Tag Archives: construction

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.

 

Of Mice and Men: Yes, you need a written construction contract!

Posted on by
Field mouse

Photo by delphywnd via Flickr*

 

Does a written contract *really* matter?   Yes; yes it does.

While you can get by for years- decades, even- on handshake deals—when something goes wrong you will wish you had a written contract.  Even the best projects, with familiar clients and trusted contractors, can go awry.  (“The best laid plans of mice and men often go awry”).

Many of my clients come to me after having been in business 20, 30 years or more.  They come to me because they have either already been sued, or the handwriting is on the wall and they are about to be brought into litigation.  They tell me they’ve never needed a written contract before now.  That’s well and good.  However, I’d bet dollars to donuts those same folks have fire insurance, and yet very few if any of them have actually experienced a house fire.  What’s different about business contracts?

The goal, of course, is that you will never need to rely on the written provisions in your contract.  But if you ever find yourself facing a lawsuit, you’ll wish you had a written contract.

A written contract spells out expectations, rights, and responsibilities.  It sets standards that may be understood by the parties, but very different from what the common law would allow.  Without a written contract, you are trusting yourself to laws you may not agree with or giving up protections you may otherwise have.  Why chance it?

Get something in writing—a signed proposal, an email which is confirmed—something that spells out basic agreements that might come into dispute later.  A thorough contract written for each project is ideal, though not always practical on smaller, quick-turn deals.  That’s fine.  But get something on paper.  You’ll be glad you did, if and when you ever find yourself on the courthouse steps.

 ————–

*Photo: Have you seen the Muffin Mouse by delphwynd via Flickr and made available via Creative Commons license.

Pay When Paid Clauses in the NC Construction Contract

Posted on by

“Pay when paid” clauses are clauses found in many construction contracts that state that the contractor will pay his subcontractor only if and/or when the contractor receives payment from the owner.   Are these clauses enforceable?  The answer depends on (1) what state you are in and (2) what choice of law provision is contained in your construction contract.

A limited number of states do honor “pay when paid” clauses under the theory that the parties are usually sophisticated parties who negotiated the contract terms and as such they are duty bound to honor those terms.   When such a clause is enforced, it can prove fatal in a case where the owner files bankruptcy or otherwise defaults on its payments to the general contractor.

In North Carolina,  such clauses are unenforceable as against public policy.

Performance by a subcontractor in accordance with the provisions of its contract shall entitle it to payment from the party with whom it contracts. Payment by the owner to a contractor is not a condition precedent for payment to a subcontractor and payment by a contractor to a subcontractor is not a condition precedent for payment to any other subcontractor, and an agreement to the contrary is unenforceable.

N. C. Gen. Stat. Section 22C-2.

Does that mean that, if you are a subcontractor, you don’t need to worry about such “pay when paid” clauses in North Carolina?  Not necessarily.  It depends on what law is the law that will be applied by the court.  If your contract states that the law of another state will apply, you need to know if that state is one in which “pay when paid” clauses are enforceable.  In some states, such as Virginia, the contract is king and whatever the contract says will be enforced.  Such clauses are also generally enforceable in a few other states such as Connecticut and Michigan.

Other states take a more cautious view, and hold that such clauses are only enforceable if unambiguously written, including  Arizona, Ohio, and Massachusetts.

States which concur with North Carolina’s view that such clauses are unenforceable include New York, California, and South Carolina.

Therefore, it is important to know not only what your contract says, but what state’s law will apply to your contract.

Because case law and statutes change the law regularly, consult a licensed attorney in the jurisdiction you are concerned about to learn the latest status of contingent payment clauses in that jurisdiction.

Tips for hiring and using your Construction Attorney

Posted on by

Often, people in the construction industry don’t bother to hire an attorney until they are in trouble. An owner isn’t paying them. A subcontractor has filed a lien on the property. Another contractor or homeowner is suing them. When your back is up against the wall, how do you find and use a construction attorney to your best advantage?

Check out the post on “How to be an Effective Construction Client” written by Jordan Furlong (@jordan_law21) on Christopher Hill’s Virginia-based construction law blog, Construction Law Musings.

In the article, Furlong discusses how to communicate expectations, bottom line deal breakers, and the like with your attorney both prior to hiring him/her and during the matter itself. Read it. Know it. Use it. Your attorney will thank you and so will your wallet.