{"id":896564,"date":"2019-10-10T09:50:54","date_gmt":"2019-10-10T15:50:54","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=896564"},"modified":"2019-10-10T09:51:01","modified_gmt":"2019-10-10T15:51:01","slug":"michigan-court-construction-lien-cant-exceed-contract-value","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/michigan-court-construction-lien-cant-exceed-contract-value\/","title":{"rendered":"Michigan Court of Appeals: Construction Lien Can\u2019t Exceed Contract Value"},"content":{"rendered":"\n

Scott R. Murphy | Barnes & Thornburg<\/a> | September 27, 2019<\/p>\n\n\n\n

The Michigan Court of Appeals held that an arbitrator\u2019s decision to award a contractor consequential damages on a construction lien claim warranted reversal even under the extremely narrow standard of review for arbitration awards. In reaching its decision, the court made the definitive ruling that a contractor may not assert a construction lien for consequential damages beyond the monetary value of the parties\u2019 contract.<\/p>\n\n\n\n

In\u00a0TSP Services, Inc. v. National-Standard, LLC<\/em>, the contractor\u2019s scope of work included asbestos abatement, demolition of steel structures and disposal of scrap steel as well as other site restoration work for an abandoned industrial facility. The parties\u2019 contract required payment in installments with an aggregate contract price of $414,950, due upon completion of the asbestos abatement. Notably, the contract did not mention the sale of scrap steel or TSP\u2019s potential profits therefrom as compensation under the contract. This fact was significant in the eyes of the appeals court because the arbitration proceeding focused on the profits from the sale of scrap steel as a major component of the contractor\u2019s scope of work.<\/p>\n\n\n\n

Because the project experienced significant delays in permitting, the contractor was unable to begin the steel reclamation work. During the delay, the market price for steel declined dramatically and as a result, the value of the contract was diminished significantly. In response to the declining steel prices, the contractor requested an equitable adjustment to the parties\u2019 contract. At the time the contractor requested the equitable adjustment, only 9 percent of the available steel had been removed from the project site. When the parties could not reach an agreement to adjust the contract price, the owner terminated the contractor for cause.<\/p>\n\n\n\n

However, the arbitrator ultimately concluded that the owner improperly terminated the parties\u2019 contract and committed the first material breach of the parties\u2019 contract. The arbitrator awarded the contractor a construction lien for $782,496.05 and broke that amount out as follows:<\/p>\n\n\n\n