For Engineers & Architects: Top 10 Construction Law in NC Blog Posts

top10Since I have so many newer readers here at Construction Law NC, I thought a brief summary of some of the most popular posts might be helpful.  (I have also added this list to the About Me & Contact Info page, in case you want to refer to it later).

Presented below are the top 10 posts by popularity (although the list does fluctuate some):

  1. “Substantial Completion” on the Construction Project: How is it defined?  (always a popular post; owners want every last paint scratch fixed before they are willing to consider the project complete)
  2. The Sticky Statute of Limitations in NC  (the general rule: 3 years from date of service; however, there are many exceptions)
  3. Statute of Repose: Putting your Risk to Bed  (after 6 years, in North Carolina, even the exceptions to statutes of limitations don’t help)
  4. Planning Ahead for Additional Compensation  (money; cause, we all need to get paid!)
  5. Spring Cleaning: 6 Contract law tips for limiting risk on construction projects  (contracts are the first step in limiting your risk- read here to learn how to make them effective)
  6. How to Smartly Handle Project Documents  (your policies and procedures with documents can make or break a lawsuit)
  7. The Architect’s and Engineer’s “Standard of Care”  (note: perfection is NOT the standard!)
  8. Design Error and the Spearin Doctrine (why your designs must actually, you know, work!)
  9. Active vs. Passive Negligence (sharing the blame, unequally, when something goes wrong)
  10. Adding an “Additional Insured” in the Professional Services Agreement: an exercise in futility!  (for those times when you have an obtuse owner- show them this!)

Are there other posts that you think should be added to this “Best of” collection?  Wish I had written a post on your pet topic?  Share below.

Photo (c) Independent Association of Businesses.

A trap for the unwary: Construction contracts under Seal (Law note)

signing contractHave you ever signed a contract that was “under seal”?  You probably have, and you probably have done so without really understanding what it means.  In North Carolina, a contract “under seal” means that the contract can be enforced for ten (10) years instead of the usual three.  In other jurisdictions, the contract can be enforced for even longer periods of time.  [For example, in Delaware, a contract under seal extends the time for brining a claim to twenty (20) years!]  Since a sealed contract extends your liability significantly, it is not something you should do lightly.

The phrase “under seal” comes from the old tradition of using a unique wax symbol (such as an engraved signet ring) to identify the owner signing the contract.  Today, however, you sign under seal when the words “under seal” or even just “[Seal]” is printed next to your signature, like this:

______________  [SEAL]
Melissa Dewey Brumback

While it is good to know about seals in general, construction professionals should be more concerned than ever about sealed contracts following a recent North Carolina Court of Appeals decision, Davis v. Woodlake Partners.  The Court in Davis held that in a contract to purchase improved property, signed “under seal,” extended the statute of limitations to the ten year statute as authorized by N.C. Gen. Stat. 1-47(2).  This is despite the fact that there is a six year statute of repose in North Carolina.  In the case, the lawsuit was brought within the 6 years, but outside of the 3 year statute of limitations for ordinary contracts.  The Court found the action was timely because of the “sealed” nature of the contract.

What does this mean for construction contracts?  You could find yourself liable on a construction contract longer than you intended.  Does this case apply in a situation where the 6 year statute of repose was violated?  The Court was not faced with that issue, so it’s too soon to tell.  The case was a divided opinion, so the state Supreme Court may be weighing in on the issue.  Stay tuned.

In the meantime, consider striking through any “seals” on your construction contracts.

Your turn.  Take a look at the last contract you were asked to sign.  Was it “under seal”?  Did you know what that meant when you signed it?  Share below.

Photo (c) Losinpun.

Latent Defects: extending the statute of limitations (law note)

 

surprisedAs we’ve previously discussed, the statute of limitations for construction claims in North Carolina is generally three years.  That is, once 3 years have passed, you are generally protected from any lawsuit filed after that time.

Does that mean that no lawsuit can be filed against you subsequent to that time?  No.  First, the statute of limitations is an affirmative defense, meaning that you must timely assert the defense as part of your response to the lawsuit.

Secondly, it is sometimes not apparent when the three year period begins to run.  Substantial completion or final completion?  What if your work is finished, but the project is not– does the three year period not start until project completion?  The issue of whether the statute of limitations has run is complex, and a mixture of law and fact questions.  See, Lord et al v. Customized Consulting Specialty, Inc. et al, 182 N.C. App. 635, 643 S.E.2d 28 (2007).

Finally, be aware of the hidden danger of hidden dangers. 

The three years does not start to run until it becomes obvious that there is damage stemming from your professional negligence.  The applicable statute states that the three years “shall not accrue until bodily harm to the claimant or physical damage to his property becomes apparent or ought reasonably to have become apparent to the claimant, whichever event first occurs.” N.C. Gen.Stat. § 1-52 (2005).

In other words, if there is a defect that is not readily observable and visual, the three years may not start to run until it becomes observable (e.g., through destructive testing, repair work, or renovation work).  This is what is known as a “latent defect”, and it can impose liability far beyond the initial 3 years.

Does the latent defect rule extend liability indefinitely?  No, it does not.  The statute of repose (6 years in NC; other states vary) will impose an absolute final date on real property improvements, after which no further liability can successfully be claimed.

Questions?  Drop me a comment, below.  Also, be sure to sign up for regular email updates and our free Construction Professional newsletter by entering your contact information on the top right of the homepage.

Photo credit: photo found on  (link no longer working)

 

Tolling the Statutes of Limitation & Repose? (Law note)

Lowe's Motor Speedway

A blog reader recently raised the question of to how to handle construction defect claims while repair attempts are being made on a defective building.  In part, the answer to this question will depend on how close you are to the statute of limitations or the statue of repose from running.  The closer you are, the more you need to be concerned about this issue.  Just because all parties are working together to solve construction issues does not mean that the statutes are not running.  They can.  [There are, as usual, exceptions for equitable reasons.]  And once statues run, there’s no getting them back.

One prudent approach to dealing with the statutes is to have all parties involved enter into a “Tolling Agreement.”  What a properly drafted tolling agreement can do is to stop the running of the statue of limitations and/or repose while the parties attempt to fix the defects or otherwise settle their issues with one another.  Note that the tolling agreement does not give a party any greater rights than they would have at the time it is signed– that is, if the statute has *already* run, then it would be of no use.  But the tolling agreement can act as a “time out” on the running of the clock.

A good example of a tolling agreements is found in the Court of Appeals opinion in Charlotte Motor Speedway, Inc. v. Tindall Corporation, 195 N.C. App. 296, 672 S.E.2d 691 (2009).  The Speedway case involved the infamous collapse of a pedestrian walkway during the NASCAR Winston Cup.  The walkway which collapsed had been substantially completed by October 1995, and the collapse occurred in May 2000.  Speedway (the project owner) and Tindall (which constructed the walkway) entered into a tolling agreement:

“to toll and suspend any applicable statute of limitations, repose or time, whether created by statute, contract, laches or otherwise, within which any cause, claim action, cause of action, or suit must be made, or commenced by the parties against any one of them concerning the [pedestrian] claims, including any and all claims for indemnification and contribution.”  Id. at 298, 672 S.E.2d at 693.

Tindall attempted to argue that the statute of limitations barred Speedway’s claim for indemnification of monies paid prior to three years before it filed its complaint, but the Court found that the Tolling Agreement, which remained effective “through and including January 1, 2006” tolled the action, and Speedway brought suit on July 17, 2007, less than two years after the Tolling Agreement expired.  Likewise, the Court held that the statute of repose did not bar the action, because the Tolling Agreement was entered into less than six years after substantial completion, and the lawsuit was brought during the pendency of a second funding [tolling] agreement between the parties.

If you are considering a tolling agreement (or think you don’t need one because you “have time”), it is always smart to get a professional opinion on the matter.

______________________________

Comments? Let me know.  I welcome the opportunity to discuss how the statute of limitations and repose may be tolled in your specific situation.

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Photo “Trucks” by JMLeedy (Justin Leedy) via Flickr via Creative Commons License.

 

Exception to the Statute of Repose?

Hold the phone– didn’t I just say last week that the statute of repose was basically an absolute bar to any action after 6 years?  Why, yes, yes I did.

BUT it too has exceptions!  (If you’ve learned anything from my rantings, I hope it is that there is always an exception to the rule).  In a recent Court of Appeals case, the application of the statute of repose was called into question.

In Dawson v. N.C. Dept of Environment and Natural Resources (June 15, 2010), a couple bought land only after inquiring of the Person County health department to determine that the lots perked.  Based on a 1989 letter issued by the health department stating that the lots perked, the couple bought the land.  In 2000 (that is, 11 years later!), the couple applied for building permits only to learn from DENR that the land was not suitable for building.

The couple sued DENR under a negligence theory, and DENR argued the time bar of the 6 year statute of repose.  In its decision, the court held that because the 1989 letter was not based on an improvement to real property, the statute of repose was not applicable.  The Court indicated that, had the county inspector been inspecting an existing septic system, their decision may have been different.

Moral of the story? Just because you think you have a good defense, don’t forget that there is always an exception to the rule or, rather, there are many times when the shoe looks like it fits, but it really doesn’t.  Be careful– blisters are painful!

boot

Photo “Dakota Composite Dual Toe” by Bottinex via Flickr via Creative Commons Attribution-Noncommercial-Sharealike license 

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