Tag Archives: North Carolina Construction Law

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.

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

Courts Generally Will Enforce North Carolina’s Anti-Indemnity Statute, But How Far?

Back in March, I wrote about the role of North Carolina’s anti-indemnity statute in the construction industry.  The statute, codified at N.C. Gen Stat. § 22B-1, appears below (you can click the image for a larger version):

Anti-Indemnity Statute

As my previous blog post indicated, the statute prevents “one party from shifting the entire risk of its own negligence to another.”  A recent case from the U.S. Bankruptcy Court for the Eastern District of North Carolina demonstrates how courts utilize the so-called “blue pencil” doctrine to accomplish that goal.

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Filed under Federal case law, Indemnity Claims, State law, policy & news, Subcontractors

Just Got Terminated for Convenience? Five Steps You Should Take Right Now.

Image by Hans Braxmeier / Pixabay.com

Did your contract just get axed? Read on. (Picture by Hans Braxmeier / pixabay.com)

Most private owners negotiate for a contract clause permitting them to terminate a construction agreement without regard to the quality of the contractor’s performance.  These so-called “termination for convenience” clauses come in handy when, for example, an owner’s financing runs dry and a project must be halted.  A termination for convenience clause allows an owner to cancel a project without materially breaching the contract and avoid paying the contractor its anticipated lost profit on unperformed work.

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Filed under Construction Risk Management, Termination Claims

Is a 20-Year Express Warranty Good for Only Six Years in North Carolina?

Ten years ago, you had the roof on your office building replaced.  Your roofer had assured you that the new membrane would be waterproof, wouldn’t crack and would be well-suited for your building over the long-haul.  He even backed up these representations with a document stating that both the membrane and his workmanship were “fully warranted for 20 years.”

The work was substantially complete on September 15, 2003, and until recently, the new membrane hadn’t given you any problems.  After storms passed through your neck-of-the-woods last week, however, your “new” roof leaked.  Big Time.

Turns out you’re going to need to replace your roof immediately, ten years earlier than expected.  Adding insult to injury, interior spaces were damaged, including common areas and rented space, and the operations of some of your tenants were disrupted.  You suspect they might seek rent abatement, maybe more.  Good thing you kept that 20-year warranty in a safe place, right?

Kind of.  Under a recent North Carolina appellate decision, you might be able to compel the roofer to replace the roof, but you’re not likely to succeed in recovering any monetary damages from him.

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Filed under Construction Defects, Defect Claims, State law, policy & news, Warranty Claims

Bid Protests: Look Before You Leap

A $15 million school construction project is being let by a local board of education, and you really want this contract.  Your team has been working relentlessly over the past week to accurately estimate the project and provide the school board with the most competitive price possible.  You’ve sharpened your pencil, and reduced your margin to virtually nothing in the hopes of landing this project.  Time to submit your proposal, fingers crossed…

…Well, the bid opening has now come and gone, and unfortunately, it looks like the work is going to be awarded to one of your competitors.  However, you believe there was an irregularity in the bidding process, and the more you think about it, the more you want to contest what you consider to be an unjust result.   Should you sue in an attempt to stop the contract from being awarded to your competitor?

The answer to that question depends substantially on the severity of the irregularity you’re concerned about.

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NCDOT, CAGC and CAPA Encourage Your Participation In Highway Construction Wage Survey by April 11, 2012

Sen. James J. Davis (R-PA) and Rep. Robert L. Bacon (R-NY), co-sponsors of the 1931 Davis-Bacon Act

The North Carolina Department of Transportation (“NCDOT”), in conjunction with Carolinas AGC (“CAGC”) and the Carolinas Asphalt Paving Association (“CAPA”), is conducting a Highway Construction Wage Survey to determine the validity of the U.S. Department of Labor’s prevailing wage determinations for North Carolina highway projects under the federal Davis-Bacon Act.

All highway contractors and subcontractors who performed construction, alteration and/or repair of roads, streets, highways, runways, taxiways, alleys, trails, paths, parking areas, bridges or other similar projects with a value greater than $2000 between January 1, 2010 and December 31, 2011, whether financed by federal, state, municipal and/or private funds, are encouraged to participate in the survey.

Please note that the deadline for participation in the survey is Wednesday, April 11, 2012.

Additional information about the survey can be found here.  The survey can be filled out online here.  Click “Continue reading” below for more information about the Davis-Bacon Act and the importance of your participation in the current survey.

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You Just Signed A Construction Contract That’s In Excess of Your Limited General Contractor’s License; Can You Still Compel The Owner To Pay You?

Yes, but only up to a point.  Specifically, once the statutory limit of the license is reached, no additional contract balance above that limit may be recovered.

Our analysis begins with the N.C. General Statutes, specifically Chapter 87-10, which states, in pertinent part, that “the holder of a limited license shall be entitled to act as general contractor for any single project with a value of up to five hundred thousand dollars ($500,000)[.]”  We also need to bear in mind that in 1983, the North Carolina Supreme Court adopted the rule that “a contract illegally entered into by an unlicensed general construction contractor is unenforceable by the contractor.  It cannot be validated by the contractor’s subsequent procurement of a license.”  Brady v. Fulghum, 309 N.C. 580, 586, 308 S.E.2d 327, 331 (1983).

Based solely on the cited language of Chapter 87-10 and the general rule expressed in the Brady decision, it would be tempting to conclude that a contract entered into in excess of the statutory limit is illegal, void and therefore unenforceable in a court of law as of the moment the contract is signed.  Fortunately, however, that is not how subsequent appellate decisions have handled the situation.

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Filed under Licensure, NC case law

Recommended Reading: The Basics of E-Verify in North Carolina

I’m a pure sticks-and-bricks construction and surety lawyer, focusing on construction contracts, change order claims, payment claims, defect claims, delay claims, etc. etc.  While I don’t dabble in either employment or immigration law, I fully recognize that construction participants — and particularly general contractors and subcontractors — confront a host of employment- and immigration-related legal issues on a regular basis.  I therefore endeavor to pass along important information authored by my colleagues in the legal community who, unlike me, are experts in the employment and/or immigration law fields.

In that vein, Jennifer Parser of PoynerSpruill has posted an excellent primer on E-Verify that I recommend to all North Carolina construction participants.  E-Verify is an internet based tool that allows employers to instantly verify the eligibility of their employees to work in the United States.  E-Verify became the “law of the land” here in North Carolina last June, and Ms. Parser’s article discusses how the legislation will be phased in, how employers can comply and the penalties for non-compliance.  Must reading.  And for more, head to the federal government’s E-Verify site.

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Filed under Federal law, policy & news, State law, policy & news

An Ounce of Claims Prevention Worth a Pound of Cure?

I spent last Thursday and Friday at a continuing legal education program offered by the Fidelity & Surety Law Committee of the American Bar Association’s Tort Trial & Insurance Practice Section (“TIPS”) at the Waldorf-Astoria Hotel in Manhattan.

One of the many highlights of the excellent two-day program was a panel discussion on Thursday featuring general counsel and risk managers from five large general contractors: The Walsh Group, Kiewit Corp., Turner Construction Co., Skanska USA and Granite Construction Inc.

During that panel discussion, Mr. Kenneth M. Smith, Assistant General Counsel of Granite, spoke about a topic near and dear to my heart:  in-project claims prevention.  Mr. Smith spoke about how claims prevention begins with the contract review process, which should feature a thorough identification and analysis of key contract clauses to ensure an appropriate allocation of contract risk between the parties.  Legal counsel should follow that review with training of key project staff to ensure that they understand all key contract terms, such as claim notice provisions.

Mr. Smith then spoke about his company’s implementation of monthly impact reports to and/or conference calls with legal counsel to provide a periodic check-up on the health of a project.  Are an excessive number of change orders creating a risk of cumulative impact damages?  Is the project on budget?  If not, in which cost codes can the cost overruns be found?   Is the project falling behind schedule?  Are there personality conflicts on-site that are preventing effective communication between and among project participants?

The purpose of getting answers to these types of questions on a periodic basis is threefold.

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Filed under Contract Review & Negotiation, Feature story, Project Counseling

Cell Phone Ban for Commercial Vehicles Takes Effect TODAY

A new year ushers in new laws, and one potentially applicable to participants in the construction industry is the new regulation from the Federal Motor Carrier Safety Administration (FMCSA) and the Pipeline and  Hazardous Materials Safety Administration (PHMSA) prohibiting interstate truck and bus drivers from using hand-held cell phones while operating their vehicles.

The new rule prohibits commercial drivers from using a hand-held mobile telephone while operating a commercial truck or bus.  Drivers who violate the  restriction will face federal civil penalties of up to $2,750 for each offense  and disqualification from operating a commercial motor vehicle for multiple  offenses.  Additionally, states will suspend a driver’s commercial driver’s license (CDL) after two or more serious traffic violations.  Commercial  truck and bus companies that allow their drivers to use hand-held cell phones while driving will face a maximum penalty of $11,000.

The rule also applies to intrastate drivers who operate commercial vehicles transporting a quantity of hazardous materials requiring placarding under 49 CFR Part 172 or any quantity of a material listed as a select agent or toxin in 42 CFR part 73.

Note that the rule applies to the popular “push-to-talk” devices frequently utilized in the construction industry.

Under the new regulation, a driver can only initiate, answer or terminate a call by touching a single button on a mobile telephone, earpiece, steering wheel or instrument panel.

Employers should consider establishing policies or practices that make it clear that its employees and agents are neither required nor allowed to use hand-held mobile telephone devices while driving a commercial vehicle.

For more on the new rule, see the attached link announcing the rule and an accompanying FAQ.

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