Tag Archives: construction

Unlicensed Contractor & his partnership take a hit (Law Note)

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man banging head against wallImagine being told that you will not be paid for a house you constructed pursuant to a contract with homeowners.  And imagine that the reason for not getting paid had to do with whether or not you signed a contract “on behalf of” your partnership or whether you simply signed your individual name.  This is the exact case that Ron Medlin, partner in Ron Medlin Construction, is facing thanks to a recent North Carolina Supreme Court case, Ron Medlin Construction v. Raymond A. Harris, __ N.C. __, (December 20, 2010).

Ron Medlin entered into a contract with the Harris’ for the construction of a home not to exceed $604,800.  Of note, Medlin did not have a licensed general contractor’s license, as is required.  However, Ron Medlin Construction, a partnership, was appropriately licensed as a general contractor, and the partnership performed the work relating to the construction of the residence.

When litigation arose over cost overruns, the Harris’ claimed they did not need to honor the contract because it was with an unlicensed contractor.  Under North Carolina law, any person who performs work in excess of $30,000 needs to be appropriately licensed or he cannot recover for his work in the Courts.  (See Brady v. Fulghum, 309 N.C. 580, 586, 308 S.E.2d 327, 331 (1983)).  The partnership argued that it did not have a contract with the Harris’, yet it performed work in constructing the residence and, therefore, was entitled to recover a just amount under a theory called quantum meruit.  The Court held that the partnership ratified Ron Medlin’s individual acts, and as such the partnership was bound by the (unenforceable) contract and could not recover. 

The Court held, as a matter of law, that:

a contract for the construction of a home or building executed by a partner in a licensed partnership engaged in the construction business is the contract of the partnership unless the remaining partners can show that the partner was not authorized to act on behalf of the partnership and, if not so authorized, the partnership did not ratify the contract.

Moral of the story?  It is important that you follow the rules in signing and performing under construction contracts, as well as in maintaining your proper corporate formalities.  It might even be worth having your attorney review your construction contract before you sign it.    Unless, that is, you don’t mind that chance that you may end up performing some of your work for free.

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Photo:  “361/365 days -it feels good to stop” by badjonni via Flickr/Creative Commons license.

Top 10 OSHA Violations– don’t let it be you! (Tue Tip)

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dancing woman in safety vest
Photo: Dancing for Workplace Safety

by Washington State DOT via Flickr/Creative Commons license

OSHA has published the top safety violations for 2010.  There are two categories:  (1) the top 10 standards for which OSHA most frequently gave Citations in fiscal year 2010; and (2)the top 10 standards for which OSHA assessed the highest penalties in fiscal year 2010.  

The most frequent violations are:

  1. Scaffolding
  2. Fall protection
  3. Hazard communication
  4. Ladders
  5. Respiratory protection
  6. Control of hazardous energy (lockout/tagout)
  7. Electrical, wiring methods, components and equipment
  8. Powered industrial trucks
  9. Electrical systems design
  10. Machine guarding

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The most expensive violations are:

  1. Fall protection
  2. Electrical
  3. Safety training and education
  4. Control of hazardous energy (lockout/tagout)
  5. Machines
  6. General duty clause 
  7. Excavations
  8. Lead
  9. Grain handling facilities
  10. Ladders

 

Detail about the specific regulations which were violated, the OSHA requirements in these areas, and related materials can be found here on the OSHA website.  (Hat tip to NC Construction News for alerting me to OSHA’s list). 

OSHA violations can be costly– both in money, and in safety.  Don’t gamble with either!

Now it’s your turn:  Do you have an experience with OSHA violations that you think others should learn from?  Let me know in the comments below or email me at [email protected].

Personal Assets at Risk Despite Corporate Formalities (Law Note)

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checking the plumb of a trussMany people establish business entities to protect themselves from personal liability.  In a ruling last week, however, the NC Court of Appeals  held that despite such corporate formalities, contractors can be personally liable for their own negligence.

The case, White v. Collins Building, Inc., __ N.C. App. __ (January 4, 2011), involves a new home constructed by developer AEA and purchased by the Whites.  AEA contracted with Collins building, Inc. to build the residence.  Collins Building is a one-member company owned by Edwin Collins, president, sole-shareholder, and qualifier for the company.  When the Whites began to experience alleged construction defects, they sued all involved, including both Collins Building Inc. and Edwin Collins, individually.

Edwin Collins moved to dismiss the lawsuit against him individually, and his motion was granted.  On appeal, the Court held that the dismissal was in error, and that Edwin Collins could be found individually liable to the Whites because the alleged negligence was his own action.   While noting that it was a case of first impression for the construction context, the Court pointed out that “It is well settled that an individual member of a limited liability company or an officer of a corporation may be individually liable for his or her own torts, including negligence.”

The Court stated that a properly formed and maintained business entity may provide a shield or “veil” of protection from personal liability, but that the protection was not absolute.   The Court also contrasted this situation to one in which the parties had contracted with each other; there the claim is usually a contractual one only, so if the Whites had contracted directly with Collins Building, Inc. to build their residence, they likely would not have a cause of action against Edwin Collins individually.

This case shows that, whilecorporate formalities are  important to protecting yourself from individual liability,  they are not a guaranty.

Share your thoughts, questions, or comments below.

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Photo copyright Defense.gov.

 

Tues Tip: Prepare for new ADA Standards

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ADA sign   The Americans with Disabilities Act (“ADA”) has been a standard in construction since its was signed into law by President George   H.W. Bush in 1990.  However, there are significant new changes coming, thanks to a new Department of Justice Rule and Standards.  The new Rule becomes effective in a little over two months– on March 15, 2011.  The new Standards are not mandatory until next year (March 15, 2012).  Buildings can currently be constructed to meet either the current or the 2010 Standards; however, the 2010 Standards will become mandatory next year.

According to the Department of Justice, some of the changes that design for new construction will need to accommodate include:

1. Reach Range Requirements (Section 308)

The reach range requirements have been changed to provide that the side reach range must now be no higher than 48 inches (instead of 54 inches) and no lower than 15 inches (instead of 9 inches). The side reach requirements apply to operable parts on accessible elements, to elements located on accessible routes, and to elements in accessible rooms and spaces.

2. Water Closet Clearances in Single User Toilet Rooms (Sections 603, 604)

In single-user toilet rooms, the water closet now must provide clearance for both a forward and a parallel approach and, in most situations, the lavatory cannot overlap the water closet clearance. The in-swinging doors of single use toilet or bathing rooms may swing into the clearance around any fixture if clear floor space is provided within the toilet room beyond the door’s arc.

3. Common Use Circulation Paths in Employee Work Areas (Sections 203.9, 206.2.8)

Under the 1991 Standards, its was necessary to design work areas to permit an employee using a wheelchair to approach, enter, and exit the area. Under the 2010 Standards, it will be necessary for new or altered work areas to include accessible common use circulation paths within employee work areas, subject to certain specified exceptions.

4. Location of Accessible Routes (Section 206)

All accessible routes connecting site arrival points and accessible building entrances now must coincide with or be located in the same general area as general circulation paths. Also, where a circulation path is interior, the required accessible route must also be located in the interior of the facility.  [Editor’s note: this requirement will help meet the Universal Design principle of equitable use by all persons.]

These are just some of the many changes.  The DOJ ADA website offers several fact sheets and the actual regulations, so take some time to review it if you have not already.

Questions about the Americans with Disabilities Act?  Comments about how these changes will affect your projects and how you are adapting plans to accommodate these coming changes?  Drop me a line in the comment section below.  Also, be sure to enter your email to get delivery of posts direct to your email inbox to be sure you never miss a post.

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Photo:  “Minneapolis Road to Freedom 71“by Transguyjay via Flickr/Creative Commons License.

Pay when Paid & Pay if Paid

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pay here signRecently I was contacted by several readers asking questions about “Pay when Paid” clauses.  For those of you who may have missed it, I’ve previously addressed Pay When Paid issues in my April 29, 2010 post, Pay When Paid Clauses in the NC Construction Contract.

For a good discussion of the application of N.C. Gen. Stat. 22C-2, the Court of Appeals opinion American Nat. Elec. Corp. v. Poythress Commercial Contractors, Inc., 167 N.C.App. 97, 101, 604 S.E.2d 315, 317 (2004) is worth a read.

In that case, the electrical subcontractor sued the general contractor for delay claims. The contract provided that the contractor would only be liable to the subcontractor for delays if the contractor was compensated for such delays by the owner.  While such a term is clearly a “pay if paid” provision, the Court called the provision a “pay when paid,” and declared it unenforceable in North Carolina.  It seems likely, therefore, that the Court would find that both provisions have the same legal effect in North Carolina– that is, both are unenforceable.

One time when a “pay if/when paid” provision could be enforceable?  Residential construction of fewer than 12 units.

As always, consult your local attorney because such clauses very widely in their enforceability from state to state.

Questions or comments on “pay when paid” or “pay if paid”?  Drop me a line in the comments section, below.

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Photo: “Pay Here” via Freefoto.com / Creative Commons License.