Termination for cause is costly and adversarial and has been covered in this article. But can a terminating party use equipment and tools left behind on the worksite (i.e., a crane)? The answer depends on what is in your contract.
Under ConsensusDocs, a constructor must give its permission to use any equipment or supplies left at the worksite, such as a crane.[i] Moreover, the owner must indemnify the constructor for using their equipment. This makes sense because even if a constructor were appropriately terminated for cause, using their equipment and materials they no longer possess or control unfairly creates additional liability exposure. At a minimum, the owner should take on the risk of using the equipment and materials since they benefit from such use.
In contrast, the American Institute of Architects (AIA) A201 General Conditions Document gives an owner unfettered permission to use tools and equipment left at the worksite upon termination. The AIA A201 184.108.40.206 provides that once termination for cause is invoked and notice is given, the owner may “Exclude the Contractor from the site and take possession of all materials, equipment, tools, and construction machinery thereon owned by the Contractor.”
ConsensusDocs and AIA take drastically different approaches to this issue. Under AIA, an owner is given a blank check to use equipment left at the worksite by a terminated contractor. If the owner’s termination for cause is later deemed wrongful, using such equipment and materials would likely lead to a claim for additional costs. This is another reason why termination for cause, while rare, gives rise to expensive claims.
Comments or questions about this article may be directed to Brian Perlberg, Executive Director and Senior Counsel, ConsensusDocs Coalition, at bperlberg@ConsensusDocs.org.
ConsensusDocs Guidebook here.
[i] ConsensusDocs 200 section 11.3.2. provides “. . . Owner and others performing work under §11.3 shall also have the right to use construction tools and equipment located on the Worksite and belonging to the Constructor or Subsubcontractors for the purpose of completing the remaining Work, but only after Constructor’s written consent. If Owner uses Constructor’s construction tools and equipment in accordance with this subsection, then Owner shall indemnify and hold harmless Constructor and applicable Subcontractors and the agents, officers, directors, and employees of each of them, from and against all claims, damages, losses, costs, and expenses, including but not limited to reasonable attorneys’ fees, costs, and expenses incurred in connection with Owner’s use of Constructor’s or applicable subcontractor’s construction tools and equipment. Immediately upon completion of the Work, any remaining materials, supplies, or equipment not consumed or incorporated in the Work shall be returned to Constructor in substantially the same condition as when they were taken, reasonable wear and tear excepted.”