◦ If customer wants to use your copyright, then you may need a one-time, exclusive license agreement.

◦ This is a special subsection of law, and to fully understand your rights you should speak to an intellectual property attorney.

Important Clauses#5, 6, & 7

Examples

Venue: The parties agree that any legal or equitable action or proceeding with respect to this Agreement or the transactions contemplated by it shall be brought in any court of competent jurisdiction sitting in the State of Michigan, or the Western District Court of the United States sitting in Michigan, and each of the parties submits to and accepts generally and unconditionally the exclusive jurisdiction of those courts…

Choice of Law:This Agreement is a contract made under, and shall be governed by and construed in accordance with, the laws of the State of Michigan.

Interpretation:This Agreement shall be interpreted as being prepared jointly by the Company and Customer. Any uncertainty or ambiguity in the Agreement shall not be interpreted or construed against either party.

Venue, Choice of Law, & Interpretation

◦ Generally, by court rule, there are limited jurisdictions that can preside over a litigation.

◦ You can require that the laws of the State of Michigan will govern your contract and any litigation that may result.

◦ Generally, any ambiguity or vagueness is interpreted against the drafter of the contract; however, you can agree to waive this presumption.

What Have You Learned?

Characteristics of Good Contracts

◦ Identify the capacity of all parties to the contract (e.g. President, Member, etc.)

◦ Outline the responsibilities of each party

◦ Specify the terms for payment of the services, labor, or materials being provided

◦ Simplicity over complexity

Don’t Let This Be You…Characteristics of

Bad Contracts

◦Not in writing or not signed

◦Vague or ambiguous

Filing Notices and LiensProtect Your Right to Payment for Your Labor and Materials

Slightly Different Rules Apply to Commercial Projects Than Residential Projects

Commercial Liens Residential Liens

Meet the Key Players

Terminology

Owner: The title holder (fee owner) to the property or the land contract purchaser.

Lessee: Holds an interest in the property either as a tenant or a purchaser who has signed a Purchase Agreement with a builder.

Contractor: Provides an improvement to the property pursuant to a contract directly with the owner or lessee (general contractor).

Subcontractor: Provides labor and/or materials to a Contractor or Subcontractor.

Supplier: Supplies materials and/or equipment to a subcontractor or contractor used on the project.

Designee: Person designated by the Owner or Lessee to accept service of Notices on behalf of the Owner.

Notice of Commencement

A Notice of Commencement is a document which provides:

• the names and addresses of the owner (and/or lessee),

• general contractor (if any), • the owner's designee, and• the legal description of the subject

real property.

When improvements are being made to commercial (non-residential) property, the owner is responsible for the recording the Notice of Commencement with the Register of Deeds in the County where the real property is located.

The owner and/or general contractor must provide a copy of the Notice of Commencement within 10 days to those parties performing on a project that request it. The request must be in writing and sent by certified mail. Failure to provide the Notice of Commencement to the lien claimant will extend their time to file a Notice of Furnishing.

The Notice of Commencement

must be posted in a conspicuous place

on the real property being

improved for the duration of the

performance of the work

Time to File Notice of Furnishing

• 20 days after supplying the first labor or materials to the project.

• 30 days for individual laborers after wages are due and unpaid.

• Filing a Notice of Furnishing untimely is not fatal to making a claim for unpaid wages.

Notice of Furnishing

The purpose of the Notice of Furnishing is to put the Owner, Lessee, or Designee on notice that a Contractor, Subcontractor, or Supplier has provided labor or materials to the project.

This document is necessary for the lien claimants that do not have a contract directly with the Owner, Lessee, or Designee.

A Notice of Furnishing should alert the Owner, Lessee, or Designee to request lien waivers at the time the payment is made to the general contractor.

How to Get Your MoneySworn Statements

MCL 570.1110(1)(a):

(1) A contractor shall provide a sworn statement to the owner or lessee in each of the following circumstances:

(a) When payment is due to the contractor from the owner or lessee or when the contractor requests payment from the owner or lessee.

Types of Lien Waivers

Full Unconditional Waiver• Work done, Final payment received, release of lien rights

Full Conditional Waiver• Work partially or fully done, payment not received• Do not use if extras, back-charges, etc are being negotiated

Partial Unconditional Waiver• Work partially done, partial payment received, release of lien

rights

Partial Conditional Waiver• Work partially done, partial payment not received, future money

will be owed

90 Day Requirement

Claim of Lien

Lien claimant must file a

Claim of Lien within 90 days

after the last day of

providing labor or materials

to the real property with the

Register of Deeds where the

real property is located. This time restriction to file a claim of lien is strictly enforced. Only “labor and materials” are considered for the 90 day time frame. Later performed “warranty work” does not apply to extend the time to file a Claim of Lien.

Must file Proof of Service of Claim of Lien on Owner, Lessee, or Designee by certified mail or personal service within 15 days after filing Claim of Lien.

Additional Info:

• You cannot foreclose on your construction lien unless you can prove you gave the Owner or Lessee a Sworn Statement; MCL 570.1110(1)(a) and MCL 570.1117(7).

Foreclosing On Your Construction Lien

Governed by MCL 570.1117 Must foreclose within 1 year after Claim of

Lien is filed Must file a Notice of Lis Pendens with

Register of Deeds Must join all parties that have an interest in

the real property or a claim against the real property as well

If judgment entered, it will give: (1) time for payment; and (2) applicable redemption period.

Sale will be conducted in the manner provided by statute for foreclosure of execution levy.

Residential Lien Requirements

Remember, slightly different rules apply to Residential Construction Liens

How is “Residential” Defined?

Construction Lien Act

Defined by MCL 570.1106(3) as:

“an individual residential condominium unit or a residential building containing not more than two residential units, the land on which it is or will be located, and all appurtenances thereto, in which the owner or lessee contracting for the improvement is residing or will reside upon completion of the improvement.”

Occupational Code

MCL 339.2401

Much broader than Construction Lien Act

MCL 339.2401(a) and (b); residential builders and residential maintenance and alteration contractors, must be licensed before providing such services

Written Contracts are Required

Not entitled to a Construction Lien if you failed to enter into a signed, written contract with Owner or Lessee; MCL 570.1114

The contract must state the following:◦ Contractor may need to be licensed to perform the services; MCL

570.1114(a); and◦ If a license is required, the Contractor must also provide

Assurance that they are licensed; and Provide their license number

The contract required by MCL 570.1114 must contain a statement, in type no smaller than that of the body of the contract, stating all of the following:

(a) That a residential builder or a residential maintenance and alteration contractor is required to be licensed under article 24 of the occupational code, 1980 PA 299, MCL

339.2401 to 339.2412. That an electrician is required to be licensed under the electrical administrative act, 1956 PA 217, MCL 338.881 to 338.892. That a plumbing contractor is required to be licensed under the state plumbing act, 2002 PA 733, MCL 338.3511 to 338.3569. That a mechanical contractor is required to be licensed under the Forbes mechanical contractors act, 1984 PA 192, MCL 338.971 to 338.988.

(b) If the contractor is required to be licensed to provide the contracted improvement, that the contractor is licensed and the contractor's license number.

Exceptions to License Requirement

• Builder that builds a structure for his own use or occupancy

• Contracts where the total price is less than $600.00

• A person “who engages solely in the business of performing work and services under contract with a residential builder or a residential maintenance and alteration contractor licensed under this article.”

MCL 339.2403(b), (e), and (f)

Licensing Requirement

If required by Occupational Code to be licensed, and Contractor is not so licensed, then they are not entitled to file a Claim of Lien for unpaid wages; MCL 570.1114

If not licensed as required by Occupational Code, then Contractor cannot sue in equity to recover the reasonable value of his services or the materials, as that would defeat the statute

Contact Information:4121 Okemos Rd. Ste. 10Okemos, Michigan 48864Phone: (517) 381-2663Fax: (517) 381-9775Email: zac@jkylegal.com