Tag Archives: damages

With Construction, Compromise is Always an Option (guest post)

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Chris Hill, attorney, construction law.

Chris Hill, attorney, construction law.

Today, we have a guest post from one of our favorite  Virginia lawyers- Chris Hill. 

As always, he knocks it out of the park with another worthy post explaining why biting the bullet and settling your claim sometimes is the way to go. 

Here is Chris’s 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. 

Without further adieu, take it away Chris!

As always, thanks to Melissa for letting a Blue Devil invade her blog. I always enjoy the opportunity. Now, on with the post.

I know, you read a title like this and your first thought is “I’ll never have to compromise, if I get into trouble, I’ll be in the right!” You followed your friendly construction attorney’s advice, drafted a great contract (using a “belt and suspenders” approach) and do good work! What could possibly go wrong?

Well, among other things: 1. An owner may not pay the general contractor that you subcontracted to, 2. Weather could cause delays beyond your control, or 3. (yes, I’ll say it here) the architect may not like your work and what you did with his or her masterpiece of design. [Editor’s note: architectural plans exist for a reason, people!]. These three were just off the top of my head. Given that “Murphy was an optimist,” there are many other things totally beyond your control as a construction pro that can and likely will go wrong. The question is how to make the best of that bad situation.

Lets skip the easy points and head straight for the title of the post. You’ve already done all you can to “fix” the situation: increased manpower, shuffled your workforce, and gotten the work done as soon as possible. The party that should be paying you has decided not to do so. You decide that you need to do something besides beg for your money.

At this point you have a couple of options (not mutually exclusive): Mediation or Litigation/Arbitration. The second option is the “nuclear” option and to be used as a last resort. Remember, this is a zero sum game with no winners once the lawyers start filing papers. You will spend money that you didn’t plan to spend and take focus away from your business.

The first option is where you compromise. While you may not get the result that you may get by going to the mat in litigation, namely a judgment for everything that you would have gotten had you been paid in full, mediation has its advantages.

What are they? 1. The big one is control. With litigation or arbitration, you are turning your fate (and possibly the fate of your business) over to a third party. In mediation, you get some control and get to creatively determine the best way to solve the problem. 2. After anywhere from a few hours to a day, the dispute is resolved. Compare this to the several months to several years of litigation and you see where this would help. 3. It cuts off the attorney fee spigot much sooner than the alternative. While I as a construction attorney don’t mind being paid, you can’t run a business profitably with a monthly legal bill.

While a compromise is never the ideal, it is in most cases far better than the alternative.

Thanks, Chris!  It is a tough message to hear when you are in the thick of battle, proving that you are right, but the economic realities should always be considered before starting down the long path toward a court trial. 

Now it is your turn.  Have you settled or mediated a claim purely to put the economic pain of litigation to rest?  Do you regret that decision, or feel it was for the best?  Share in the comment section below.

PS:  Final reminder to VOTE for this blog in the “Best Legal Blog” competition. TODAY IS THE LAST DAY!  It takes, literally, about 1 second, and does not require your name, email, or anything else.  (It tracks IP numbers only).  THANK YOU for your vote!!!!!

 

How is the Carnival Cruise Ship Disaster Like Some Construction Projects?

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cruise shipNow that I have your attention:  Have you followed the “cruise from hell” story, in which Carnival Cruise passengers were forced to make do on a ship with no working power or lavatory facilities for the better part of a week?

Think this has nothing to do with construction projects?

On the contrary, this story serves as a reminder that if something can go wrong, eventually, it WILL go wrong.

No where is this more true than on a construction project.

Read my guest post on today’s Construction Law Musings to find out how you can prepare for the unexpected on your construction projects.  While you are there, browse around and check out the wealth of information on Chris Hill’s Virginia-based construction law blog.

~ Melissa

PS:  New to this blog?  Please sign up for email delivery and your free white paper on 7 Critical Mistakes made by architects & engineers.

Photo:  (c) Roger Wollstadt

Consequential Damages: What are they? Should I waive them? (law note)

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A client asked me about a contract he was asked to sign in which consequential damages were being waived.  Consequential damages are those things that cost money which arise indirectly out of a failure of a party on a construction project.   dollar signsThey can include:

  • loss of use
  • loss of rent
  • loss of profit
  • loss of bonding capacity
  • extended overhead
  • extended equipment rental fees
  • increased material costs
  • interest

Note that this is not an exhaustive list, and other consequential damages may be applicable depending on the project.

Often, like my client, you may be asked to waive consequential damages.  This is a double edged sword.  If the waiver is mutual (something on which you should insist), then the provision may save you money in the event your design or services delay the project.  The Owner has agreed that it cannot seek to recover indirect, consequential damages.  On the other hand, if you are the one suing the Owner, it means that there may be costs that you cannot be compensated for if a project goes awry.

The standard industry contracts all have at least some waiver of consequential damages, as noted in this chart.

waiver in form contractsBottom line: waiver of consequentials can be a good thing or a bad thing, but you will not know which when you are signing on the dotted line.

Just make sure that if there is a waiver, that it is mutual on both sides.  Good luck, and “be safe out there”

Your turn.  Have you ever waived your right to consequentials?  Horror story to share about paying someone else’s costs?  Share in the comment section.

Dollar Photo (c) sivlen001.
Chart (c) Melissa Brumback Creative Commons License

Research Produces New Standards for Construction (guest post)(& more)

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Welcome Back!  The “regular season” of Construction Law in NC blog posts has now officially started.

Recently, I had the privilege of writing on the subject of Private, Single Panel Arbitration on Chris Hill’s blog.  Please read the article if haven’t already. 

The first issue of my brand-spanking new newsletter, The Construction Professional, went out yesterday to those on the email list.  If you want to be one of the cool kids, be sure to sign up now by visiting the right hand side of the blog.  (Or, you can simply shoot me an email at mbrumback at rl-law dot com).

Finally, today’s post is a guest post by Susan Wells.  Susan is a freelance blogger who enjoys writing about automotive and health news, technology, lifestyle and personal finance. She often researches and writes about automobile, property and health insurance, helping consumers find free insurance quotes, and the best protection available. Susan and I welcome your thoughts and comments on this article.

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The Insurance Institute for Business and Home Safety (IBHS) sits on a 90-acre parcel of land in South Carolina. The research facility is dedicated to advancing building science by evaluating various residential and commercial construction materials and systems.

In layman’s terms, IBHS builds things and then attempts to destroy them by recreating conditions of natural disasters. In a studio-like production, the laboratory builds houses and then submits them to fire, wind, ice and water damage.

The IBHS research center even has a few videos on YouTube that demonstrate the effects of wind damage and fire.

two houses compared in wind damage situation

This destruction is an integral part of the construction industry as insurers work to identify risks and mitigate them through improved materials and structures. IBHS President Julie Rochman explains that the research center allows them to produce controlled experiments that are not being conducted anywhere else in the world. No longer forced to rely on case studies or opinions, the IBHS can record its findings and actively search for (and test) stronger systems.

Engineer Scott Sundberg explains the value of the research center in a single sentence, saying, “One test is worth a thousand expert opinions.”

To those at the IBHC, the information produced by these experiments is essential to advancing a sustainable community. Using hard data and conclusive evidence, such large-scale and detail oriented research allows the insurance and construction markets to focus on effective mitigation techniques. The average consumer will also have more access to product knowledge and has the potential to become more informed about products and strategies that can make their homes and buildings safer.

“Predictability and reliability of building materials and information is extremely important to the sustainability of the community, “says Mississippi Housing Director Gerald Bessey.

“Collectively as we apply these to public policy decisions and as the market place makes market choices. I think the market will react to good information that’s reliable and stable.”

In insurance underwriting laboratories like IBHS, disaster resistant and energy efficient technologies are merging to produce a new definition of sustainability.

Admittedly, there are few market standards for “green” products, and the FTC is actively working to mitigate the damage caused by “greenwashed” products that touted false claims of durability and environmental benefit. For uninformed consumers and construction managers, the wrong green system could put building structure at risk.

Some elements, such as vegetative roofs, can actually serve as fuel for fires or pose a threat under high winds. The IBHS proposes that energy efficiency and structural durability can work in tandem to create a truly sustainable product: one that will be environmentally friendly yet resilient in the face of environmental disasters.

One such recommendation is retrofitting older homes. Owners can replace windows and doors with energy efficient and wind resistant materials and seal energy leaks. Simple weatherization steps can actually help the average homeowner reach a new level of sustainability without rebuilding their home using entirely new green technology.

Interestingly, there are green insurance policies that allow policy holders to rebuild after a disaster using green upgrades. This would allow for recycling of debris, LEED certification as well as coverage for new appliances.

Most insurance policies do not currently consider products like wind-resistant glass to be a green upgrade, but as research begins to define standards of sustainability, it’s only a matter of time before green technologies and resistant materials merge to produce the highest standards of construction.

Thoughts? Comments? Questions?  Drop me an email or leave your musings below.

 

Something to Hang Your Hat On… (Limitation of Liability clauses) (law note)

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hat rackIn the past on this blog, I have pointed out the benefits of Limitations of Liability clauses.  These are the clauses that state that the most damages that your Firm can be responsible for is capped at a certain dollar amount or your contracted fee.

Do you have a limitations of liability clause in your professional services contract?  You should.  Best practice would be to have such a clause that limits damages against you to a set amount.  For example:

Engineer’s liability to Client for any and all injuries, claims, losses, expenses, damages or claim expenses arising out of this agreement, from any cause or causes, shall not exceed the total amount of $50,000 or the amount of Engineer’s fee, whichever is greater.

While best practice is to have such a provision, it is not always enforced.  In a case arising out of the Western District of North Carolina, the court noted that such provisions will not be enforced where the result would be unconscionable and “elicit a profound sense of injustice.” See  Performance Sales & Mktg., LLC v. Lowe’s Companies, Inc.,2010 WL 2294323 (W.D.N.C. June 4, 2010).

What does this mean in practical terms?  It means that you should endeavor to include a limitation of liability clause, but don’t necessarily think that if you have that you’ve capped your risk.  A court can always decide that the clause is unconscionable.  But, such a limitation is one more thing to “hang your hat on” if and when you find yourself staring down the barrel of litigation*.

* If, however, you are facing litigation, make sure you sign up for regular blog updates.  Starting next week, I am writing a new series on the anatomy of a construction lawsuit, so stick around! 

 

Photo:  (c) BabbNet via CC.