Chapter 13- Construction Law

1) Introduction
a) Gov. develop and adopt statutes and regulations at the federal, state and local
levels
b) Courts interpret and enforce statutes and regulations and apply common law
principles to resolve disputes
c) Project participants make many of their own rules by entering contracts for goods
and services
2) The Role of Government
a) Many statutes grant rule-making authority to administrative agencies in the
executive branch of gov.
b) Rules adopted pursuant to this authority are regulations
c) Regulations
i) The details of compliance with statutes
ii) What forms must be completed
iii) Where to file materials
iv) How approval is granted
v) How to appeal unsatisfactory results
vi) Fill in details omitted from the statute
d) Federal Statues and Regulations
i) A federal statute may be determined to be beyond the power of the federal gov
if it fails to relate to a power specifically granted in the US constitution
ii) Most federal laws apply across the board to many industries and commercial
activities, therefore apply only to construction industry
iii) Take precedence over state or local laws Preemption
iv) Federal act provides a minimum threshold and permits state or local
governments to regulate the are more strictly if they so elect
e) State Statutes and Regulations
i) Licensing Laws
(1) Establish the qualifications one must possess to practice professions
ii) Mechanics Lien Laws
(1) Another set of state statutes design to apply specifically to the construction
industry
(2) General purpose is to permit someone who provides labor and or materials
for a construction project to obtain a lien on the underlying real estate for
the value of the goods and services incorporated in the work
(3) Meant to overcome the problem that once the materials are incorporated
into the work one cannot easily repossess bricks
(4) Valid against both the current and future owners of the property
(5) A lien can be foreclosed and the debt be paid from the proceeds of the sale
of the real estate
(6) They follow one of several common models
(7) Requirement that a notice of contract be filed with a public records office
(8) Court action to enforce the lien must be filed within a certain period of
time after the filing of the notice of contract, statement of claim or
completion of the work

iii) Local Ordinances and Bylaws

(1) Local statutes- ordinances or bylaws
(2) Zoning ordinances regulate building dimensions and other design and
construction features
(3) Zones
(4) May require review or approval by a planning board
(5) Inspection that the project is built in accordance with all the legal
requirements ad the previously approved plans
3) The Role of Courts
a) Courts are charged with interpreting statutes and local ordinances
b) Common law is the body of law that has developed over time through the courts
interpretation of legal principles
c) State and Federal Court Systems
i) Based on strict hierarchy
ii) Three levels
(1) Trial court
(a) Trier of fact, judge or jury, listen to testimony and reviews documents
regarding the facts of the case and sometimes hears opinions from
experts
(2) Initial appeal
(a) Appeals court or court of appeals
(3) Court of final appeal
(a) Supreme court
d) Jurisdiction
i) Most common bases for federal court jurisdiction are when the action is based
on federal statute, when the claims relates to interstate commerce or when
there is diversity between states
(1) Diversity means the disputing parties are citizens of different states
ii) Federal courts provides a neutral forum which the parties may resolve their
disputes
e) Common Law Torts
i) Torts, wrongs against people or property, are areas in which the common law
has its greatest impact in modern life
f) Negligence
i) Defined as the failure to exercise the degree of caret hat would be exercised
by a reasonably prudent person under similar circumstances
ii) Failure must cause reasonably foreseeable harm
g) Strict Liability
i) Danger is so great that it matters not whether the person acted reasonably
under the circumstances
ii) Liability is imposed without fault
h) Defamation
i) Libel
(1) Untrue written statement causing damage to another
ii) slander
(1) untrue oral statement

4) The Role of Contracts

a) Contracts must be consistent with a common set of legal principles
b) Contract Formation
i) May be written or oral but is only formed when there has been an offer to do
or provide something that is accepted by another party and is supported by
consideration
ii) Offer
(1) A letter, verbal statement or a course of dealing can be enough to establish
an offer
iii) Acceptance
(1) Offers may be withdrawn at any time prior to acceptance
(2) Difference between acceptance and a counteroffer
(3) Invitation to bid is not considered to be an offer
(4) Bids are considered offers and contract award is considered to be an
acceptance
iv) Consideration
(1) Something of value being exchanged on both sides of the transaction
v) Capacity
(1) Legal age and sound of mind
(2) Corporate party, contract must be authorized by an officer or board of
directors
c) Contract Interpretation
i) Parol Evidence Rule
(1) Relates to when information that is not contained within the four corners
of the contract will be considered in any dispute
(2) Courts will generally not admit evidence of information outside of the
contract to resolve the dispute
(3) Look to language of the contract
ii) Plain meaning
(1) Their common or usual meaning rather than a contrived interpretation
d) Statutory Controls
i) Statute of Frauds
(1) Be in writing
ii) Statute of Limitations
(1) Set outside dates for commencing litigation
(2) They begin to run when the cause of action occurs
(3) Tolled or put on hold
(4) Discovery rule
(a) Until the injured party has discovered or reasonably should have
discovered the condition giving rise to the claim, the statute of
limitations does not begin to run
iii) Statute of Repose
(1) Lawsuit related to defective design and or construction must be
commenced within a certain number of years after the building is

completed, certificate of occupancy is obtained, the public is admitted or

some other fixed milestone occurs
iv) Damages
(1) Monetary damages
v) Equitable damages, order one party to take a certain action or refrain from
taking other actions
(1) Direct Damages
(a) Diminution of value
(i) The difference between the value of what was bargained for and
the value of what was received
(2) Consequential Damages
(a) Costs that result indirectly from a breach
(b) Contracts contain a waiver of consequential damages
(3) Liquidated damages
(a) Daily amount payable by contractor
(b) Agree to the amount of damages payable in the case of breach
(4) Punitive Damages
(a) Penalties awarded to an injured party over and above its actual
damages
(b) Must be authorized by statute or common law precedent
(c) Willful, malicious reckless actions endangering human health
e) Equitable relief
i) To take or refrain from taking a particular action
ii) Specific Performance
(1) Type of equitable relief granted when a court finds that party cannot be
made whole simply through the payment of money
(2) Often granted on the sale of land
iii) Injunction
(1) Order by the court prohibiting one party from taking certain actions
(2) Party seeking injunction must prove that irreparable harm will be caused
without injunction
iv) Defenses
(1) when one party breaches contract
(2) impossible to perform, illegally entered or unconscionable
5) Dispute Resolution
a) Alternate dispute resolution
i) Arbitration
(1) Award-decision
(2) Same binding effect as the decision of a judge or jury
(3) Parties will have waived their right of access to the court system with
respect to such disputes
(4) Solving labor disputes
(5) Potential of being faster and less expensive
(6) Non-binding mediation

(a) Structured, facilitated negotiation in which a neutral mediator employs

a variety of techniques to help the parties reach agreement
(b) Parties are required to attempt to solve disputes through mediation
(7) Dispute Review Boards
(a) Visit site periodically to become familiar with the progress of the work
and to provide assistance in the early stages of disputes
(b) Issue detailed decisions
(8) Partnering
(a) Culture of cooperation and open communication is encouraged
through workshops
(9) Project alliances
(a) Partnering principles are reflected in commercial and risk allocation
arrangements that align interests and encourage cooperation