Buy-Sell Agreement Needed

By: Carl F. Staiger, Esquire cfs@muslaw.com

A buy-sell agreement is a contract between business partners that describes the framework for transferring ownership of the business. A buy-sell agreement is important for all businesses, and particularly for businesses owned by baby boomers, most of whom will probably be retiring within the next 10 years.

The buy-sell agreement is a "last will and testament" for business partners that determines the process for transferring ownership if the partners want to split or if one partner dies, retires, becomes disabled, is divorced or just wants out. The agreement should address not only the events that trigger a transfer of ownership, but also the method for valuing the company.

Partners often don't think about how they will fund the purchase of the business under the agreement. Neither partner may have enough money to satisfy the obligation to buy the business. To make sure there is money to enable the business to be purchased by a partner, the partners should consider funding buy-sell obligations with life insurance.

Finally, a business owner shouldn't assume that a one-size-fits-all buy-sell agreement exists. Every business situation is different. For example, the terms of a buy-sell agreement between unrelated business partners may be significantly different than the terms of a buy-sell agreement between family members. Tax issues also may play an important role in structuring a buy-sell agreement.

Construction Manager Safety Responsibilities

By: David E. Sweitzer, Esquire des@muslaw.com

The Pennsylvania Supreme Court has ruled that under certain circumstances a construction manager can be held responsible for injuries to employees of its subcontractors.

Here’s what happened: a construction worker was killed when he drove a dump truck off a temporary road and down an embankment. The family sued the construction manager, but the Court of Common Pleas of Allegheny County dismissed the case, ruling that the construction manager owed no legal duty to the worker, who was the employee of a subcontractor. The Pennsylvania Supreme Court then overruled the lower court, saying that the general contractor was responsible for safety and that a trial must be held to determine if the construction manager had in any way been negligent.

The problem is that there is no rigid definition of the duties of a construction manager. In determining negligence and liability, courts must analyze each contract for a definition of those duties.

In the case in question, the construction manager agreed in the contract to assume an active role in developing, implementing, maintaining and monitoring a safety program for the project. The court said that meant the construction manager assumed an obligation to ensure the safety of the employees of its subcontractors.

The lesson for construction managers is obvious: review contracts carefully and make sure there is adequate insurance to cover potential liabilities.

‘No Damage for Delays’ Provisions in Construction Contracts: Recent Pennsylvania Case Law

By: Benjamin D. Kerr, Esquire bdk@muslaw.com

In a recent case, Guy M. Cooper, Inc. v. East Penn School District, the Pennsylvania Commonwealth Court ruled that the trial court properly refused to set aside a “no damage for delay” clause when an owner does not guarantee or indemnify against loss occasioned by the delays of independent contractors which may be reasonably anticipated.

In Cooper, the school district awarded a general contractor the overall construction contract and a mechanical contractor the heating, ventilation and air-conditioning contract. Completion of the project was to occur within 460 days of the issuance of the notice to proceed; however, delays developed and substantial completion was delayed by 505 days beyond the original completion date.

The mechanical contractor’s complaint alleged that the school district breached its contract with the mechanical contractor by failing to see that construction proceeded without delay, and specifically that the school district failed to prevent delays by the general contractor.

The “no damage for delay” clause in the contract stated:

“[The School District] shall not be liable to contractor or any subcontractor for claims of damages of a monetary or any other nature caused by or arising out of delays contemplated or not contemplated at the signing of the contract. The sole remedy against [the School District] for delays shall be the allowance to claimant of additional time for completion of work.”

Though “no damage for delay” clauses are generally enforceable in Pennsylvania, prior cases have held that they may be unenforceable where there is a positive or affirmative interference by the owner with the contractor’s work or the owner fails to act on some essential matter necessary to the performance of the work. Similarly, an owner cannot insulate itself from a delay damage claim where it fails to perform an essential contractual duty.

Analyzing the contract language which imposed the duty of coordination and construction scheduling on the general contractor, the Commonwealth Court found no duty in the school district to oversee the construction schedule and held that reasonably anticipated delays by general contractors are covered by the “no damage for delay” clause.

For more information about this case or “no damage for delay” clauses, contact Benjamin D. Kerr at 412-456-2589 or bdk@muslaw.com