Ken Robinson

Construction Contracts 103 - Breach

by Ken Robinson

This is the final installment of a three-part series on construction contracts. Be sure to check out the two previous parts, Construction Contracts 101 - The Basics, and Construction Contracts 102 - Interpreting Contracts


A contract is in essence a promise given in consideration for a reciprocal promise.  A construction contract is a very complex series of promises that establish the rights and obligations of the parties.  A breach of the contract in its simplest form, then, is a failure to perform a promise.  Technically, a breach of contract can provide the non-breaching party with a remedy; for example, if the non-breaching party incurs a loss as a result of the breach.  In that case, the non-breaching party can assert a claim for damages.

 If the level of a breach rises to a “material breach,” additional remedies are available.  A material breach can excuse the non-breaching party from further performance under the contract until the material breach is cured.  This might occur in a construction setting where the owner refuses payment until the contractor cures the breach.  In some cases, a material breach gives rise to a right of the non-breaching party to terminate the contract.  Colorado Structures, Inc. v. Insurance Co. of the West, 161 Wash.2d 577, 167 P.3d 1125, 1132 (2007) (material breach permits, but does not require, non-breaching party to cancel or terminate contract), cited with approval in Blood v. Qwest Services Corp., 224 P.3d 301 (Colo. App. 2009).

Curiously, there is no legal standard as to what constitutes a material breach of contract.  Rather, the question of whether a breach is a material breach is a question of fact for the fact finder, either the jury, the judge in a trial to the court, or the arbitrator.  Carder, Inc. v. Cash, 97 P.3d 174 (Colo. App. 2003) (Whether a breach of a contract is material, and therefore excuses further performance by the other party, is a question of fact; in deciding that question, the trier of fact should consider the extent to which an injured party will obtain substantial benefit from the contract, as well as the adequacy of compensation in damages).  Colorado appellate courts have provided some guidance on this issue.  See, e.g., Kaiser v. Market Square Discount Liquors, Inc., 992 P.2d 636 (Colo. App. 1999).  (In deciding whether a breach of contract is material, the extent to which an injured party would still obtain substantial benefit from the contract, and the adequacy of compensation in damages for the breach, should be considered.  The importance or materiality of contract terms must be assessed in context and in light of the expectations of the parties at the time the original contract was formed.  Whether a breach of contract is material is a question of fact); Blood v. Qwest Services Corp., 224 P.3d 301 (Colo. App. 2009) (A material breach of a contract does not obligate the non-breaching party to terminate the contract; rather, that party can continue performing its own obligations and insist the other party do likewise).   See also Restatement Second, Contracts § 241 (Circumstances significant in determining whether a failure to render performance is material); Restatement Second, Contracts § 242 (Circumstances significant in determining when remaining duties are discharged).

The lesson for contract administrators is that a failure to perform by any party to a construction contract, be it a late payment by the owner, or a missed milestone by a contractor, needs to be evaluated in the larger context of the project and the consequences of the breach, and then take action appropriate to the conditions.  As stated above, in the extreme, this could be termination of a contract, but this should be the remedy of absolute last resort as the consequences to the project could be unacceptable.


For more information on construction contracts, please contact Ken Robinson or another member of our Construction Contracts, Real Estate Law, or Construction Law & Litigation teams.

Construction Contracts 102 – Interpreting Contracts

by Ken Robinson

This is the second of a three part series on construction contracts. Please check back next week for Construction Contracts 103 - Breach, and be sure to check out last week’s Construction Contracts 101 - The Basics


The guiding principle of contract law is that a contract will be interpreted to give effect to the intention of the parties.  To discern that intention, a court will look first to the written document, the so-called "four corners rule" of contract interpretation.  If that document is ambiguous -- that is, susceptible to more than one interpretation -- the court can look outside the four corners to "extrinsic evidence."  Extrinsic evidence can include other documents, testimony of the parties as to their intent in entering into the contract, called "parole evidence," or the way the parties actually conduct themselves under the contract, particularly before a dispute arises.

Another principle of contract interpretation, not always applied with consistency, is that an ambiguous contract will be construed against the interests of the party who drafted the contract.  This means that if a party is given a contract on a take it or leave it basis with no opportunity to fairly negotiate the contract language, and the contract is susceptible to more than one interpretation in some respect, an ambiguous provision will be construed in favor of the non-drafting party.  Also, a court will always try to harmonize all parts of the contract so that if a clause is ambiguous and one interpretation of the clause creates a conflict with another non-ambiguous clause, the non-conflicting interpretation will prevail.

It is important to understand that a contract is not necessarily a static document, even where the parties don't sign any addenda or modifications.  This is because the parties can inadvertently choose one interpretation of an ambiguous provision merely by acting consistently with that interpretation, particularly before a dispute arises.  For example, if a notice requirement in a change clause is not clear, but the parties proceed on the project processing changes with no formal notice, the notice requirement will be dispensed with by a court based upon the way the parties acted.  That is, their conduct is regarded as dispositive of the parties' intentions as to the ambiguous notice provision.

It is also important to recognize that the parties can amend their contract by their very conduct even though they had no discussions about the modification and signed no addenda, and even though the contract has a requirement that any modification of the contract be in writing and signed by both parties.  In Hahl v. Langfur Const. Corp., 529 P.2d 1369, (Colo. App. 1974), the operative contract had a written change order requirement.  A dispute arose as to the validity of the subcontractor's claim for additional work,  and the general contractor defended on the grounds that the work had been performed without prior written authorization.  The Colorado Court of Appeals held that the parties had amended their contract and waived the requirement for written authorization by their words and their conduct.  Accord, Hi-Valley Constructors, Inc. v. Heyser, 428 P.2d 354 (Colo. 1967) (by their conduct, parties waived contract requirement for written authorization).


For more information on construction contracts, please contact Ken Robinson or another member of our Construction Contracts, Real Estate Law, or Construction Law & Litigation teams.

Construction Contracts 101 – The Basics

by Ken Robinson

This is the first of a three part series on construction contracts. Please check back next week for Construction Contracts 102 - Interpreting Contracts and again in two weeks for Construction Contracts 103 - Breach


Virtually all construction projects are accomplished by way of a contract of some sort, and it is important to keep basic contract law in mind when drafting, negotiating, reviewing and entering into construction contracts.  To be enforceable, a contract must be supported by consideration.  In its simplest form, consideration is a promise – a contract thus is a promise given in exchange, that is in consideration, for a promise received.  A contract does not necessarily need to be in writing; the conduct of the parties can rise to an enforceable oral contract.

In a construction setting, a contractor agrees, promises, to build a structure in exchange for the owner’s promise to pay for the construction.  Of course, the complexities of a construction project require that there be many promises given and received.  These promises create rights and obligations on both sides that are expressed in the written contract language.  However, the effect of a contract doesn’t end there, as there are often obligations that are attendant to a written contract implied by law.  For example, every contract in Colorado contains an implied duty of good faith and fair dealing.  Wells Fargo Realty Advisors Funding, Inc. v. Uioli, Inc., 872 P.2d 1359, 1362 (Colo. App. 1994).  The doctrine exists to effectuate the parties' intentions and to honor their reasonable expectations.  City of Golden v. Parker, 138 P.3d 285, 292 (Colo.2006); Amoco Oil Co. v. Ervin, 908 P.2d 493, 498 (Colo. 1995) (Good faith performance of a contract involves “faithfulness to an agreed common purpose and consistency with the justified expectations of the other party.”).

While it is unlikely that anyone can draft a truly "impenetrable contract," it is possible to craft a relatively clear and consistent document that is not susceptible, at least on its face, to multiple interpretations giving rise to the possibility of a dispute over contract meaning.  To do so, it is helpful to understand some of the basic rules of contract construction that a judge, or an arbitrator, will use in trying to decide a claim.


For more information on construction contracts, please contact Ken Robinson or another member of our Construction Contracts, Real Estate Law, or Construction Law & Litigation teams.

Insurance Coverage for Construction Projects


A basic mechanism for managing risk on construction projects is insurance.  Insurance policies provide two basic benefits: protection from losses arising out of covered claims; legal representation for covered claims.  There are numerous kinds of insurance coverage available for a construction project.   It’s worth carefully assessing your risks and matching them with the appropriate coverage. 

Commercial General Liability Insurance (“CGL”).  CGL coverage is a basic business liability policy.  Typically, a CGL policy provides only “first party” coverage: it protects only the parties named in the policy. Third parties, such as an injured bystander, cannot submit a claim to the insurer.    It is therefore important to ensure that all of the parties required by contract are included as “named insureds” or “additional insureds.”  However, in doing so, the additional insureds are then made first party claimants should they be sued by a third party

Property Insurance.  Property insurance provides protection against most risks to property, such as fire, theft and possibly weather damage.  Special forms of property insurance include flood insurance, earthquake insurance, home insurance, and boiler insurance.

Builder’s Risk Insurance.  Standard property insurance policies do not cover losses to new improvements to the property.  Builder’s risk insurance provides coverage to new improvements for damage to the work during construction, including installed materials and equipment as well as permanent structures.  Typical exclusions from builder’s risk policies are land, existing structures, tools and machinery not part of the new permanent structure, contractual liabilities and faulty workmanship.  Builder’s risk insurance does not provide liability coverage in the case of loss to another party.   Both the owner and the general contractor are typically named insureds under a builder’s risk policy.  Subcontractors are sometimes also named insureds.

Professional Liability Insurance.  Professional liability insurance provides malpractice coverage to construction designers such as architects and engineers for defects or deficiencies in the design aspects of the project, and for any deficiencies in the project administration responsibilities undertaken by the design professional.  To the extent that a construction manager or the general contractor has a licensed designer on its staff, or if they have design responsibilities, the GC or CM should have an additional design insurance policy. 

Excess/Umbrella Insurance.  Additional coverage for construction parties is readily available in the form of “excess” or “umbrella” policies.  It is a good practice for construction contractors to procure liability insurance in addition to their CGL coverage in the form of excess insurance policies.  The additional coverage is implicated only when the underlying insurance is exhausted.   It is important to give prompt notice to both insurers if a claim arises.  This is so even if the two policies are issued by the same insurer as the insurer typically assigns two adjusters to the claim, one for each policy.

Other Policies.  Besides the policies described above, there are also other policies typical on construction projects including worker’s compensation, automobile/vehicles, directors and officers, so called “wrap” policies (essentially insuring all parties to the project), and products completed operations hazard policies.


For more information on insurance coverage for construction projects, contact Ken Robinson or another member of our Construction Law & Litigation team.

Flood Water Drainage Rights Between Adjacent Landowners


Everyone knows that water flows downhill, but what are the legal ramifications when the flow is obstructed and property damage results?  During flooding, conditions that historically allowed water to pass serenely from one property to another can be overwhelmed. Previously harmless objects in the drainage path become obstacles, and water reroutes without benefit of hydraulic design.  Who is responsible for resulting damage and under what circumstances?  The law governing the rights and obligations of the landowners is well-developed, but the wide range of property configurations and varying drainage patterns can still make assessment of the legal relationships challenging. 

Such questions often arise after unprecedented flooding, such as occurred in 2013 in and around Boulder and the Front Range of Colorado.  That event demonstrated that we still have a lot to learn about flood risks and how to manage them.  The relevant law can provide guidance as there are well-established legal rights that attend the flow and drainage of water over adjacent properties.  

Common Law Drainage Easements

The right to have water drain from one property onto another is in the nature of an easement.  In traditional legal terms, an easement is a form of “servitude” which is defined as “[a] charge or a burden resting upon one estate for the benefit or advantage of another” (Black’s Law Dictionary).  The benefitted property is known as the dominant estate, while the burdened property is known as the servient estate.  Thus a drainage easement benefits the adjacent upstream property, the dominant estate, and burdens the adjacent downstream property, the servient estate.  In some instances, though technically not an easement, the downstream property may have a right to require that the drainage from the upstream property be regulated such that the downstream flow will not be destructive.

Drainage easements can be established in several ways: (1) by an instrument of conveyance such as an easement deed; (2) by a dedication in a subdivision plat or an engineered drainage plan associated with a subdivision; or (3) by common law, that is by appellate court rulings.  It is the latter two types of drainage easements that give rise to most disputes.

Colorado law recognizes the right of the owner of an up-gradient property to have surface water drain onto an immediately adjacent, down-gradient property by way of a “natural easement for drainage.”   When natural and historic drainage conditions are modified or disturbed by construction or development, the law becomes more complex.  Generally, the owner of a down-gradient (servient estate) property is allowed to modify the drainage pattern on that property provided that the modifications do not adversely impact the drainage over the up-gradient (dominant estate) property.

The Colorado Court of Appeals summarized the common law of drainage easements as follows:

 Colorado has always followed the ‘civil law rule,’ which provides that the owner of upstream property possesses a natural easement on land downstream for drainage of water flowing in its natural course.  Also, “(n)atural drainage conditions may be altered . . . provided that water is not sent down in manner or quantity to do more harm than formerly.”  Neither the fact that the land concerned is urban rather than rural, nor the fact that the elevation on both properties has been lowered without materially altering the natural drainage flow, affords a rational basis for creating exceptions to the general rule. Colorado cases on water drainage have drawn no such distinctions.  (emphasis added)

Calvaresi v. Brannan Sand & Gravel Company, 534 P. 2d 652, 654-55 (Colo. App. 1975).  Note that, in Calvaresi, the Court of Appeals in the highlighted text indicated that drainage patterns can create drainage easements through the result of “urbanization,” that is the construction of improvements that alter the flow of water over servient estates.

Prescriptive Drainage Easement

The common law of access easements also provides for the creation of an easement by way of uncontested use over the alleged servient estate for a prescribed period of time.   Hankins v. Borland, 163 Colo. 575, 431 P.2d 1007 (1967) (holding that a drainage easement can be created by prescription, with a prescriptive period of 18 years).  Accord, Stoll v. MacPherson Duck Club, Ltd., 607 P.2d 1019, 1022 (Colo. App. 1979).

Repair and Maintenance of Drainage Easement

Though the primary purpose of a drainage easement is to allow water to flow over the dominant estate, there is an attendant, but limited, right of access over the servient estate in order to maintain drainage area such that entry onto the servient estate is not trespass.  In Shrull v. Rapasardi, 517 P.2d 860, 862 (Colo. App. 1973), plaintiffs brought an action for trespass when the defendants entered plaintiff’s property to reopen a ditch.  The trial court held that the defendants were acting lawfully in repairing the ditch.  The Court of Appeals in Shrull affirmed the trial court’s judgment, stating:

If the owner of the dominant estate does not unnecessarily inconvenience the owner of the servient estate and use of the easement is not expanded, the owner of the dominant estate may do whatever is reasonably necessary for the enjoyment of the easement, including repairs, ingress and egress, with space therefor as exigency may show.

Accord, Stoll v. MacPherson Duck Club, Ltd., 607 P.2d 1019, 1022 (Colo. App. 1979).

Liability for Impairment of Drainage Flow

If the owner of a down-gradient property subject to a drainage easement alters the drainage pattern for water flowing from the upstream, servient estate, and those changes substantially alter the flow so as to cause the water to back up onto the dominant estate, the owner of the servient estate may be liable for damages.  It is important to note that a physical alteration to a drainage area may not cause water to back up except during flood conditions, and thus the impairment may go unnoticed for years.  Nevertheless, the servient estate owner may be liable though the flooding may take place long after the alteration.  Also, it is useful to note that, in Colorado, the governmental immunity statute, C.R.S. §§ 24-10-101, et seq., does not apply to drainage easement disputes.  Upper Platte and Beaver Canal Co. v. Riverview Commons General Improvement Dist., 250 P.3d 711, 714-15 (Colo. App. 2010).  Thus, even if the downstream drainage blockage is created by a governmental entity, it could still be required to remove the blockage and even found liable for damages.

Upstream property owners have standing – that is, the right to file suit – to seek recovery of damages for the injury resulting from flood waters backed up by blockage of the downstream drainage.  In Romano v. Village of Glenview, 660 N.E.2d 56 (Ill. App. 1995), homeowners brought an action against the developer of a residential subdivision for injunctive and declarative relief seeking to have the developer replace drainage channels on their properties with underground drainage systems or, in the alternative, to require that the natural flow of surface water be restored so as not to flood the plaintiffs’ land.   In Romano, the city intervened, filing a motion to dismiss—based on governmental immunity and lack of standing—and contending that the plaintiffs had not alleged injury in fact.  The trial court granted the motion.  The Illinois Court of Appeals reversed, holding that the plaintiffs had alleged injury-in-fact that the drainage channels created unreasonably dangerous conditions for their children, deprived them of the use and enjoyment of their yards, and created soil erosion in their yards. 


For more information on flood water drainage rights, contact Ken Robinson or another member of our Drainage Disputes or Real Estate Law teams.

Anatomy of a Construction Contract


The function of a contract is to reflect the intentions of the parties.  In construction, the shared intention is to construct a specific project, within a defined time frame, at an agreed price, and in a prescribed manner.  If the contract is well-drafted, the parties have a good start toward a successful project.  The contract will tell the parties what their respective rights and obligations are, as well as the consequences on not fulfilling their obligations.  It is important to recognize that, unlike in old England, there is no debtor's prison in the American system of jurisprudence, and the remedy for non-performance may often be too little too late.  Good contracts can help minimize unintended consequences.  Good construction contracts have their own anatomy in the form of eight fundamental categories of clauses.  Understanding the categorical nature of any particular clause can help determine the relation of that clause to the contract as a whole and thus foster better negotiation, drafting and administration of construction contracts.  

Housekeeping.  Every contract must properly and completely identify the parties, the project and the contract documents.  This includes full corporate names and addresses, and a formal property description for the project.  If there are other material participants, such as the designer and the owner, it is useful to include them as well.  It is also imperative that all of the contract documents be identified with specificity.  Contract documents include the construction agreement itself, but they may also include separate general and special conditions, construction drawings, specifications, addenda, project manuals, soils reports, etc.  If such documents are identified as part of the "contract documents," they become part of the construction agreement that governs the parties' respective rights, obligations and liabilities, and they must be reviewed for consistency and applicability.  Contracts should also include a signature section evidencing assent to the agreement.  Make sure the contracts get signed, preferably before commencement of the work.  There is no need to inject spurious issues into future disputes such as whether a party is bound by a contract for lack of signatures.

Scope of Work.  A construction contract is not complete if it doesn't fully specify the scope of work to be performed by the contractor.  For most projects, the scope of work is described in construction drawings and specifications and these must be identified in detail in the construction contract.

Contract Price.  The Contract Price is another key component of the construction contract and must be stated without ambiguity.  If it is not, ultimately a judge or an arbitrator will be required to decide the reasonable value of the work performed, and at a much later time than completion of the project.  The contract price will, of course, depend on the project delivery method.  The most common forms are fixed price and cost-plus, with or without a guaranteed maximum price.  These forms of pricing can, in turn, be affected by whether the contract is for just construction, for design build, or for some form of construction management.

Schedule for Performance and Completion.  A large number of construction disputes arise out of scheduling.  The more clearly the parties can identify the construction schedule in a contract, the lower the risk of protracted disputes later on.  A schedule can be in the simple form of a start date and a completion date or, on more complicated projects, bar charts or full-blown critical path method project schedules.

Allocation of Risk.  There is always uncertainty in construction projects and, with that uncertainty, risk.  The risk can, and often does, translate to liability for unforeseen costs.  Good construction contracts provide for those risks by inclusion of clauses addressing matters such as differing site conditions, non-payment, injury to person or property, warranty and claims by others.  The purpose of such clauses is to reflect the parties' agreement at the beginning of the project as to who bears the risk of liability in the event that unforeseen events transpire that create liability and impose additional costs on the project or the parties.  If these provisions are not included, it becomes necessary for a court or arbitrator, much later on, to decide how the applicable law distributes that risk.  Insurance is an important aspect of risk allocation and a necessary component of every construction project.  Experience has shown that the best allocation of a particular risk is to the party best situated to manage that risk.

Contract Administration and Logistics.  This category of clauses addresses contract and project administration matters, and includes more ministerial aspects of the project such as payment procedures and reporting.  While perhaps stating the obvious, in addition to good contracts, good project documentation is essential to optimal project administration, and it is critical to resolving disputes favorably.  

Dispute Resolution.  If a dispute arises over performance obligations under a construction contract, and the contract does not provide for any dispute resolution procedures, the claimant’s recourse is in the courts.  Litigation is expensive and time-consuming, however.  Thus, contracting parties will often call for alternate dispute resolution (“ADR”) procedures which are intended to provide in theory at least, for quicker, more cost-effective resolution of disputes.   A common ADR procedure is mediation in which a trained neutral conducts a structured settlement conference between or among the parties with the intention of reaching a voluntary and acceptable settlement by the parties.  The mediator has no authority to make decisions that are binding on the parties.  Nevertheless, if the contract calls for “mandatory mediation,” the parties are required to participate in mediation in good faith, even if they don’t agree to settle in mediation. 

The major ADR procedure utilized in the construction industry is arbitration.  An arbitration procedure is binding on the parties, effectively substituting for most of the court’s responsibilities.  Arbitration statutorily divests the courts of jurisdiction over most aspects of a contractual dispute under the contract with an arbitration clause.  Radil v. National Union Fire Ins. Co. of Pittsburg, PA, 233 P.3d 688 (Colo. 2010).  The Colorado Uniform Arbitration Act, C.R.S. §§ 13-22-201, et seq., can be preempted by an enforceable arbitration clause that invokes the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq.  An arbitration proceeding is typically similar to a judicial proceeding, but often without all of the procedural elements in conventional litigation such as depositions and written discovery.  In either form of ADR, the parties pay equally for the fees of the mediator and/or the arbitrator.

Warranties.  Warranties impose an obligation to repair defective work, and they can be express, as in stated in the contract, or implied where the law will impose a duty irrespective of the contract.  An express warranty is legally separate obligation from the duty to perform under the construction contract even though a warranty may be recited in that contract.  Hersh Companies Inc. v. Highline Village Associates, 30 P.3d 221, 225 (Colo. 2001).  “[Warranty] claims seek recovery for the breach of a subsequent contractual duty to repair or replace rather than recovery for a deficiency in the original work, they do not fall within the class of actions governed by [the limitations of actions statute for construction professionals].”). 



For more information on construction contracts, contact Ken Robinson or another member of our Construction Law & Litigation team.