Construction Law in a Nutshell
Author:
Campbell, Donald E.
Edition:
1st
Copyright Date:
2015
17 chapters
have results for construction law
Chapter 1. Introduction to Construction Law 24 results (showing 5 best matches)
- Construction law implicates several sources of law. While the rights and obligations of those involved in a construction project are primarily governed by the terms of their contracts, it would be incorrect to think of construction law merely as advanced contracts. As one court noted, construction disputes “are a separate breed of animal.” In fact, even in the realm of contracts, there are a number of doctrines and provisions unique to the construction industry. In addition to contracts, statutes and municipal codes, tort law, and constitutional law all contribute to an understanding of the area. With this many rules and regulations implicating even the simplest construction project, it is not surprising that a number of states have certifications available for lawyers who specialize in construction law.
- Statutes and municipal ordinances place numerous obligations and restrictions on parties to a construction contract. It is impossible to give a comprehensive list, but to give a sense of their importance, consider federal and state environmental statutes, bidding, and workplace safety laws; state licensing laws, lien right laws, and laws of limitation/repose; and local zoning ordinances and building codes. Jurisdiction-specific variations add to the complexity.
- Tort law also impacts the construction process. Negligent misrepresentation—an allegation that material information was not provided or was incorrect—is a common claim. Suits for defective construction and personal injury as a result of worksite conditions also arise. In addition, claims of professional malpractice are asserted against architects or engineers for inadequate plans or designs. Often, construction contracts attempt to address potential tort liability through clauses that allocate or limit risk, but there are situations where those provisions prove inadequate or unenforceable. For claimants, the economic loss rule—a rule designed to maintain the divide between contract and tort remedies—may also bar an otherwise valid claim.
- A. SOURCES OF CONSTRUCTION LAW
- Generally, construction contracts do not have to be in writing to be valid. However, if a contract falls within the and be signed by the party the contract is being enforced against. The statute of frauds—originally based on a statute passed by the English Parliament—is now either a statutory or common law doctrine in all jurisdictions of the United States. While states vary as to the precise types of contracts that are subject to the statute, two categories commonly included are relevant in the construction context. Contracts for the transfer of an interest in real property—including contracts for the sale of land and grant of an easement are subject to the statute. In addition, contracts that cannot be performed within one year must be in writing. For a contract to fall into this category there must be no possibility that the contract could be performed within a year. Therefore, where the contract is to build a house with no deadline for completion, the contract is not within the...
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Preface 5 results
- Construction law has been around since a caveman put one rock on top of another for shelter and the structure collapsed maiming a neighbor. Then, the dispute was surely resolved in favor of the stronger of the two combatants (under the venerable legal doctrine of “might makes right”). However, despite these ancient origins, and its development into a unique and respected area of the law today, law schools have been late to consider construction law on its own terms. Ironically, this is not true for other professional schools—such as architecture and construction management—which have made construction law a core part of the curriculum. This is all changing, however, and this book is a testament to that change.
- The goal of this book is to provide the reader a foundational understanding of the players and legal disputes that can arise in a construction project. Of course the more complex the project the more complex the problems, but even in the simplest construction or renovation disputes arise, and the parties need to know their legal rights and obligations. This book is an overview of those rights and obligations.
- This book has been a labor of love. I enjoy reading, writing, and teaching about construction law. However, there is no such thing as a perfect manuscript or approach, and I certainly do not claim perfection here. Decisions had to be made about what to put in and what to leave out (it is a nutshell after all) and where to put concepts that could cross-cut chapters. I encourage the reader to provide feedback and comments that will serve to improve future editions of the book.
- In closing, I would like to provide a thank-you to several folks. First to my research assistants that helped me gather cases and materials as I wrote, and particular Mr. Russell Dumas who provided the final push needed to get the book finalized. I would also like to thank two folks with West Academic—Ms. Elaine Thompson who first planted the seed for this project and Mac Soto who gently but firmly pushed me toward completion of the book for their guidance. A continuing thanks to the administration at MC Law, particularly Dean Scott and Dean Emeritus Rosenblatt, who are a constant source of support and encouragement. Finally, but certainly not least, I thank those who have taken my construction law class. Without them, this book would not exist.
- This book takes each of the primary participants in a construction project and examines the legal doctrines applicable to that participant. The players analyzed are the owner, contractor, design professional, subcontractor, and surety. In addition to these chapters there are also chapters discussing common contractual provisions, defective construction, the economic loss rule, and damages. This structure is intentional and hopefully provides a way to organize a syllabus or course of study that is not only chronological but also intuitive.
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Chapter 2. The Role of the Owner 32 results (showing 5 best matches)
- Even if the owner has the legal right to build, there could be other restrictions that limit what can be built in a location. Federal, state and municipal zoning, land use, and environmental laws may limit the types of structures constructed in an area (or whether construction can be commenced at all). In addition to these regulatory restrictions, the property may also be burdened by private restrictions—such as easements or restrictive covenants. Easements on the property may limit where or how a structure is built. Restrictive covenants may limit several aspects of construction. For example, residential subdivision covenants may contain restrictions on where construction vehicles can travel during construction, setback or minimum square footage requirements, restrictions on the type of construction materials or design features that can be built on the property.
- A construction management delivery system is an umbrella term for a variety of design delivery systems. While the term construction manager does not have a set meaning, generally construction management delivery systems can be divided into two distinct categories based on the responsibilities assumed by the construction manager. The first is the
- The primary difference between the at-risk and agency construction manager is the shift in risk from the owner to the construction manager. The construction manager is responsible for unjustified delays and defective construction. The construction manager also assumes responsibility for claims from subcontractors—providing a layer of protection for the owner which is not present in an agency construction manager approach.
- As first conceptualized, the construction management approach contemplated that an owner would retain a construction manager for a fixed amount to serve as the owner’s agent from the design stage through the end of construction. This is known as
- During the preconstruction stage, the agency construction manager provides the owner with advice on designing with an eye toward construction. This may mean catching discrepancies in the plans or specifications that could arise in the construction process (and lead to disputes or change orders) and providing value engineering. During the construction phase, the construction manager assists the owner with selection of subcontractors and coordinates the trades.
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Chapter 3. The Role of the Contractor 23 results (showing 5 best matches)
- Contractors seeking to bid on a project or enter into a construction contract, must be aware of the licensing requirements of the state where the construction will take place. Each state—and some local governments—have unique laws and regulations on what is required prior to entering into a construction contract. For example, Alabama requires out-of-state contractors to register with the Department of Revenue, provide a bond based on the amount of the contract, and provide a listing to
- Bruner & O’Connor on Construction Law § 2:119.
- Bruner & O’Connor on Construction Law § 7:195.
- Bruner & O’Connor on Construction Law § 8:23.
- In addition to steps necessary to qualify to do work, states also require contractors to obtain a license in the state prior to entering into certain construction contracts. The purpose of these licensing requirements is to ensure those performing work in the state has a minimal amount of competence. Generally the licensing requirements include a written examination, fee, and bond. These licensing requirements are enforced by a regulatory body authorized to take disciplinary action against contractors that fail to abide by licensing laws. Apart from administrative discipline, failure to have a required license can have severe consequences, including disqualification from consideration for a project or, if awarded the contract, declaring the contract invalid. For example, Mississippi law declares any contract entered into in violation of the licensing laws “null and void.”
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Chapter 10. Damages and Dispute Resolution 19 results (showing 5 best matches)
- Keep in mind as you contemplate calculation of damages in the construction context that construction—no matter how complex—will ordinarily operate through the familiar lens of contract law. Therefore, just as in any other contractual relationship, when a party breaches a construction contract, the goal is to give the nonbreaching party the . This in essence means that the goal in a contract dispute is to put the non-breaching party in the same position she would have been if she had received adequate performance. In addition to these direct damages, the law also allows the non-breaching party to recover
- Arbitration is a longstanding and well-accepted method of resolving construction disputes. Three primary justifications have been put forth for preferring arbitration over litigation in construction disputes. First, participants in a construction project need quick resolution and finality in decisions. Allowing claims to linger or face multiple appeals/remands that could happen in litigation keeps a completed project open and lingering when the parties would prefer to close the books on the project and move on. Second, the cost of arbitration is perceived to be less than the cost of litigation. Third, because construction claims are complex, utilizing arbitrators familiar with the construction process and construction contracts is better for the
- Bruner & O’Connor on Construction Law § 19:37.
- The construction project without some dispute is like a four-leaf clover—often hoped for but rarely seen. Therefore, standard construction contracts set out a mechanism for resolving disputes. The resolution process is actually a two stage process. First is the recognition of a dispute and second, following the informal dispute resolution process provided for in the contract. If the informal process is unsuccessful, resolving disputes either through arbitration or litigation.
- Once it is determined that a claim is subject to an arbitration provision, the next question is the number and method of selecting arbitrators, where the arbitration will be held, and the law to be applied in the arbitration. These are all issues that the parties should agree to contractually. Often, the contract will provide that the claims will be subject to a particular set of rules—for example, the AAA Construction Industry Arbitration Rules. The number of arbitrators is usually one or three. Of course, there are costs associated with arbitration which can be substantial—including a filing fee that increases incrementally based on the size of the project and the arbitrator(s)’ fee which is usually split between the parties.
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Chapter 6. The Role of the Surety 4 results
- the construction documents. Thus, the involvement of the surety on a construction contract is for the benefit and protection of the owner. The surety is only obligated to expend funds to the extent set out in the bond document. This amount is known as the of the bond. There are four primary types of surety bonds issued in the construction context: bid bond, payment bond, performance bond, and lien bond. Federal law, under the , 40 U.S.C. §§ 3131–3134, requires both performance and payment bonds on federal construction projects. A number of states follow the lead of the federal government, and require payment and performance bonds on construction projects. These state laws are known as , but the statutes have unique differences from the federal law. With regard to private projects, the decision of whether to require a payment or performance bond is left up to the owner. The AIA General Conditions recognizes that the owner has the right to require payment and/or performance bonds.
- Bruner & O’Connor on Construction Law § 7:40.
- A surety relationship is not unique to the construction industry. In fact there is an entire Restatement on Suretyship and Guaranty. Suretyship simply represents a situation in which one person agrees to perform or to pay a debt owed by another if they fail to perform. This relationship could arise in any area of life. In the construction context, sureties are companies that issue agreeing if the contractor defaults in performance or payment under the construction documents, the surety will step in and either make payments due to those providing work on the project or to complete the project. The goal of this chapter is to identify the parties in the surety context and examine the rights and responsibilities of the parties.
- In addition satisfying the definition of a “claimant” the person seeking payment under the payment bond must also have performed work that the bond covers. For example, the AIA Payment Bond covers “labor, materials and equipment furnished for use in performance of the Construction Contract.”
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Outline 17 results (showing 5 best matches)
Chapter 8. Defective Construction 12 results (showing 5 best matches)
- The owner may believe that the design professional has a contractual obligation to spot and stop defective construction, and that the failure to do so constitutes a breach of contract. Design professionals, on the other hand, want to make it clear that their obligation in the administration of the project is not to direct how the project is constructed (what the AIA standard contract describes as the “means, methods, techniques, sequences and procedures” of construction), but simply to observe the construction when the architect visits the site and ensure that construction is proceeding consistent with contract documents. Certainly the parties can agree that the design professional will do more—even up to assuming responsibility to be on site full-time observing and inspecting the work. A design professional involved in the day to day construction process is often called a ..., does not allow the architect to close his eyes on the construction site, refrain from engaging in...
- Construction is if it either does not conform to contractual requirements or is performed in a manner that falls below the standard of care that is owed. The types of defects are as diverse as the types of construction projects. Work may be performed in an improper manner, the work may have been performed properly but the wrong material used, or the project design may be inadequate.
- This chapter addresses the most common types of claims for defective construction that arise in tort and contract. However, it is important to note that there may be other claims available for defective construction that vary by jurisdiction. For example, some claims have been successful under an statute. Often broadly worded to provide protection to consumers, they can encompass construction. Courts typically require evidence of wrongful/deceptive conduct beyond mere defective work to allow these claims. However, if a successful claim can be asserted, the statute may provide for recovery of attorney’s fees and possibly some form of penalty/punitive damages for the conduct which would not be available in a breach of contract claim. For example, a Texas court found a violation of their Deceptive Trade Practices Act where the builder made numerous false representations to the owner including statements about the cost of construction and the time for completion.
- B. DEFINING CONSTRUCTION DEFECT
- One difficulty that arises in discussing construction “defects” is that the concept is so broad and implicates so many different claimants and claims that it is impossible to capture every possible claim or claimant. The purpose of this chapter is to
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Title Page 2 results
Half Title 1 result
Chapter 9. Economic Loss Rule 5 results
- Annotated Construction Law Glossary
- are those losses suffered as the result of the defective or insufficient performance of another, such as the cost to repair/replace or diminution in value due to defective work. To give a simple example, if an owner contracts with a contractor to construct a house and the contractor negligently installs the roof, the owner must sue the contractor for breach of an express or implied provision of the contract, and will be limited to the cost to repair the roof (breach of contract damages). If the owner asserted a “negligent construction” claim instead of a breach of contract claim, the economic loss rule would require dismissal of that tort claim. Economic losses are distinct from personal injury harms or harms to property other than that which was subject to the contract. The economic loss doctrine does not bar claims for personal injury or for harm to other property. Therefore, in our prior example, if the owner was injured by a piece of roofing because of the defective
- D. ECONOMIC LOSS RULE IN CONSTRUCTION CONTEXT
- The economic loss rule is relevant to every relationship in the construction context because of the inter-related connections between those with and without contracts. To analyze whether the economic loss rule would bar recovery in a particular circumstance, the starting point is whether there is a contract between the parties. If the answer is yes, then the economic loss rule requires the claim for defective construction must be brought in contract unless there are personal injuries or harm to other property. Therefore, an owner cannot sue a subcontractor for breach of contract for the subcontractor’s defective work on a project. Similarly, the subcontractor cannot sue the owner for damages incurred by the subcontractor as a result of owner-caused delays. From the tort perspective, the owner would not be able to sue the subcontractor in negligence if there was no personal injury or harm to property other than the contract. If the economic loss rule applied then the owner would be...
- The actions (or inactions) of design professionals can have a significant impact not just on the owner, but on every participant in the construction process—particularly contractors and subcontractors. The general rule is that the contractor/subcontractors have no claim against design professionals because they have no contract and claims based on delay or inadequate plans and specifications would be purely economic losses.
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Chapter 5. The Role of the Subcontractor 22 results (showing 5 best matches)
- Bruner & O’Connor Construction Law § 9:74.
- The justifications for terminating a subcontract are often set out in the contract itself. If the parties have not agreed contractually to the justifications for termination, the common law requirement of a material breach or a defense to performance must exist. Because of the interrelated nature of the construction contracts and the dependence of the various parties to the project, it behooves all parties to set out the bases and consequences of termination. To demonstrate how the interrelated nature of the parties can justify unique contract provisions, consider the situation where the contract between the owner and contractor is terminated, but the owner wishes to continue construction with the subcontractors doing work on the project. Of course the owner has no contractual relationship with the subcontractors. To address this issue, standard contracts provide that if the owner terminates the contractor, the owner has the right to an
- Categorizing a particular party on a construction job as either a subcontractor or supplier can have a significant impact on the obligations of the party. Stated simply, contracting to provide goods implicates the party is a . If the party is a supplier, the obligations and warranties under Article 2 of the Uniform Commercial Code (UCC) govern the transaction. On the other hand, if the transaction is for services, traditional common law doctrines apply. Ordinarily, however, categorizing a particular contract as purely goods or purely services is impossible. In these situations, courts look to the nature of the transaction to determine whether it is for services or goods.
- Subcontractors face an unenviable position on a construction project. The subcontractor provides goods and services that are incorporated into a project that will be used by the owner, but the subcontractor has no contractual relationship with the owner. This means, as a matter of common law, the subcontractor must rely and look to the contractor for payment or rely on such uncertain common law claims as unjust enrichment. To
- The owner on a construction contract has certain fundamental objectives—such as having the project completed consistent with the construction documents on time and within budget. Of equal concern is ensuring that everyone performing work on the project is paid for work performed so that the property is burdened with liens. The problem for the owner is that she does not have a contract with those supplying labor or supplies on the project, and must rely on the contractor to distribute payments consistent with the work performed. One way that owners seek to address this problem is by requiring lien waivers with payment to the contractor. Lien waivers contemplate that a subcontractor will not assert a lien for work previously performed. A valid lien waiver will negate the right to assert a lien—thus, protecting the owner’s property interest.
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Chapter 7. Common Contractual Provisions 14 results (showing 5 best matches)
- The subsurface condition at the project site can be an unknown until construction has commenced and the conditions are exposed. The fact that the subsurface condition cannot be established with certainty until after construction has commenced puts both the contractor and the owner in an unenviable position. Therefore, construction contracts often contain a provision setting out an agreed process for addressing conditions discovered on the site that were not anticipated by the parties.
- Common insurance policies required on a construction project include: The purpose of the CGL policy is to allocate risks with regard to personal injury and property damage to property other than the project itself (which is likely excluded by the “your work” exclusion). Builder’s risk policies are obtained during the course of construction, and cover certain damage to the property while construction is on-going—such as damage caused by fire, wind or vandalism. Workers’ compensation insurance is provided to cover injuries to employees that occur in the course and scope of employment. The design professional may be required to maintain professional liability insurance to cover claims of negligence in the provision of architectural services.
- There are a number of contractual provisions that are common in construction contracts. These clauses are ubiquitous enough to justify a separate chapter. The provisions addressed include: (a) differing site conditions provision; (b) indemnity provision; (c) change in work provisions; (d) liquidated damages provisions; and (e) insurance provisions.
- clauses are common in construction contracts to address issues of delay. These clauses provide a set amount of damages that will be suffered if the project is delayed beyond the established completion date. In the construction context, the liquidated damages are usually assessed on a per day basis. So, for example, if the contract provides for $500 per day in liquidated damages, and the contractor is 2 days late in completing the project, then the owner can charge $1,000 against the balance due to the contractor. The parties can agree when the liquidated damages stop. Ordinarily liquidated delay damages cease once the project is substantially complete. The EJCDC contracts, however, provides a two tiered approach—with one amount of liquidated damages before substantial completion and a second, lower amount for delay in obtaining final completion.
- If construction contracts function largely to shift risk for potential claims resulting from a project, it should come as no surprise that construction contracts contain a number of provisions regarding insurance. It is important to know precisely what policies a party is agreeing to obtain—because failure to acquire a policy when required may constitute a material breach of contract or result in a party being responsible for costs that should have been covered by an insurance policy. Generally, insurance policies provide indemnification for ...the insurance company has the right to seek to recover the amounts paid out on the claim from the responsible party. So, for example, if an insurance company has to pay the medical expenses of an insured involved in an automobile accident, the company has the right to seek recovery for those amounts from the negligent party. In the construction context, allowing subrogation could defeat the purpose of having coverage. Therefore, standardized...
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Chapter 4. The Role of the Design Professional 31 results (showing 5 best matches)
- While the administrative responsibilities a design professional may assume during construction are discussed in detail later, it is important to note that the relationship between the design professional and the owner shifts from the design phase to the construction services phase. While preparing design documents the design professional maintains her professional independence from the owner, and acts as an independent contractor. However, during the construction phase, the designer acts as the agent of her principal the owner. That shift in relationship means that the design professional assumes certain duties and responsibilities to the owner, and must act at the direction of the owner.
- A primary benefit to the owner of having the design professional involved in the construction phase of the project is to provide an expert on the ground, responding to questions about ambiguities or inconsistencies in the design documents. The design professional is in the best position to provide guidance or clarification as construction is ongoing.
- owner. In other words, as a general rule, the design professional has no duties to third parties at all. However, if the contract includes that obligation, failure to exercise it in a non-negligent manner can constitute a breach in tort law. The case among others, prompted design professionals to reconsider the language used in standard contracts. To this end, the current language setting out architect obligations in the course of construction tends to be indefinite and include a number of disclaimers. For example, the current AIA language is: “The Architect shall not have control over, charge of, or responsibility for the construction means, methods, techniques, sequences or procedures, or for safety precautions and programs in connection with the Work, nor shall the Architect be responsible for the Contractor’s failure to perform the Work in accordance with the requirements of the Contract Documents.”
- In addition to contractual obligations, as professionals, design professionals must perform with a minimum amount of competence in their field, and if they fall below this standard they can subject to a tort claim for breach of professional standard of care as well as breach of contract. The extent of involvement the design professional will have in the construction phase of the project depends on the needs of the owner. The AIA documents contemplate that the design professional will remain the owner’s agent throughout the construction process. Practically this makes sense because the design documents as contemplated on the drafting table inevitably will change/need clarification when the construction phase begins. However, if the owner’s needs are merely design related, the parties can agree that the design professional’s services will be limited to the design documents.
- A design professional is exactly that—a professional—and is subject to liability under standards of negligence in tort law if they fail to meet the minimum standard of competence in the profession. Therefore, the general common law duty that the architect or engineer owes to the owner is to use that skill and care that a licensed design professional would take under the circumstances. A design that is in violation of a building or housing code is almost always a breach of the design professional’s duty, and courts have been willing to find that such violations are . To establish a breach of the duty the owner ordinarily must come forward with an expert to testify as to how a minimally competent professional, faced with the same circumstances, would have acted differently. These claims arise most often when construction was more expensive or took longer to finish as a result of defective design documents.
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Index 15 results (showing 5 best matches)
Table of Cases 5 results
- Anco Construction Co. v. Witchita .................... 53
- L&B Construction v. Ragan Enterprises .................... 116
- Lewistown Miller Construction Co. v. Martin .................... 158
- Midland Engineering Co. v. John A. Hall Construction Co. .................... 127
- Mrozik Construction, Inc. v. Lovering Associates, Inc. .................... 13
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Advisory Board 10 results (showing 5 best matches)
- Professor of Law, Michael E. Moritz College of Law,
- Professor of Law Emeritus, University of San Diego Professor of Law Emeritus, University of Michigan
- Professor of Law, Chancellor and Dean Emeritus, Hastings College of the Law
- Professor of Law, Yale Law School
- Professor of Law, Pepperdine University Professor of Law Emeritus, University of California, Los Angeles
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- Publication Date: June 12th, 2015
- ISBN: 9781628101072
- Subject: Construction Law
- Series: Nutshells
- Type: Overviews
- Description: This book provides a comprehensive survey of the major legal issues that arise in the course of a construction project. The structure of the book first focuses on the major participants on a project and the relationships and interests of each of participant. It then shifts to chapters on recurring themes in construction law such as the economic loss rule, calculation of damages, and defective construction. While making the concepts accessible for any reader, the book provides a logical structure for those teaching construction law to use as either the primary or supplemental reading for the course.