Monthly Archives: July 2012

Architects & Engineers – Are you committing a Class 2 misdemeanor without realizing it? (Tue Tip; law note)

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handcuffsBuried within the general contractor provisions of the North Carolina General Statutes is a little-known provision that can get architects and engineers in hot water.  If you recommend to a project owner anyone who is not properly licensed under the general contractor statute, you have committed a Class 2 misdemeanor.  Really!  Here is the pertinent language:

§ 87-13. Unauthorized practice of contracting; impersonating contractor; false certificate; giving false evidence to Board; penalties

Any person, firm, or corporation not being duly authorized who shall contract for or bid upon the construction of any of the projects or works enumerated in G.S. 87-1, without having first complied with the provisions hereof, or who shall attempt to practice general contracting in the State, except as provided for in this Article, and any person, firm, or corporation presenting or attempting to file as his own the licensed certificate of another or who shall give false or forged evidence of any kind to the Board or to any member thereof in maintaining a certificate of license or who falsely shall impersonate another or who shall use an expired or revoked certificate of license, and any architect or engineer who recommends to any project owner the award of a contract to anyone not properly licensed under this Article, shall be deemed guilty of a Class 2 misdemeanor. And the Board may, in its discretion, use its funds to defray the expense, legal or otherwise, in the prosecution of any violations of this Article.

However, there is also some relief in the same statute, which provides that:

No architect or engineer shall be guilty of a violation of this section if his recommendation to award a contract is made in reliance upon current written information received by him from the appropriate Contractor Licensing Board of this State which information erroneously indicates that the contractor being recommended for contract award is properly licensed.

Has this issue ever really been litigated?  Yes, it has.  While I cannot point to reported cases, I will tell you that I have had this become an issue – more than once – in my practice.  Each time, the design professional knew that the entity involved had been a licensed general contractor, but the entity had lost its contractor’s license before the particular project at issue.

Take-away:  Even if the general contractor is the largest and most well-known in the state, always, always, always check with the Licensing Board to confirm that a general contractor is in good standing before making any recommendation to a project owner.  Just in case.  Since Consider it two minutes well spent.

Questions, comments, experiences with this statute?  Share in the comments section of the blog.

Photo (c) Riki Maltese via CC

 

 

 

Something to Hang Your Hat On… (Limitation of Liability clauses) (law note)

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hat rackIn the past on this blog, I have pointed out the benefits of Limitations of Liability clauses.  These are the clauses that state that the most damages that your Firm can be responsible for is capped at a certain dollar amount or your contracted fee.

Do you have a limitations of liability clause in your professional services contract?  You should.  Best practice would be to have such a clause that limits damages against you to a set amount.  For example:

Engineer’s liability to Client for any and all injuries, claims, losses, expenses, damages or claim expenses arising out of this agreement, from any cause or causes, shall not exceed the total amount of $50,000 or the amount of Engineer’s fee, whichever is greater.

While best practice is to have such a provision, it is not always enforced.  In a case arising out of the Western District of North Carolina, the court noted that such provisions will not be enforced where the result would be unconscionable and “elicit a profound sense of injustice.” See  Performance Sales & Mktg., LLC v. Lowe’s Companies, Inc.,2010 WL 2294323 (W.D.N.C. June 4, 2010).

What does this mean in practical terms?  It means that you should endeavor to include a limitation of liability clause, but don’t necessarily think that if you have that you’ve capped your risk.  A court can always decide that the clause is unconscionable.  But, such a limitation is one more thing to “hang your hat on” if and when you find yourself staring down the barrel of litigation*.

* If, however, you are facing litigation, make sure you sign up for regular blog updates.  Starting next week, I am writing a new series on the anatomy of a construction lawsuit, so stick around! 

 

Photo:  (c) BabbNet via CC.

Who is Working for You? Consider These Three Items Before Hiring in your A/E Firm (guest post)

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black shadow of a womanToday, a tale of caution before you make your next hire, from guest blogger Jane Smith.  Jane is very familiar with personal information screenings and online background checks, and regularly writes about these topics in her blogs. Feel free to send her comments at [email protected] or leave a note in the comments section, below.

 

I watched my parents build a small landscaping store into a bustling business for over twenty-five years. Though the rewards were great, my mother and father worked tirelessly every day of the week. I often wondered if it was really worth all the anxiety and stress they carried around with them.

I once overheard my father saying, ‘It’s not the work that’s tricky. That’s always been easy. It’s managing the fifty employees that gets me.’ For years, I never understood what he meant. Whenever I visited them at their company, everybody seemed to be busy as a bee causing no trouble. I later learned that my parents always had one or two employees they had to keep their eye on. It sounds easy, given that two out of fifty is hardly anything. Yet, as I later learned through my own career, even one person can derail an entire successful operation.

Knowing who works for you is a vital part of running any business. If you don’t know who is stepping on the job each day, you may find yourself in a bind, a liability – or worst of all – a lawsuit. As I’ve learned through my own work experiences, it’s vital to know who you are hiring before you bring them on the job. Consider these three items before hiring anyone to join your staff:

Word-Of-Mouth-Referrals are the Best

As the old saying goes, “It’s all about who you know.” It may seem unfair, but it’s true: It’s best to go with somebody you know as opposed to a random person who walks through the door looking for a job. Whenever you are hunting for new talent to join your team, ask those you trust most – fellow employees, family members, business colleagues, etc. – to help you track down your next hire. I’m not saying that an unknown applicant is unacceptable; however, searching through a web of referrals is usually the best way people find astute, reliable employees. Sticking to this formula will help you in transitioning a new employee to your team.

Run a Background Check – Always

It would be wonderful to think that every person who came to work for you was a saint with no problems, no past, and no trouble. Unfortunately, we don’t live in such a world. It’s best to have your guard up, especially when hiring new people. A background check reveals a lot about a person: their past, their problems, and, likely, what they are capable of doing. If a person comes to you with poor credit and an extensive criminal record, what does that say about the person? I’m not saying that the world isn’t full of second chances, but you need to ask yourself what this person is capable of doing to your business. Are you willing to take a risk on that? That’s up for you to decide.

If it Smells Fishy, It Probably is

Let’s say you’ve hired a new employee and things seem to be going great, but then all of the sudden job materials start disappearing. The first one or two don’t really bother you, but the third and fourth burn. What’s going on? Well, here’s the unfortunate truth: If stuff starts to turn up missing and it didn’t before there was a new employee in the ranks, you might have a problem on your hands. No, don’t accuse anyone of anything without hard evidence, but keep your eye out for more occurrences. I give you this wisdom because I watched this very thing happen to my parents. They hired someone to manage their business on the weekends and one day $400 turned up missing from the register. My father quietly looked into his new employee’s past and discovered that he had stolen money from a number of businesses. You can imagine how much longer he was employed after that.

Hiring new employees can be an exciting process, but it’s always best to proceed with caution. If you find yourself needing some extra help, consider these three tips when hiring anyone and everyone.

Thanks Jane!  Questions, comments, stories to share of your own hiring problems?  Leave a note below.

When is a Construction Project truly “Complete”? That depends. (law note)

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Crossing the finish line

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Long-time readers of the blog may remember my earlier post on substantial completion.  However, in looking over my blog stats to see what search terms lead people here, it looks like this is hot topic.  The blog searches came in two general categories:

1.  Those searching strictly for a definition of substantial completion.  Some examples:

  • What does “substantial completion” mean?
  • when does a building achieve substantial completion
  • contracts “substantial completion”
  • substantial completion undefined
  • when is a project substantially complete

For those of you who want a definition, I refer you to my earlier post.  Essentially, however, the term is not always defined, which can be part of the problem.  If you are using AIA contract documents, there is a built in description that defines it as when the Owner can occupy or use the building.  Even the AIA definition, however does not state that there must be a permanent or temporary certificate of occupancy before substantial completion can occur.  While some might presume that a certificate of occupany is required, better practice would be to include language that specifically states that substantial completion also requires that the Contractor deliver to the Owner a certificate of occupany. This leads to the second major category of blog search terms related to substantial completion:

2.  Those looking to compare substantial completion with certificates of occupancy.  Examples include:

  • certificate of substantial completion vs certificate of occupancy
  • substantial completion or final completion
  • completion vs substantial completion
  • construction certificate of substantial completion

This can be a confusing distinction, but in reality the two are generally unrelated to each other [unless you state that a Certificate of Occupancy is part of the Substantial Completion process.] A Certificate of Occupancy is issued by the Building Department official when the building fulfills all requirements to be safely occupied.  In contrast, a Certificate of Substantial Completion is requested the contractor and granted by the architect.  Sometimes things that need to be completed before the architect can issue a certificate of substantial completion do not prevent the building of receiving Certificate of Occupancy.  [Unless, that is, you are in an odd jurisdiction, where a Building Inspector will demand a Certificate of Substantial Completion before issuing a Certificate of Occupancy.] A final note:  for those who were wondering about Final Completion, this occurs after the final inspection; i.e., after the architect verifies that the punch list is complete and all contract terms have been met.   [The punch list work can be conducted while the Owner has beneficial use of the building.]  At Final Completion, the final Certificate of Payment is issued. Confused yet? Drop me a line.  And, share below:  what has been your experience with certificates of occupancy and whether or not they relate to substantial completion?

Photo (c) Euromotorworks.