Nowhere is the downturn in the economy more pronounced than in the construction industry. Contractors and subcontractors are going out of business with increasing frequency. When a party to a construction project defaults on its obligations, everyone else involved in the project is affected. Material suppliers may have been left unpaid, the bank must examine its potential liability, the surety must determine its exposure, and above all else, the work.must be completed. The cases and legislation during this survey period reflect this aspect of the construction industry.
The most significant event during the survey period was the enactment of new provisions in the mechanics' and materialman's lien statutory framework. Agreements to waive liens before the material or services are supplied are no longer valid. Accordingly, property owners and contractors cannot rely on blanket lien waivers to prevent liens from being placed on the property.
Also during the survey period, the Georgia Court of Appeals ruled on several lender liability issues further clarifying the potential exposure a bank has when it becomes heavily involved in a construction project. The economic downturn has also led to an increasing number of surety claims as construction projects continue to fail. The changes in the law in the last year make it absolutely imperative that the construction lawyers prepare their clients for the possible default by one of the other parties. Proper planning is the only way to reduce the harmful effects of bankruptcy and business failure.
Brian J. Morrissey and Matthew W. Wallace, Construction Law, 44 Mercer L. Rev. 125 (1992).