Tag Archives: delay

The Sticky Statute of Limitations in NC

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sticky notesIf you are not a lawyer, but you play one on TV, you may have a passing understanding of the legal concept of a statute of limitations.  This is post is to provide you just a little more information about the concept, and how it applies to your North Carolina construction project.

What is a statute of limitations, and why is it important?

The Statute of Limitations is a time-barring statute which gives you a set time within which to bring an action (i.e., lawsuit) against another party.  If you do not bring your lawsuit within that period of time, the court will kick it to the curb.  The reasoning behind the statute of limitation (often, ironically, abbreviated as “SOL” in legal circles) is that people need to have some certainty in how long they can be sued for an event that happened in the past.  Witnesses die or forget, papers are destroyed, and in general it is extremely difficult to try a case years after the fact.  The law has, therefore, established a somewhat arbitrary deadline for when you can sue or be sued, and it is vital that you do not go past that deadline if you hope to bring a lawsuit.

What is the statute of limitations on a construction project?

The answer, as always, is:  it depends.  The statue of limitations is governed by whatever state’s law will apply to your case—usually, but not always, the state the project was built in.  The statute of limitations is also determined by what type of lawsuit you are trying to bring (or defend against).

 In North Carolina, the statute of limitations for most construction disputes (breach of contract, professional negligence, implied warranty of plans) is generally 3 years from the date time when you knew or should have known about the issue.   N.C. Gen. Stat §1-52.1  ABL Plumbing and Heating Corp. v.  Bladen Co  Board of Education, N.C. App. 623 S.E.2d 57 (2005). See also AIA A201 para. 13.7.   As always, there are exceptions.  If a contract is “under seal”, a claim can be brought for up to 10 years. (N.C. Gen. Stat. §1-47).

 If the contract involves merchandise and falls under the Uniform Commercial Code, the statute of limitations is 4 years. N.C. Gen. Stat §25-2-725.  However, where a defect in merchandise results in bodily injury or damage to real property, the shorter 3 year statute still applies.  Hanover Ins Co. v. Amana Refrigeration, Inc., 106 N.C. App. 79, 415 S.E.2d 99 (1992). In Hanover, a defective HVAC unit caused a fire, which destroyed a building. The court held that the shorter 3 year statute of limitations applied because the defective merchandise caused damage to the real property.

Therefore, it is best practice to assume that the Courts will find that the statute starts running at the first inkling of a problem, and bring your action accordingly. Also, regardless of the length of any warranty period, contractors can still be liable until the statute of limitations period expires.

What happens to claims after the owner accepts the project?

Once a project has been accepted by an owner, the owner waives his right to claim damages for all but latent defects. Acceptance by the owner with knowledge of a defective performance may be deemed a waiver of the defective performance.

Where, however, the defect is unknown (or “latent”), the owner’s acceptance does not waive the defective performance. Tisdale v. Elliott, 13 N.C. App. 598, 186 S.E.2d 685 (1972).   If a defect is a “latent” defect, hidden or not readily discoverable, the statute of limitations starts running from the date of discovery. Under AIA A201 para 13.7, any statute of limitations is deemed to have accrued in any and all events not later than the date of Substantial Completion.   This section may shorten the statute of limitations in some cases of latent defects.

Can the Statute of Limitations be lengthened or shortened?

Yes.  But, as they say on television, “don’t try this at home.”  Carefully drafted agreements for a shorter or longer period of time can be executed.  Consult your attorney before you do so, however.  You may also want to check with your insurance carrier to make sure you have sufficient insurance coverage for a longer warranty period.

What if the parties are working together to fix construction problems?

If the parties are working to fix problems, but the statute of limitations is fast approaching– run, don’t walk, to your attorney to discuss a tolling agreement to stop the running of the statute, or otherwise enter into legally enforceable agreements concerning the statute of limitations.  Just because the parties are all working together to solve a construction issue now doesn’t mean that the finger-pointing won’t begin once the bill is presented.

Have a question about the statute of limitations?

Comment below, drop me an email, or find me on twitter @melissabrumback .

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Photo (Public Domain):  “brightly coloured sticky notes and tags” by Adrian van Leen via OpenPhoto.


Implied Warranties on Construction Projects

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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.

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

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

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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!

Managing Changes on the Construction Project

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As sure as Santa’s arrival each year, the setting of the sun each night, and the arrival of the bowl games each December, there will be changes to a construction project.   How you manage those changes is important.  If you can properly document delays, changes in scope, or other issues, you can recoup your time and expenses.  If you fail to manage changes well, you are literally throwing money away.  And– if you are a design professional and do not have a good system in place for handling change order requests, you are almost guaranteeing a lawsuit at the end of the project.  Read more on how to handle changes in the AIA documents here.

 

Holidays and downtime on the job

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google lego calendarThis time of year, folks look forward to taking time off from their jobs and spending time with family.  Most of your workers, subconsultants, and vendors do, too.  Add to that that many owners may be unreachable during the holidays, and it seems that sometimes it is impossible to get anything done during December.

Despite all the festive good cheer, be careful not to let the holiday season turn into a claim for delay on a project.  Project holidays are usually set at the beginning of a job.  It is a good idea to review your contract and any set calendars agreed to prior to making assumptions about what days will be considered non-work days.  Discuss anticipated absences early in the month, and determine back-up plans for when a needed individual (for example, the architect) is not reachable.  If the owner will be unavailable, has he delegated decision making authority in his absence?  Anticipating potential problems and solutions to them can make the difference between a productive month and weeks of float creep.

If you experience problems due to the vacation of others, be sure to document the delays and timely request an extension of time.  Under AIA A201 8.3.1, the contract time shall be extended by change order  if the contractor is delayed in the progress of the Work by an act or neglect of the Owner, Architect, or a separate contractor employed by the Owner.  Contract adjustments due to the delay are also available.  Likewise, Consensus DOCS 200, at 6.3.1, contains a similar provision for compensation for delay damages caused by others.

Under EJCDC documents, however, only an extension of time, and not an equitable cost increase to the contract, is the remedy for a delay experienced by a contractor.  EJCDC C-700 12.03.

Regardless of the form of contract on your Project, be sure do document all delays experienced due to the unavailability of others.  Make claims for time and/or money adjustments in accordance with your contract for all such delays to avoid finding yourself short on time at the end of the Project.

Oh, and happy holidays!

Photo:  google lego calendar by keso s via Creative Commons license.