Category Archives: Law Notes

Implied Warranties on Construction Projects

Posted on by

warrantyA contractor client asked me to explain to him what it meant when someone told him that he had given implied warranties to an owner.  This is an excellent question.

Implied warranties are warranties that the law presumes you have given to the other party.  Even if you never make any written warranty or guaranty, North Carolina courts will often find that you are still liable for certain warranties unless  you explicitly disclaim them.

The warranties that are generally implied in construction contracts include:

 

  • Warranty of Merchantability

 

  • Warranty of Fitness for a Particular Purpose

 

  • Warranty of Habitability (residential construction only)

 

  • Warranty of Plans and Specifications

 

  • Warranty of Workmanship

 

  • Warranty to not delay or hinder any other parties on the Project

 

 

What do these warranties mean?  Essentially, they all mean the same thing:  that your product or labor is at least acceptable.  It may not be perfect—but it meets certain minimum expectations.

Disclaimable Warranties

Warranty of Merchantability—Under the Uniform Commercial Code, this warranty states that the merchant or supplier of a  product delivered to the buyer warrant that the product is able to be used as intended.

Warranty of Fitness for a Particular Purpose—This warranty, also under the Uniform Commercial Code, states that a product will be able to be used for a specific purpose which the buyer has told you about.  It is usually less of an issue that merchantability—however, if a buyer tells you of an unusual need that he is expects the product you supply to him will meet, it can come into play.

Both of these warranties can be disclaimed—that is, you can assert that you are making no such warranties in your written contract or purchase order form.  Certain requirements apply to make a disclaimer valid, so check with legal counsel.

Nondisclaimable Warranties

The remaining warranties—Habitability, Plans and Specifications, Workmanship, and Not to Hinder or Delay—are warranties that, in general, cannot be disclaimed.

Warranty of Habitability– The contractor for new residential construction owes a duty to build a house (and related fixtures) such that it can be lived in for normal residential purposes.  This duty extends to both the original purchaser and subsequent purchasers, so long as statute of limitation and repose are met.

Warranty of Plans and Specifications–The owner impliedly warrants to the contractor that the plans and specifications provided to the contractor are adequate.  This is also called the “Spearin doctrine.”

Warranty of Workmanship—Every contractor impliedly warrants that his construction will be built in a workmanlike manner and sufficiently free of major defects.  This implied warranty is sometimes made express in written contracts—such as in AIA A201 3.5.1.

Warranty to Not Delay or Hinder—This warranty is owed by each contractor to his subcontractors, prime contractors to one another, and the owner to the contractor.

If a warranty is breached, the other party has a claim for breach of the implied warranty at issue.

  Question Mark Have a question about implied warranties?  Shoot me an email at mbrumback @rl-law dot com.

____________

Photo “Warranted/Day 70” by Aaron Goselin via Flikr made available via an Attribution-Noncommercial-Share Alike 3.0 License.

LEED Credibility Challenged– UPDATE

Posted on by

 A group of local citizens, designers, and school board Building Committee members in Eagle Ridge, Wisconsin has issued a statement expressing their belief that LEED certifications are now suspect, following the failure of the USGBC to withdraw LEED Certification from the Northland Pines High School.  The group had appealed a decision to dismiss their claims that the LEED Gold certification for the school should be revoked, despite clear evidence which, they claim, shows that the building did not meet specific ASHRAE Standards, which are prerequisites to getting a LEED (green) building certification.

 They call into question the value of LEED certification if there is no verification of a purported building’s “green” credentials.

 You can download their statement of concern “USGBC and LEED Credibility Destroyed”.

 For more information relating to the case, Stephen Del Percio’s article “Wild Week for Green Real Estate Law” is an excellent summary.

 As previously mentioned on this blog, there is no clear idea of how the Courts would treat any LEED-specific claims.  Yet.  Stay tuned.

 UPDATE:  This afternoon, the USGBC has issued a statement standing by their findings:

LEED’s intent, and USGBC’s mission, is about helping people learn about and understand how to design, build and operate better buildings.  Buildings are complex systems of systems and any of the 100,000 of decisions associated with design, construction and operation can always be second-guessed. We are confident that our due diligence has been more than sufficient to put these issues to rest, and we are moving forward to focus our efforts where they do the most good — advancing the market uptake of green buildings and communities that is at the heart of our work

The full statement and commentary can be reviewed at Chris Cheatam’s article “Breaking: USGBC Stands by Its LEED Challenge Decision.”

Even Subcontractors can sue other Prime Contractors Directly on State projects (Law note)

Posted on by

While we have previously looked at direct contractor-to-contractor lawsuits and contractor-to-design professional lawsuits, I have said very little about the role of subcontractors in the multi-prime system.

In the Bolton case addressed earlier, Bolton made a claim against another prime contractor on behalf of itself and its subcontractor.  

However, in 2004 the Court of Appeals dealt with the issue of a subcontractor making a direct claim against a prime contractor other than the contractor for which the sub performed its work.  Pompano Masonry Corporation v. HDR Architecture, Inc., 165 N.C. App. 401, 598 S.E.2d 608 (2004).

That case involved the Biological Science Research Center at UNC-CH .  HDR was the “project expeditor” under a separate contract with UNC, responsible for preparing the project schedule and coordinating work between the prime contractors.

Metric Constructors served as the prime general contractor, and Pompano Masonry was a subcontractor to Metric.  Pompano sued HDR directly as the project expeditor, and the court allowed the case to proceed, holding that subcontractors to prime contractors could sue other prime contractors directly.

The court held that HDR could be sued directly by a subcontractor to which it had no contract for economic injury resulting from its alleged negligent performance of its duties as project expediter.  Citing its earlier decision in Davidson, the court held that liability exits due to the “working relationship” and “community of interests” despite the fact there was no contractual privity between Pompano and HDR.

 Conclusion

The moral of the story with regard to this series of cases?  Never assume that you cannot be sued by someone because you don’t know them, you have no contract with them, you are a licensed professional, or they are on a different “tier” than you on the project.  You have duties to all parties on a construction project, and the multi-prime statute in North Carolina gives yet another arrow in the litigator’s arsenal which could be pointed at your chest.

Are you having fun yet?  Next blog post will be on a less “scholarly” topic, I promise!

Statutory liability of Architects and Engineers to Contractors on State Construction projects (Law note)

Posted on by

As noted in my last post, the state multi-prime bidding statute provides for liability between separate contractors on state projects.

 A specific case from the Middle District Court of North Carolina (federal court), interpreting state law, further extended this liability to architects and engineers on state multi-prime projects.  RPR & Associates v. O’Brien/Atkins Associates, P.A., 24 F. Supp. 2d 515 (M.D.N.C. 1998).

 In that case, which involved the George Watts Hill Alumni Center at UNC-Chapel Hill, the court held that an architect and consulting engineer could be held accountable to contractors who rely on their work on North Carolina construction projects based on the same statute as that imposing liability on multi-prime contractors on one another.

 The issue in the RPR case was whether the statute applied to architects and engineers, since they are not “prime contractors” under the North Carolina multi-prime contracting statute.  The RPR court held that for purposes of the statute, design professionals were “separate prime contractors” such that they could be sued directly by prime contractors on state jobs.

 While this case is now over a decade old, it still surprises many design professionals who incorrectly assume that since they are not one of the enumerated prime contractors that they are not subject to statutory liability to the prime contractors.

In my next and final (for the time being) post on this subject, I will address the application of the statute on subcontractors.

 

Contractors liable to other prime contractors on state construction projects in North Carolina (Law note)

Posted on by

As we discussed in the last blog post, the state legislature created the multi-prime system for many state construction projects.

One of the first cases to deal with the statute allowing contractors to sue each other is Bolton Corp. v. T.A. Loving  Co., 94 N.C. App. 392, 380 S.E.2d 796, disc. rev. denied, 325 N.C. 545, 385 S.E.2d 496 (1989). 

In that case, which involved the construction of an 8 story library on the UNC-CH campus,  a HVAC prime contractor, Bolton, sued the project expeditor, TA Loving, for Loving’s breach of its contract with the State.  Bolton brought the claim on both its own behalf and on behalf of its subcontractor.

 The court allowed the suit, not based on tort, but based on the multi-prime statute (N.C. Gen. Stat. §143-128).   The court held that a prime contract can be sued directly by another prime contractor working on a state construction project:

We interpret N.C.G.S. § 143-128 to mean that a prime contractor may be sued by another prime contractor working on a construction project for economic loss foreseeably resulting from the first prime contractor’s failure to fully perform “all duties and obligations due respectively under the terms of the separate contracts.”

In my next post, I will discuss the application of this concept to design professionals.