Your Forum Selection Clause Might Not Be As Strong As You Think It Is

Last week, I blogged about the Southeast Caissons, LLC v. Choate Construction Company case, in which the North Carolina Court of Appeals held that a general contractor could not enforce a forum selection clause in a subcontract that was never signed.

And now, the rest of the story (with apologies to Paul Harvey).

Even if the subcontract HAD been signed, the forum selection clause would not have accomplished the general contractor’s goal of having all disputes resolved in the Wake County Superior Court.  You might find that ruling surprising after reading the following excerpt from the decision:

The subcontract also contained a clause in Article X, Section 3(b) entitled “Additional Dispute Resolution Provisions.”  This clause stated: “Venue for any arbitration, settlement meetings or any subsequent litigation whatsoever shall be in the city of Contractor’s office as shown on page 1 of the Subcontract.”  [The GC’s] office was shown on page 1 of the subcontract as being located in Raleigh, Wake County, North Carolina.

Huh?  A clause stating that disputes “shall” be resolved in a particular location is not sufficient to require dispute resolution in that locale?

That’s right, folks!  In order for one party to secure home field advantage in construction dispute resolution, North Carolina’s appellate courts consistently require that the applicable forum selection clause contain words like “exclusive,” “sole” or “only” to indicate that both parties intended to make jurisdiction exclusive in a certain place.   That means the GC in Southeast Caissons could only require its sub to litigate in Wake County if the forum selection clause had read something like this: “The parties agree that Wake County, North Carolina shall be the sole and exclusive venue for the resolution of any and all disputes arising out of or related in any way to this Subcontract.”  (And, of course, if the GC had secured its sub’s John Hancock on the subcontract’s signature page — per my previous blog post).

Bottom line?  If you use a form subcontract that includes a forum selection clause, you might want to review it and make sure it includes magic words like “exclusive,” “sole” or “only” in describing where venue is proper.  Better still, have your construction attorney review your forum selection clause and evaluate whether it’s likely to be enforced as you intend it to be.

Leave a comment

Filed under State law, policy & news, Subcontractors, Forum Selection Clauses

The Subcontract’s Unsigned, the Work is Complete and a Dispute Has Arisen — Now What?

In order for an agreement to constitute a valid contract that courts or arbitrators will enforce, both parties to the agreement must mutually assent to all of the terms of the deal.  The fancy Latin term for this mutuality requirement is “aggregatio mentium;” we Americans call it a “meeting of the minds.”  And as between general contractors and subcontractors in the construction industry, the signatures of the parties typically signify their mutual intent to be bound.

But what if the subcontract isn’t signed, and the parties proceed with performance of the underlying scope anyway?

That’s the conundrum the North Carolina Court of Appeals (“COA”) confronted in its April 19, 2016 decision in Southeast Caissons, LLC v. Choate Construction Company.

The general contractor and caisson subcontractor in that case went back and forth repeatedly on various drafts of a written subcontract.  The sub’s scope was commenced — and completed about three months later — without a final deal being reached on all terms.

When the subcontractor wasn’t paid, it sued for breach of contract (among other claims) in the Forsyth County Superior Court.  The unsigned subcontract called for dispute resolution in Wake County, prompting the general contractor to move for dismissal of the sub’s suit or, in the alternative, a change in venue.  The trial court determined that the subcontractor was not bound by the unsigned subcontract, and that venue was proper in Forsyth County.  The GC appealed.

In affirming the trial court’s Order, the COA relied on the rule that the absence of a signed, written instrument is evidence of the parties’ intentions not to be bound by the proposed contract.  On  the rights set of facts, that evidence could be outweighed by other evidence demonstrating that both parties accepted and acted upon the unsigned terms.  That wasn’t the case in Southeast Caissons, however — to the contrary, the COA concluded that virtually all of the evidence suggested that the parties never achieved a “meeting of the minds” on all of the subcontract’s terms.

Does that mean no deal existed between the GC and the sub?  Not necessarily.  The COA remanded the case back to the trial court for a determination of whether a contract “implied-in-fact” existed between the parties by virtue of their actions.  Even in the absence of a contract implied-in-fact, the subcontractor might still prevail on its payment claim under an equitable quantum meruit (i.e., unjust enrichment) claim for relief.

The takeaway?  Southeast Caissons makes it clear that general contractors seeking to utilize their standard subcontract forms should insist upon a signed agreement before permitting work to begin.  Allowing your subcontractor to proceed with its scope without first obtaining its “John Hancock” risks losing the benefits of those favorable subcontract terms your construction attorney spent so long drafting for you.

Leave a comment

Filed under Construction Risk Management, Forum Selection Clauses, Local law, policy & news, NC case law, State law, State law, policy & news, Subcontractors

Improving the Odds for a Jackpot Year for Your Commercial General Contracting Business

Wednesday’s Powerball drawing promises the winner a $1.3 $1.5 billion (yes, that’s “billion” with a “b”) jackpot.  Unfortunately, your odds of picking the winning numbers are about 1 in 292 million, or roughly the same odds as an architect acknowledging a deficiency in construction plans & specifications (I kid!).  Buying a few extra tickets might “improve” your chances, but they’ll remain infinitesimally small.

Fortunately, there are some steps you can take to improve the odds your commercial general contracting business will have a jackpot year in 2016.  These five tips spring to mind:

  1.  Know who you’re doing business with.  One bad project can spoil the gains from ten successful ones.  Do your homework on the owners who want you to build their projects.  Avoid owners who insist on oppressive contract terms, have a history of problem jobs, and/or just don’t seem to know what they’re doing.  Sometimes the best contracts are the ones you don’t sign.
  2. Buy out subcontracts thoughtfully.  Just as you need to be careful picking & choosing the jobs you bid, you should be equally careful about selecting your downstream dance partners.  First-tier subcontractors offering you a price advantage might not necessarily be reliable team players down-the-road.  Balance price with dependability. 
  3. Cultivate a culture of jobsite safety.  Having a track record for operating safe jobsites makes your company more attractive to the best owners, keeps your workers’ compensation mod rate in-check, and decreases the chances you’ll be spending time & money this year defending against claims.  Safety first, every day.
  4.  Secure your payment rights.  In North Carolina, that means filing a Notice to Lien Agent as your work begins, informing suppliers of the identity of the lien agent, guarding against double payment liability through the Notice of Contract procedure, and enforcing your lien rights timely, when necessary.  If you’re unaware of how any of these tools work, call your construction attorney immediately.  Speaking of construction lawyers…
  5. Rely on your lawyer for more than just dispute resolution.  Construction attorneys do more than resolve claims.  We draft & review contracts (as well as construction forms) and provide counseling throughout the construction phase of a project and beyond.  Make an experienced construction attorney your partner in profitability all year long.

Good luck, both with Wednesday’s drawing and with the year ahead.  As always, comments welcome!

Leave a comment

Filed under Construction Risk Management, Contract Review & Negotiation, Lien Law, OSHA

If You Like My Blog Posts, and You Think They’re Helpful, Come On, Readers, Let Them Know

It’s an honor to be nominated for two prestigious construction industry blog awards this winter, and I humbly ask for your vote in each competition.

ConstructionMarketingIdeasBlogFor the third year in a row, N.C. Construction Law, Policy & News has been nominated for Construction Marketing Ideas’ annual Best Construction Blog competition.  You can find the ballot here.  Once you open the ballot, you can vote for my blog in four easy steps: (1) scroll down and check the square radio button to the left of N.C. Construction Law, Policy & News; (2) click “Next Page: Comments/ verification;” (3) enter your first name, last name and email address; and (4) click Submit.  See?  Easy as 1-2-3 (and 4).  Voting closes on March 31, 2015.

JDRNomineeBadge_Construction2015And for the first time, the blog has been nominated for the 6th Annual JDR Industry Blogger Awards in the Construction Business category.  You can find the ballot here.  Once you open the ballot, scroll down to the “Construction Business” nominations; you’ll see my blog at the bottom of the list.  Click the round radio button to the left of N.C. Construction Law, Policy & News and then hit “Submit.”  Total breeze.  Voting closes on April 10, 2015.

The blogs nominated in both competitions are tremendous resources for AEC professionals in North Carolina, the United States and globally.  As pleased as I would be to earn your vote, it would thrill me even more to know that my readers are spending time in the blogosphere soaking up all of the rich construction risk management content my fellow bloggers have to offer.

Wednesday WisdomSo when you’re done voting, peruse the two lists of nominees and visit those blogs of interest to you.  You’re sure to be entertained and learn something helpful to your bottom line.

As always, thanks for your support of N.C. Construction Law, Policy & News.

Oh yeah, about the title of this post: my apologies to Rod Stewart.  And also to you, dear readers, for implanting that earworm into your noggins.  Might listening to the entire track, courtesy of YouTube’s Rhino channel, help?

It would be an honor to have your vote, Mr. Stewart.


Filed under Uncategorized

Everything’s Bigger in Texas, Including the Construction Litigation (Part 3 of 3)

Image by skeeze via

Image by skeeze via

This is the third of a three-part series exploring the Texas Supreme Court’s decision in Zachry Construction Corp. v. Port of Houston Authority of Harris County.  A summary of the case can be found at Part 1 of the series.  Part 2 addressed the “no-damages-for-delay” aspects of the case and commented upon the current state of North Carolina jurisprudence on the enforcement of such contract clauses.  This post explores the decision’s holding with respect to lien waivers and highlights some key issues contractors should bear in mind before executing these often-overlooked instruments.  

What Zachry Says About Lien Waivers

By way of reminder, here’s the pertinent lien waiver language that gave rise to the dispute over whether Zachry waived its right to claim $2.36 million in liquidated damages (“LDs”) that had been withheld by the Port Authority:

[Zachry] hereby acknowledges and certifies that [the Port Authority] has made partial payment to [Zachry] on all sums owing on Payment Estimate Number [–––] and that it has no further claims against [the Port Authority] for the portion of the Work completed and listed on the Schedule of Costs in Payment Estimate Number [–––].

The Port Authority argued this language constituted a waiver of all claims for payment; Zachry argued it only applied to lien claims.  The trial court saw it Zachry’s way, and the Texas Court of Appeals reversed.

The Texas Supreme Court thought the jury got it right.

Continue reading

Leave a comment

Filed under Case law from other states, Lien Law

Construction Arbitration Is Too Lengthy & Costly. The AAA Hopes to Fix That.

As I noted last November, there’s a growing concern among construction industry stakeholders and others that arbitration too often fails to serve its intended purpose as a speedy, less costly and more streamlined alternative to civil litigation.  This rising chorus has complained that pre-hearing discovery is too extensive and drawn out, the hearings themselves take too long, and at the end of the day, no meaningful cost savings are actually achieved.

The American Arbitration Association (“AAA”) is taking those concerns seriously.

Continue reading


Filed under Arbitration

Everything’s Bigger in Texas, Including the Construction Litigation (Part 2 of 3)

This is the second of a three-part series exploring the Texas Supreme Court’s decision in Zachry Construction Corp. v. Port of Houston Authority of Harris County.  A summary of the case can be found at Part 1 of the series.  Part 3 will address the lien waiver issues raised by the decision.  This post considers the “no-damages-for-delay” aspects of the case, specifically exceptions to enforcement of such contract clauses.

What Zachry Says About No-Damages-for-Delay Clauses

The Texas Supreme Court began its analysis by noting that as a general rule, a contractor can assume the risk of, and not seek damages for, construction delays by agreeing to a no-damages-for-delay clause (“NDFD clause”) in a construction contract.  The court, however, then went on to note five “generally recognized exceptions” to the enforcement of such clauses:

Continue reading

1 Comment

Filed under Case law from other states, Delay Claims, NC case law, No Damages for Delay Clauses

Inspiration to Help You Keep Your 2015 Construction Risk Management Resolutions

Well, the first full business week of 2015 is nearly in-the-books.  How are you doing with those risk management resolutions of yours?  Holding steady?  Or do you need a pep talk?  If it’s the latter, my Twitter feed is here to help.

Friday ForumThat’s because a number of my fellow AEC twerps had risk management, including successful project management, on the brain this week, and I’d like to use the Friday Forum to share some of their unique insights.

So without further ado, let’s get things started…

Continue reading

1 Comment

Filed under Construction Management, Construction Risk Management

It’s Not Enough to Read Before Signing; Always Strive to Understand Before Signing

An unpublished decision from the North Carolina Court of Appeals yesterday demonstrates how important it is to not only read, but also to fully understand, legally binding documents before signing them.

Continue reading


Filed under Indemnity Claims, Lien Law, NC case law, No Damages for Delay Clauses

Everything’s Bigger in Texas, Including the Construction Litigation (Part 1 of 3)

Because my practice is focused almost exclusively on construction projects in North Carolina, I focus far more attention on local case law developments than on appellate decisions from other states.  But every now and again, a decision from some far-flung jurisdiction gets published that is just too big, too fascinating and too important to overlook.

Zachry Construction Corp. v. Port of Houston Authority of Harris County, handed down by the Supreme Court of Texas (the “Texas Supreme Court”) on August 29, 2014, is just such a decision.

Continue reading


Filed under Case law from other states, Delay Claims, No Damages for Delay Clauses