Tag Archives: risk avoidance

Tolling the Statutes of Limitation & Repose? (Law note)

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Lowe's Motor Speedway

A blog reader recently raised the question of to how to handle construction defect claims while repair attempts are being made on a defective building.  In part, the answer to this question will depend on how close you are to the statute of limitations or the statue of repose from running.  The closer you are, the more you need to be concerned about this issue.  Just because all parties are working together to solve construction issues does not mean that the statutes are not running.  They can.  [There are, as usual, exceptions for equitable reasons.]  And once statues run, there’s no getting them back.

One prudent approach to dealing with the statutes is to have all parties involved enter into a “Tolling Agreement.”  What a properly drafted tolling agreement can do is to stop the running of the statue of limitations and/or repose while the parties attempt to fix the defects or otherwise settle their issues with one another.  Note that the tolling agreement does not give a party any greater rights than they would have at the time it is signed– that is, if the statute has *already* run, then it would be of no use.  But the tolling agreement can act as a “time out” on the running of the clock.

A good example of a tolling agreements is found in the Court of Appeals opinion in Charlotte Motor Speedway, Inc. v. Tindall Corporation, 195 N.C. App. 296, 672 S.E.2d 691 (2009).  The Speedway case involved the infamous collapse of a pedestrian walkway during the NASCAR Winston Cup.  The walkway which collapsed had been substantially completed by October 1995, and the collapse occurred in May 2000.  Speedway (the project owner) and Tindall (which constructed the walkway) entered into a tolling agreement:

“to toll and suspend any applicable statute of limitations, repose or time, whether created by statute, contract, laches or otherwise, within which any cause, claim action, cause of action, or suit must be made, or commenced by the parties against any one of them concerning the [pedestrian] claims, including any and all claims for indemnification and contribution.”  Id. at 298, 672 S.E.2d at 693.

Tindall attempted to argue that the statute of limitations barred Speedway’s claim for indemnification of monies paid prior to three years before it filed its complaint, but the Court found that the Tolling Agreement, which remained effective “through and including January 1, 2006” tolled the action, and Speedway brought suit on July 17, 2007, less than two years after the Tolling Agreement expired.  Likewise, the Court held that the statute of repose did not bar the action, because the Tolling Agreement was entered into less than six years after substantial completion, and the lawsuit was brought during the pendency of a second funding [tolling] agreement between the parties.

If you are considering a tolling agreement (or think you don’t need one because you “have time”), it is always smart to get a professional opinion on the matter.

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Comments? Let me know.  I welcome the opportunity to discuss how the statute of limitations and repose may be tolled in your specific situation.

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Photo “Trucks” by JMLeedy (Justin Leedy) via Flickr via Creative Commons License.

 

Tues Tip: 8 Best Collection Practices

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crayon tips

COLLECTION “TIPS”

 

 Readers of this blog may not know this, but in addition to construction law I also head our firm’s Collections practice.  What that means is that, once your client is no longer paying your bills or taking your calls, you can hire our Firm to either (1) get the client’s attention or, failing that,  (2) sue the (former) client for unpaid fees or merchandise.         However, if you establish good collection practices up front, before you extend credit to any client, you may be able to avoid having to hire a collection attorney to do the dirty work for you.  Here are my top 8 collection practice management tips:

1.

 Be careful on the front side in who you extend credit to. Get personal guarantee if possible.  Make a copy of the person’s driver’s license. (This helps if you have to sue to collect). Check their credit.

2.

Have a written contract.  Failing that, a signed purchase order agreement, with contract terms on the back, would be good. Just don’t rely on a handshake.  You can include language for interest (up to 18% per annum in North Carolina) and reasonable attorney fees and collection costs.  If you don’t have this in writing, you may not be able to get these items later.

3.

With the first payment by the customer, make a photocopy of the check.  (This is helpful to know where they bank in case they later stop making payments).

4.

Bill regularly- at least monthly.

5.

Charge an interest rate on past due accounts so your money isn’t being used for your client’s “float”.

6.

If you are in the position to file a mechanic’s lien (contractor, subcontractor, etc)– be aware of time deadlines for both (1) filing a lien and (2) perfecting that lien.  These are state-dependent so consult an attorney in your state.

7.

Create a system for large A/R accounts.  For example, when account is X days late, send a polite but firm demand letter.  When account is Y days late, initiate lawsuit/have your attorney send demand letter.

8.

Consider alternative payment arrangements.  If your customer acknowledges the debt, and is willing to sign a note or confession of judgment, you can offer payment terms.  If the payment terms are not met, then you can file the note and judgment.

Bonus tips– Steps for after a judgment, to help your collection efforts:

  • Send a copy of the debtor’s drivers license to the sheriff for execution on your judgment.
  • See if your jurisdiction allows for the seizure of bank funds.  If so, provide the banking information to the sheriff to aid in his seizing assets.
  • If a judgment comes back with “no assets,” consider having your attorney serve supplemental discovery questions if allowed in your jurisdiction.
  • Some states (but NOT North Carolina) allow you garnish wages.  Ask your local attorney if this is an option.

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Comments? Questions? Other good collection practices?  Let me know in the comments section or drop me a line.   And sign up for email updates by putting your address in the box on the top right so you will not miss any posts.

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Photo “Crayon Tips” by laffy4k via Flickr via Creative Commons License.

 

Follow your Change Order Requirements

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 check markIt is extremely important that you follow your written contract requirements.  No where is this more evident than in the change order process.

Most contracts have an explicit provision for the payment for additional work– and they generally require a written, signed change order (or change directive) before the work is performed.  Can you get by with verbal agreements for additional work? Sometimes yes, sometimes no.  Will it be much harder to get paid for additional services without a signed change order? You bet.  So why put yourself through that trouble?

Often times parties begin to “waive” formal requirements for written change orders, and construction projects are often on tight deadlines where stopping work to get a fully executed change order would bog down the schedule.  However, you run the risk of throwing yourself on the mercy of the Court when you don’t play by the contract rules.

A new case out of the Eastern District of Virginia demonstrates this fact very clearly.  In Artistic Stone v. Safeco, 2010 WL 2977894 (E.D.Va July 27, 2010), the Court held that the requirement that change orders be in writing was to be strictly construed and the subcontractor in that case could not recover for verbal change orders that violated the written change order requirement.  The Court held that where there is a method to ensure recovery of additional extra work in the written contract, the subcontractor could not recover additional money when it failed to follow that method.

“Written change order requirements maintain order and predictability in the construction business, and are meant ‘to avoid subsequent disagreement, and prevent just such a controversy as has arisen in this case.  For this reason, ‘where there is a method under the contract by which a party can insure the recovery of the cost of extra work, that party is not entitled to recovery where it fails to follow that method.'” Artistic Stone Crafters at 5.   [Internal citations omitted.]

A North Carolina court would likely concur.

To ensure you can fully recover for extra work, make sure it is authorized.  Follow the contract.  If circumstances make it so you cannot always follow the contract terms, document the situation as best as you can.  A follow-up email, confirming a verbal change order, would at least provide written evidence you can present in Court, should it come to that.  Otherwise, arguments can and will be made that the person who gave the change order wasn’t authorized to do so, and you may be stuck with no recovery for the extra work.

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Photo “white check mark on blue- acrylic on canvas” by kylemac via Flickr via Creative Commons license.

Those Pesky “Gentlemen’s Agreements”

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handshake

Head on over to Construction Law Musings today to read my guest post on why you should never rely on a “gentlemen’s agreement” for a construction project.  Handshakes are well and good, but put it in writing.  Same goes for any agreement, really.  Read, review, and understand your contracts, settlement agreements, and warranty deeds.

 A written document almost always trumps oral “understandings,” so why chance your business to anything less?

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Photo “handshake I” by oooh.oooh [Álvaro Canivell] via Flickr via Creative Commons License.

 

Tues Tip: “Business” of architecture & engineering

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Love your work but hate the “job” portion of it? You know, quoting scope of work, dealing with fees, and getting paid?  If so, check out Milton Gregory Grew’s great article about setting fees that can realistically account for your overhead and other indirect costs, “The Business of Architecture (Oxymoron?)”.

Of  the tips Greg discusses, step #2, “Put it in writing” is key,  as I’ve discussed earlier here.

Moreover, for fee issues, a written agreement is the gold standard.  In a written agreement you can even account for collection costs, higher interest charges, and “reasonable” attorney fees if you later (heaven forbid) have to sue a (former) client for payment of services.  Without a written agreement, you are stuck with statutory limits on what you can recover.

As they say, an ounce of prevention is worth a pound of cure.Gold 1 oz

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Photo “Gold1oz” by Olegvolk via Creative Commons Attribution 2.5 license.