On behalf of Law Offices of Richard Mucci posted in Construction Law on Monday, January 14, 2013.
Recently, we have seen an increase in the number of purchasers of specially fabricated goods after the goods have been fabricated refuse delivery of the order and/or abscond without paying leaving many fabricators of these specialized goods wondering what their rights and remedies for security and to seek payment under the law especially if these goods are never incorporated into the construction project.
First, what exactly is a “specially fabricated good?” Generally speaking, Massachusetts defines this term as materials not generally suited for or readily adaptable to use in a structure. As you can see, however, this leaves a lot of room for interpretation. As a result, you can think about building materials as being part of a spectrum, with some materials absolutely, positively being specially fabricated for a specific project, and others obviously being your run-of-the-mill standard building material that is not specially fabricated. Then, in the middle, there is some gray area.
Most courts will apply a simple test to decide whether a material is specially fabricated, weighing these two factors: (1) Were the materials specially ordered and specially fabricated for that specific project? and (2) Can the produced materials be easily used in another structure?
Recently, we have seen an increase in the number of purchasers of specially fabricated goods after the goods have been fabricated refuse delivery of the order and/or abscond without paying leaving many fabricators of these specialized goods wondering what their rights and remedies for security and to seek payment under the law especially if these goods are never incorporated into the construction project.
First, what exactly is a “specially fabricated good?” Generally speaking, Massachusetts defines this term as materials not generally suited for or readily adaptable to use in a structure. As you can see, however, this leaves a lot of room for interpretation. As a result, you can think about building materials as being part of a spectrum, with some materials absolutely, positively being specially fabricated for a specific project, and others obviously being your run-of-the-mill standard building material that is not specially fabricated. Then, in the middle, there is some gray area.
Most courts will apply a simple test to decide whether a material is specially fabricated, weighing these two factors: (1) Were the materials specially ordered and specially fabricated for that specific project? and (2) Can the produced materials be easily used in another structure?
If the specially fabricated goods were fabricated for a public project then G.L. c 149, § 29 applies and the fabricator has a claim against any surety bond even if the goods were not delivered or incorporated into the project. G.L. c. 149 § 29 states:
“Any material specially fabricated at the order of the contractor or subcontractor for use as a component part of said public building or other public work so as to be unsuitable for use elsewhere, even though such material has not been delivered and incorporated into the public building or public work, but only to the extent of its purchase price less its fair salvage value and only to the extent that such specially fabricated material is in conformity with the contract, plans and specifications or any changes therein duly made…”
A fabricator may not enjoy the same protections if the specially fabricated goods are fabricated for a private project. The statutory context of G.L. c. 254 § 4, the Massachusetts Mechanic’s Lien statute, contains the phrase “improvement of real property” which strongly indicates that something is not an improvement unless it is itself, in whole or in part, constructed or assembled in connection with a building or structure or other construction-related project. Therefore, unless the specially fabricated goods are delivered and incorporated into improving the real property of the owner then the fabricator has no rights to a mechanic’s lien. If the private construction project has an applicable private bond then the terms of the bond would control the fabricators’ rights.
Therefore, when executing contracts to provide specially fabricated goods, fabricators must be aware of the potential limits in security and take the necessary steps when executing the contract to protect themselves. The alternative may leave fabricators holding specially fabricated goods with little value and no security for payment.
Contact the Law Offices of Richard Mucci if your business needs assistance in drafting and recording mechanic’s liens.