Tag Archives: document

Contract Essentials: 8 key points to consider

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eight ball

As promised, my guest post on Contract Essentials is now live over on Construction Law Musings.   Go on over and check out my post on the 8 key points you should consider in your construction contract. 

While not an exhaustive list, the 8 issues I discuss will put you on the right path to avoid litigation later over a construction project “gone wrong.”

Be sure to check out Chris’ other great construction law articles while you are there, and leave a comment to say “hi”.  See ya there!

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Photo:  behind the eight ball via Ed Schipul/Creative Commons license.

ENR’s Top 500, the Economy, and Lawsuit Fever

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Engineering News-Record logo

[This article was originally published on May 5, 2011]

Engineering News-Record (ENR) has released its annual list of the largest 500 design firms in the United States.  The list is based on design revenue generated by the firms, and covers both public and privately-held companies.

The bad news?  According to ENR, overall design revenue of the top 500 firms ($79.8 billion in 2010) was down 0.2% from 2009.  I know my clients have been hit hard.

One thing that construction lawyers see in down markets is more lawsuits.  Whereas in good times people will let something go to move on to their next project, in slow times contractors and owners sometimes look for a scape-goat.  That scape-goat, more often than not, is an insurance-carrying design firm.  Sad, but true.  Now, more than ever, make sure that you are practicing good risk avoidance, documenting everything, and communicating thoroughly.

There is some good news:  “There is a general feeling among the Top 500 firms that the markets will recover over the next 12 months.”  Let’s hope they are right.

What do you think?  Will the market improve this year?  How is your company weathering the economic storm? 

Certificate of Merit to sue architects or engineers? (Tue Tip)

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[note: this article was originally posted April 5, 2011.  As of September 4, 2025, there is no requirement for a Certificate of Merit in North Carolina, but things can change, so stay tuned]

You know how they say the best laid plans can go awry?  Just as unforeseen issues pop up in construction, they also pop up in the practice of law.  So, while it is still Tuesday, I apologize for the late hour of my post.

I bring you good tidings, despite my lateness.  Right now, in the North Carolina General Assembly, is a proposed bill that would require a Certificate of Merit to be filed in civil litigation against an architect, engineer, or a design firm.  If it passes, this would require that an unbiased, third party (who is also a licensed professional) has reviewed the claim and believes it has merit.

boy holding certificate of merit

This boy has his certificate of merit: will lawsuits against architects and engineers require the same?

Such a pre-lawsuit requirement  has long been a right that doctors enjoy.  Now, there may a chance for architects and engineers to also enjoy protection from otherwise frivolous lawsuits.

The bill has been introduced, had its first reading, and has been referred to the Judiciary Committee.  While the bill is a long way from passage, it is a good sign that the public recognizes too often professionals are the targets in lawsuits simply because of their “deep pockets” (really!) or their insurance coverage.

(h/t to Kathryn Westcott, ACEC-NC Executive Director)

Photo: (c) John Dolan via Flickr/Creative Commons License.

Which Contract Form Should You Use? (Guest Post)

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Nathan Hinch

Today’s Guest Post is by Nathan B. Hinch, an associate at Mueller & Reece, LLC in Bloomington, Illinois, concentrating in the practice of commercial, construction, environmental, and real estate law.  He can be reached at nhinch@muellerreece.com and on twitter @NathanHinch. 

 Form Construction Contracts – How Do They Compare, and How Should They Be Used?

By Nathan B. Hinch

Imagine that you are a contractor from the mythical State of Verbalville, a land where the handshake deal is the norm and no one ever puts anything in writing.  If a developer/owner awarded you a project and asked you to sign an AIA Document A101™ form construction contract, along with AIA Document A201™ General Conditions, would you sign it without reading the document?  Of course not.  Assuming that you were willing to consider bucking the verbal trend and sign the document at all, you would likely read it over very carefully first.  You might also consult an attorney, to help you understand the potential risks and liability issues involved with the contract, including the enforceability of the contract under Verbalville State law, and suggest changes to the document.

Now imagine that you are a contractor in my home State of Illinois and are awarded a project in North Carolina.  If the developer/owner handed you a ConsensusDOCS® 200 form construction contract with general conditions and asked you to sign, would you do so without reading it?  Would you consult a professional attorney before signing?  What if you were familiar with the form documents from your work in Illinois?  Would it matter if it was an EJCDC document instead?

I have worked with AIA, ConsensusDOCS®, and EJCDC form documents, and all three are excellent resources that in the right hands can help save time and money for construction projects.  But here’s the point – form contracts are wonderful tools that can help allocate risk and clarify the roles and responsibilities of the parties, but that is all they are.

In the construction field, the leading form contracts have been drafted by teams of experts representing the interest groups in general and supporting teams of attorneys.  If you have never used or read one of these before, I would encourage you to take an evening and read through at least one of those mentioned above.  Given the detail of the documents, it may be difficult to imagine that these forms, without editing, are likely not specific enough for your project.  But keep in mind as you read that these are national forms and are meant to be of use throughout the U.S.  By definition these forms do not generally consider 1) variations in State law requirements and 2) your particular project needs or goals.  For that reason, credible forms such as those produced by AIA, ConsensusDOCS®, or EJCDC will encourage users to consult an attorney before using the document for specific projects.  They are not meant for “plug and play” use.

For a great reference comparing these forms, see Gillies, Heckman, and Perlberg, THE Construction Contracts Book: How to Find Common Ground in Negotiating Design and Construction Clauses, American Bar Association 2008.  The EJCDC and ConsensusDOCS websites both provide a matrix from this book for PDF download.  The book may be purchased from the ABA website here.

[Ed note:  I second Nathan’s book recommendation, which is a great resource for anyone considering the pros and cons of each set of form documents.  You can sometimes find the book much cheaper from your usual big online book site, so check around]

Nathan and I look forward to answering your comments, thoughts, and questions.  Drop us a note!

 

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.