Category Archives: Law Notes

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

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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.

Avoid Disaster: Have Your Contracts Reviewed (guest post)

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Today, we have a guest post by on of my comrades in crime (that is, a fellow construction law blogger), Chris Hill.  Here’s his official bio:  Christopher G. Hill, LEED AP is Virginia Supreme Court certified mediator, construction lawyer and owner of the Richmond, VA firm, The Law Office of Christopher G. Hill, PC.  Chris authors the Construction Law Musings blog where he discusses legal and policy issues relevant to construction professionals.  His practice concentrates on mechanic’s liens, contract review and consulting, occupational safety issues (VOSH and OSHA), and risk management for construction professionals.

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Chris Hill, AttorneyFirst of all, thanks again to Melissa for letting me post at her fine blog.  She’s one of the more knowledgeable and cool Tarheels I know (and this is coming from a Blue Devil!).  Now, on with the show.

As those who read my Construction Law Musings blog on a regular basis know, I am a huge proponent of getting a knowledgeable attorney involved in your construction contracting business early on.  While we construction lawyers are generally seen as last resorts, we can actually be helpful and (dare I even say it?) save you money.  How, you may ask, can paying a construction lawyer that ostensibly is only there when you have a claim actually save you money?  Well, as you may have gathered by the title of this guest post, I’m going to tell you.

Two words:  Disaster avoidance.

Litigation is a money, time and emotion draining process for those that don’t have the particular odd propensity of the litigator that makes them actually enjoy trials.  Litigation takes money from the bottom line because no business this side of a cigarette or pharmaceutical company can do business planning to sue or be sued.  For that reason, litigation cannot be treated as overhead and even in the case where you could get a judgment for any fees that you may spend, you are still out the cash and even then may never recover on the judgment.  A contractor cannot make money through litigation (at least in my experience).

Even in the case where you are “right” and “should never lose” there is risk in court.  Juries, arbitrators and judges sometimes go the other way.  These are humans.  They are fallible and in many ways unpredictable.  Litigation is (and should be) a last resort.

The best way to avoid this result is a good contract and good advice from those of us who have seen the results of litigation on numerous occasions and that therefore know how to avoid it.  Everything from the proper claim and notice procedures to a well scoped project are necessities up front.  Aside from the “common sense” issues that you as a business person will see coming, an attorney can see the picky “traps” that are there and are counterintuitive.  For instance, Virginia, unlike many other states, allows the waiver of mechanic’s lien rights in a contract.  You wouldn’t want to miss this thinking that you “knew” that such a clause was unenforceable.  [Editor’s Note: By comparison, in NC, such a waiver in advance is against public policy].

Much like your bi-annual visits to the dentist (yes, I compared my profession to one that is almost as popular), the relatively small expense of early review of your contracts and business practices can go a long way toward avoiding surprises and disastrous expenses later.  In short, and as you learned in kindergarten, doing it right the first time is always easier than fixing the problem later.

My final advice:  Add a lawyer to your team of advisers, you’ll be glad you did.

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Thanks, Chris, for another fine post.  And I completely agree:  the number of hours spent on claims will vastly supersede the small cost for most companies/Firms to properly prepare and vet their contracts and proposals.  Chris and I welcome your comments, questions, and thoughts!

 

Ask not for whom the bell tolls: it tolls for thee! The construction trial (Law & Order: Hard Hat files Part 9)

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This is the final section of a 9 part series discussing the entire trajectory of a construction lawsuit involving claims of design errors or omissions.  If you missed any of the earlier posts, click on the Law & Order tag to read them all.
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The time has come.  You’ve been sued.  Suffered through discovery.  Talked about the project under oath til your throat turned raw.  And responded to the umpteen million request from your lawyer.  You’ve engaged experts, second-guessed your work, and looked at copies of legal documents that made your head spin.  Now, at long last, you will have your day in court.  Or will you?

church bellsWhen will your case be heard?

Your trial date is a moving target, at least in North Carolina.  Depending upon the county or jurisdiction the lawsuit is filed in, you are probably looking at your case taking from 1 year (for a small homeowner lawsuit) to 2 or 3 years for very complex cases.  This is one reason why court ordered mediation is required in all Superior Court cases in North Carolina.  It is also why most construction lawsuits do settle– at some point– prior to trial.  Some cases settle, literally, on the courthouse steps (or in the courthouse conference room).  Others settle during trial itself.  But if you find yourself settling at the last minute, you will have spent the time and money for trial preparation for naught.  A somewhat bitter pill to swallow.

What is involved in trial preparation?

Expect to review many documents relating to the project all over again with your lawyer(s), even if you’ve previously discussed them.  Expect to spend time with your expert(s) discussing your plans and design intent.  Expect to have some mock testimony sessions with your lawyers and others on their team.  Mostly, expect a lot of aggravation.  Trial preparation takes time.  A lot of time.  While much will be done by your construction lawyer, you will need to be actively involved.

How does the trial work?

The trial itself is probably the closest to a Law & Order scene that you will experience.  But don’t expect Jack McCoy (or Perry Mason) moments.  Very little happens in a trial that is completely unexpected.

If the trial is a jury trial (and most are), your lawyers will question the potential jury pool to try to weed out folks that have predisposed themselves to one side of the case.  The other side will do the same.  The result, ideally, is a group of disinterested, neutral folks that will decide your case.

After jury selection, opening statements are given.  These are speeches given by the lawyers to forecast the evidence that will be given to the jury.

The, the plaintiff (that is, the party suing you) will be told to call its first witness.  The plaintiff will proceed to call witnesses to the stand to testify.  The order that they are called in is up to their lawyers, and different lawyers have different strategies for deciding which witnesses they call first, middle, and last.

With each witness, the plaintiff’s counsel will ask open ended, non-leading direct examination questions.  After that, your counsel will ask leading questions on cross examination aimed at poking holes in the other side’s case, and establishing your own case theory.

After the plaintiff has presented its case and rests (and following some procedural motions at that point), the roles are reversed, and your lawyer will conduct direct examination, while the plaintiff will cross examine witnesses.

There are often legal sidebars during a trial, where the lawyers approach the judge and whisper about legal matters.  If extended debate on something is needed, the jury will be excused.  While you will not be invited to the bar to talk during sidebars, your lawyer can tell you what was discussed and how it effects your case.

At the conclusion of all evidence, the jury is given a set of legal jury instructions, and the lawyers present their closing arguments as to why their position should prevail.  Then, you wait.  And wait.  And wait, until the jury reaches a verdict.  The jury foreperson will read the verdict into the record.

What happens after trial?gavel

Depending on the trial results, one side may ask the judge to set aside the verdict (called a j.n.o.v.), which is rarely granted.  Whoever has lost may decide to notice an appeal of the verdict.  Appeals must be based on legal errors that the judge made during trial.  An appeal can take years, and the end result can be the same (that is, the verdict is upheld), overturned (set aside), or remanded for a new trial.  Yes, that’s right: you can be forced to re-try your case.

Is all lost, then, if you lose the jury verdict?  No; definitely not.  No one likes to spend time and money on appellate briefs.  So, even though the case is over, the parties may *still* negotiate a settlement.  Be aware, however, that you will have a judgment “on the books” against you if the jury found that way, and that can affect your credit ratings.  However, the judgment will also be rendered “satisfied” if you settle (or pay it off), which generally helps re-establish your good credit rating.

That’s it!  You now know just enough about the construction trial process to be dangerous!   I’ve obviously had to condense many details in this series, so if you have any questions or want me to expand on any area, drop me a note or comment in the comment section of the blog.

How is that possible? State Law variations can snag you! (law note)

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Today I’m guest posting over on Construction Law Musings.  My post, entitled “You Mean They Can Do That?” discusses the fact that there are different legal hurdles that can present challenges to your Architecture or Engineering Firm when you venture across state lines.

skatesAs I state in the post, just as licensing issues and building codes differ, so too do the laws.  Your best defense?  A good offense. Get help specifically tailored to the new state up front so you won’t get pinched later on.   In other words, don’t be a cheapskate!

Read the full post here.

Thoughts? Comments? Questions?  Share in the comments below.

Photo (c) Jan Andersen

 

Pull on your jeans: time for some Legal Wranglings (Law & Order: Hard Hat files Part 8)

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Previously on Law & Order: Hard Hat files [chunk-chunk], we discussed how to know when a lawsuit is coming, how you will be sued, why you should not be your own attorney, and why documentation is key.  We’ve also discussed being deposed, hiring experts, and mediation.  We’re coming to the top of the 9th now, discussing how to have your case decided by a judge.  [Next up: the jury trial]. 

Your lawyer has told you that your case might be heard on legal issues alone, before a judge. Or he’s mentioned that he is filing a motion for “Summary Judgment”. What, exactly, does that mean? To understand summary judgment, it is first necessary to understand how a typical case is heard.

yada yada legal documentIn a case that goes to a jury trial, it is in fact the jury, not the judge, who decides the case. The judge handles order in the courtroom, the admissibility of evidence or witnesses, and other legal issues. But at the end of the day, the factual issues (that is, was your plan defective? If so, what if any damages did that defect cause?) are decided entirely by the jury. Most of the time.

So what’s this thing called “summary judgment”?

Sometimes, there are no real factual issues in dispute. In that case, the judge can decide the matter on the legal issues alone. For example, if you are sued after the expiration of the statute of repose, and there is no debate about when you last performed professional services on the project, then your lawyer can bring a motion to have the judge decide the case in your favor purely on that legal issue.

Most construction cases, however, are not so clear cut factually. However, you can still have a judge decide a case on summary judgment if the disputed facts, taken in the light most favorable to the other side, still show that you should win.

What happens when you file for a summary judgment hearing?

Either side can file a paper called “Motion for Summary Judgment”.  This is usually done during or after discovery, as factual issues are determined and the list of truly disputed items is narrowed.  Both sides have  an obligation to present evidence as to why/why not the judge should grant the motion.  Evidence can include affidavits (including your own and that of your expert), discovery responses, deposition testimony, and documents produced in discovery.

How does the judge decide?

The judge is required to take the factual evidence in dispute, and assume that the non-moving party’s version is correct.  For example, let’s say you are moving for summary judgment based on the statute of repose.  You claim that you last performed work more than 6 years before the lawsuit was filed.  If the other side has some evidence that work was done later than you claim, then that is a dispute of a material fact.  The judge will have to assume that the other side’s date is correct, and deny the motion for summary judgment on those grounds.

If, however, the disputed facts are not material (that is, not crucial to the deciding law), then the judge does not need to even consider them.  And no one can rely on bare assertions of fact (of the “nuh-uh” variety): they have to produce some evidence of their position.

How will we know if we won or lost?

This varies from judge to judge.  In general, unless the case is clear cut, the judge will want to take the case “under advisement”.  What that means is that the judge is going to review the presented materials, make a decision, and then call the lawyers to tell them how he/she has ruled on the motion.

What does it mean if we lose summary judgment?

If you are asking for summary judgment and lose (and in close calls, expect to lose as judges prefer that cases go to a jury), then the denial of your motion for summary judgment means that the show goes on.  Discovery can continue, and the case will be prepared for trial.

Of course, just because mediation has impassed and summary judgment has failed does not mean there *will* be a trial.  Many cases continue to be negotiated and settled “on the courthouse steps”.  Literally sometimes.

If your case does not, next week’s entry on jury trials should be required reading.

Have a question about summary judgment or other court motions?  Drop me a line or comment, below.