Fairfield Connecticut Building Expert Directory

Construction Contract Clauses Only a Grinch Would Love – Part 4

November 30, 2016 — Garret Murai – California Construction Law Blog
Scope, time and cost provisions may be the most important clauses in your construction contract but they’re not the only ones which can impact your bottom line. The fourth and final part in a multi-part series, here are some other important construction contract clauses that can put a damper on your holidays.

Provision: Warranty Provisions

Typical Provision: “Subcontractor warrants to Contractor that all materials and equipment furnished shall be new unless otherwise specified and that all Work performed shall be performed in a good and workmanlike manner, of good quality and free from defects, and in conformance with industry standards, manufacturer’s recommendations and the Contract Documents. All work not conforming to these requirements, including substitutions not properly approved, shall be considered defective. Subcontractor agrees to promptly make good any and all defects due to faulty workmanship, materials and/or equipment which may appear within the Contract Documents, and if no such period is stipulated in the Contract, then for a period of one year from the date of acceptance by the Owner. Nothing herein shall shorten or limit any applicable periods of limitations including, but not limited to, those set forth in Civil Code, Part 2, Title 2, Chapter 3.”
What it Means: Warranty periods are subject to the agreement of the parties. However, warranties are different than limitations periods, such as California’s 4 year statute of repose for patent defects and 10 year statute of repose for latent defects (note: a statute of repose is different than a statute of limitation. A statute of repose sets a deadline based on an event. So, for example, under the 10 year statute of repose for latent defects a claimant must bring a latent defect claim within 10 years following substantial completion even if the latent defect wasn’t discovered until 10 years and 1 month following substantial completion. A statute of limitation, in contrast, sets a deadline based on the occurrence of an injury or damage. So, for example, California has a 2 year statute of limitation for personal injuries, which sets a deadline of 2 years from the date of injury to bring a personal injury claim). Warranty periods are also different from limitations periods because most warranties require work to be corrected at no cost, and because many contracts include attorney’s fee provisions, breach of a warranty can give rise to claim for attorney’s fees as well.
What You Can Do: Lower-tiered parties should examine warranty provisions to see if they are reasonable, and if not reasonable, should seek to either eliminate or limit those provisions, such as by reducing the warranty period or providing different warranty periods for different components of work, etc.

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Reprinted courtesy of Garret Murai, Wendel Rosen Black & Dean LLP
Mr. Murai may be contacted at gmurai@wendel.com

Assessing Defective Design Liability on Federal Design-Build Projects

March 22, 2021 — Dirk Haire, Adam Hamilton & Dana Molinari - ConsensusDocs
A common misconception by many government officials is that a design-builder is always responsible for every design error or omission on a design-build project. This article examines the actual liability standard applied by the courts and boards of contract appeals when a design defect arises on a federal design-build project. Background: Design-Build Contracts and the Spearin Doctrine Design-build contracts combine the design and construction elements of a construction project into one contract. Design-build contracts often include two types of specifications: design and performance. Design specifications may set forth various parameters, such as precise measurements, tolerances, and materials. In doing so, the specifications create a fixed “roadmap” governing a contractor’s performance of the project. Performance specifications, on the other hand, set forth “operational characteristics” to achieve a particular objective or standard, but generally leave the details to the contractor. Reprinted courtesy of Dirk Haire, Fox Rothschild LLP, Adam Hamilton, Fox Rothschild LLP and Dana Molinari, Fox Rothschild LLP Mr. Haire may be contacted at dhaire@foxrothschild.com Mr. Hamilton may be contacted at ahamilton@foxrothschild.com Ms. Molinari may be contacted at dmolinari@foxrothschild.com Read the court decision
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Approaches to Managing Job Site Inventory

August 30, 2017 — Jessica Stark - Construction Informer
There is no question that organization on the job site can mean the difference between efficient performance and costly errors. A simple mistake can cost a company thousands, which is why details are carefully articulated and supervisors become better scrutinizers than magazine editors. But for some reason, many companies don’t consider managing job site inventory under this same attentive category, or perhaps they don’t know about the technology available to help them do it. Whole Inventory, Big to Small For contractors, keeping track of every piece of material and equipment lowers losses and keeps crews busy. This is especially true for contractors in the trades who often have specialized equipment in inventory such as power supplies, HVAC “smart energy” components or inspection equipment. Once everything is accounted for, the possibility of loss is decreased and there’s a chance to evaluate the use of all materials and equipment. This can show the efficiency of allotted resources. Is there enough equipment on the site to get tasks completed? Is there a need for more? Less? Having excess equipment can sometimes prepare a crew for problem scenarios. But it can also mean the construction company is overpaying for unneeded resources. However, the only way to know is by effectively managing job site inventory. That includes all equipment and materials. Read the court decision
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Reprinted courtesy of Jessica Stark, Construction Informer

Construction Defect Claims Not Covered

May 10, 2022 — Tred R. Eyerly - Insurance Law Hawaii
The court found that the insured's negligent acts causing damage to only the structure of the home it built were not covered under the CGL policy. Westfield Ins. Co. v. Zaremba Builders II LLC, 2022 U.S. Dist. LEXIS 36189 (N.D. Ill. March 2, 2022). Zaremba contracted to build a house for the Vrdolyak Trust. After completion of the home, the occupants found many problems, including painting defects such as bubbling and peeling, leaving the basement full of water for months, causing damage to ductwork, framing and piping in the house, etc. The Trust sued and Westfield denied a defense. Westfield filed a declaratory judgment action for a ruling that it had no duty to defend or indemnify. On Westfield's motion for summary judgment, the court determined there was no property damage. Property damage included "physical injury to tangible property." When the alleged damage occurred in the course of a construction project, tangible property had to be property outside the scope of the contract for project. Read the court decision
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Reprinted courtesy of Tred R. Eyerly, Damon Key Leong Kupchak Hastert
Mr. Eyerly may be contacted at te@hawaiilawyer.com

Confidence Among U.S. Homebuilders Declines to Eight-Month Low

March 19, 2015 — Bloomberg News
(Bloomberg) -- Confidence among U.S. homebuilders unexpectedly fell in March to an eight-month low as prospective buyers were in little rush to shop for properties ahead of the busier spring selling season. The National Association of Home Builders/Wells Fargo sentiment gauge dropped to 53 from 55 in February, figures from the Washington-based group showed Monday. The median forecast in a Bloomberg survey called for a gain to 56. Sales of single-family homes declined to a five-month low and builder optimism about the outlook failed to improve, the report also showed. Low mortgage rates and job creation may help spur homebuyer interest in coming months. Read the court decision
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Reprinted courtesy of Bloomberg News
Michelle Jamrisko may be contacted at mjamrisko@bloomberg.net

U.S. Construction Value Flat at End of Summer

December 04, 2013 — CDJ STAFF
The Census Bureau has released it numbers for the value of construction put in place for September and October, and while further numbers are forthcoming, this current report shows little change. The value of construction dropped a miniscule 0.3% in September, however, residential construction actually showed a slight increase. October then showed a 0.8% increase, but then private residential construction dropped by 0.5%. In all, however, by the end of October, private residential spending was up 17.8% over the prior year. As with other sectors of public spending, public residential spending dropped 3.4% from the prior year. Read the court decision
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Blog: Congress Strikes a Blow to President Obama’s “Fair Pay and Safe Workplaces” Executive Order 13673

March 22, 2017 — John P. Ahlers - Ahlers & Cressman PLLC
On October 25, 2016, the Federal Acquisition Regulatory Council (FAR Council) and the U.S. Department of Labor implemented former President Obama’s Executive Order 13673: “Fair Pay and Safe Workplaces” rules. The rules became effective on October 25, 2016 and fundamentally altered the way federal contractors and subcontractors will need to handle and resolve employment and labor claims, as well as compliance issues involving their entire workforce. The final rules can also result in otherwise-capable companies being “blacklisted” and effectively barred from federal contracts and subcontracts based on labor and employment law violations related or unrelated to prior or current federal contract performance. The centerpiece of the new regulatory scheme was the new disclosure and responsibility requirements. Contractors and subcontractors needed to disclose all “labor law decisions” that they had during the three years (prior to bid submission) as part of the process of applying for a new federal contract or subcontract. If a contractor or subcontractor has too many “labor law decisions” to report or the few it has are too severe, pervasive, repeated, or willful in the eyes of the government “experts,” the company could be deemed “non-responsible” and denied a contract. Read the court decision
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Reprinted courtesy of John P. Ahlers, Ahlers & Cressman PLLC
Mr. Ahlers may be contacted at jahlers@ac-lawyers.com

California Expands on Scope of Coverage for Soft Cost Claims

February 14, 2023 — Caitlin N. Rabiyan - Saxe Doernberger & Vita, P.C.
The California federal district court case of KB Home v. Illinois Union Insurance Co., No. 8:20-cv-00278-JLS-JDE, (C.D. Cal. August 23, 2022), provides much needed guidance for cases involving builder's risk insurance claims for soft cost coverage. The case stems from damage to several of KB Home’s residential building sites caused by a severe rainstorm in January 2017. Each home site was a smaller part of a large housing development project. The damage caused significant delay in the completion of some individual home sites, although there was limited evidence of delay to the overall housing development project. As a result, KB Home sought coverage under a builder’s risk policy purchased from Illinois Union for both hard costs and soft costs. “Hard costs” are the costs directly associated with repairing property damage to the sites. Conversely, “soft costs” are indirect expenses associated with project delays caused by such property damage and repair efforts. For example, hard costs would include labor and materials, whereas the soft costs claimed by KB Home included additional real estate taxes, construction loan interest, and advertising and promotional expenses incurred because of the delays. Illinois Union paid the claim for the hard costs, but denied the soft costs claim. KB Home filed suit and Illinois Union eventually filed a motion for summary judgment. Read the court decision
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Reprinted courtesy of Caitlin N. Rabiyan, Saxe Doernberger & Vita, P.C.
Ms. Rabiyan may be contacted at CRabiyan@sdvlaw.com

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