By Sara M. Bour, Esq., AIA Contract Documents, Manager and Counsel
September 27, 2022
Lien waiver and release forms are short, but powerful, documents that are often used throughout the lifecycle of construction projects. These documents substantially impact the claims and rights of project participants. For this reason and more, it is imperative to pay close attention to their terms and conditions, especially when it comes to a contractor’s preservation of claims. These forms may be submitted without consideration to their future impact because they required for cash flow and payment. Unfortunately, overly broad release language, incorrect values, or other accidental errors can be held against the contractor, as many jurisdictions strictly enforce these documents. A strict interpretation of the form may bar a contractor from later bringing a claim for payment.
A case that highlights the importance of this concept is Dommer Const. Corp. v. Savarino Const. Servs. Corp., and the Cincinnati Insurance Company¸ 85 A.D.3d 1617, 925 N.Y.S.2d 305 (2011). This case arose out of construction of a new emergency room and heart center at a medical center in New York. Savarino subcontracted with Dommer to perform certain construction on the project. After Dommer completed its work, it submitted a conditional waiver and release form that waived, released, and relinquished all claims, demands, and rights of lien up to the amount shown on the lien waiver and previously received by Dommer. After accepting payment from Savarino, Dommer later claimed that it was owed additional sums for overtime and extra work on the basis that these sums were not encompassed by the waiver and release form.
On appeal, the New York Appellate Court upheld the lower court’s dismissal of Dommer’s complaint. In ruling in favor of Savarino, the Court stated that where “a release is unambiguous, the intent of the parties must be ascertained from the plain language of the agreement.” Id. at 1618. The Court found that Dommer unambiguously waived, released, and relinquished any and all claims and demands for its work on the Project and thus, “the fact that [Dommer] may have intended something else is irrelevant.” The terms of the release were found to be a complete bar to any action on the subcontract between the parties.
Unfortunately, it is not unheard of for contractors to unintentionally release claims as part of lien waiver and release forms. Dommer shows the importance of explicitly reserving claims that arise during the project, and limiting the scope of the release. To help avoid issues like this, AIA Contract Documents developed four generic lien waiver and release forms that prompts users to consider their claims before submitting the form. Each of these generic forms contain an “exceptions” paragraph that requires the user to complete information pertaining to rights or claims that may be waived, if not explicitly reserved. For example, the G901®-2022 Conditional Lien Waiver and Release on Progress Payment contains specific language pertaining to a contractor’s lien rights on future work, unpaid retention, extras, pending modifications and changes, and disputed claims. Under the title “Exceptions,” this form reads:
“This Conditional Waiver and Release on Progress Payment covers a progress payment for Work furnished for the Project or the Property and the improvements thereon through [date] (“Effective Date”). This Conditional Waiver and Release on Progress Payment does not cover (i) Work furnished after the Effective Date, (ii) unpaid retention, (iii) extras for which Contractor has not received payment, (iv) pending modifications and changes, (v) disputed claims in the total amount of $[amount], and other exceptions described below, if any:
In this paragraph, users may list their rights and claims that will be excepted from the waiver and release. If a contractor is aware of any claims that it has (or may have) due to common construction issues like additional scope, delays, resequencing, or remobilization costs, then those claims may be explicitly listed here for preservation purposes. Users may also consider using more general language to protect and preserve their rights and claims on the project. In any event, prior to submitting a lien waiver and release, it is crucial to carefully review the document to ensure what claims are being released or reserved, and under what circumstances.
To learn more about AIA Contract Document lien waiver and release forms, visit Important Considerations for Sworn Construction Statements and Lien Waiver and Release Forms or watch a short video AIA Contract Documents New Sworn Construction Statement and Lien Waiver and Release Forms.
AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.