Contractor Claims Against Lender Upheld Despite No Contractual Privity

By: Alex Benarroche

Ed Seglias commented on the issues in BCD Associates, LLC v. Crown Bank, a Delaware Superior Court matter stemming from the bank’s failure to pay BCD Associates’ invoices for work on a hotel renovation project.

Ed noted that:

Many of the issues at stake for BCD Associates in this case are familiar for contractors — unpaid contract balances and retainages from work on a commercial project. But often contractors deal with owners, not lenders or financial institutions, a difference which can greatly alter the payment and negotiation processes.

In this instance, the bank reneged on an agreement to pay the final balance, leading to litigation, something which all businesses want to avoid. Contractors would be wise to sort out early on (even before work begins) where payment is coming from, payment schedules, and how disputes will be resolved. Carefully worded contractual provisions may help mitigate potential issues related to payment as well.