Five Ways Construction Professionals Can Protect Their Contractual Rights and Avoid Misunderstandings

If your company has recently been awarded a contract for construction work, congratulations! In finding the work and having your bid accepted, you’ve demonstrated your capability to efficiently furnish high-quality labor and materials. At this point, many contractors have no choice but to immediately proceed with reviewing the schedule, scope of work and specifications, as well as preparing to mobilize labor to meet time-related demands. With this flurry of activity, many contractors forget to reduce the agreements to writing, fail to sign written agreements, or—worse—sign contracts without reading all the terms and conditions. The following tips and information can help busy contractors prevent common pitfalls from occurring and offer guidance for those mired in contractual disputes.

1. Put everything in writing.

Most construction professionals would agree written contracts are essential for projects with new or relatively unknown clients, but many feel that long relationships with clients and mutual trust and respect eliminate the need for written contracts. In fact, some fear written agreements have the potential to offend other professionals with whom they have a positive past working relationship. However, written contracts are essential in today’s economic and legal climate and can be seen as a way to honor the mutual respect many feel toward past and repeat clients. The primary purpose of a contract is not necessarily to give one party an advantage over the other. Instead, the goal is for both parties to clearly delineate each party’s expectations from the other to avoid unwanted surprises. If both parties are aware of the duties, responsibilities, risks and rewards before the project commences, there will be less potential for disputes and misunderstandings than there will be without a written agreement.

2. Know that complying with licensing statutes is essential to preserving contract rights.

North Carolina and South Carolina, like most states, prohibit unlicensed contractors from enforcing the provisions of their contracts if a license was required for the contract in question. Additionally, North Carolina case law requires contractors to strictly comply with N.C. General Statutes Chapter 87, which contains specific provisions about the name in which contractors can lawfully hold a license. Failure to comply with the statutes will prevent contractors from enforcing the provisions of their construction contracts.

South Carolina has taken an even stricter approach. Pursuant to S.C. Code Ann. §40-11-370, it is unlawful to engage in construction under a name other than the exact name on the license issued to the contractor (if a license is required for the work), and an entity that does so may not bring an action in law or in equity to enforce the provisions of a contract. This means even a duly licensed contractor can be barred from any recovery for breach of contract, including lien and bond lawsuits, if the contractor’s name on a written contract is even slightly different from the contractor’s name on the contractor’s license. Although some states have case law adopting this principle, South Carolina appears to be the only state that has codified the rule. Therefore, it is imperative a contractor’s name on the contract is the exact same name as the name on any contracting license required for the work in question.

3. Assume no damage for delay clauses are enforceable.

Both North and South Carolina courts generally enforce “no damage for delay” clauses, which specify owners will not be liable for a general contractor’s damages arising from delay, disruption or interference—even if the owner is responsible. General contractors can enforce these provisions against subcontractors or suppliers, too. Often, the contract will provide that additional time—contingent on written approval by the owner, architect or general contractor—is the sole remedy for delay.

South Carolina courts have recognized some exceptions to these clauses’ enforceability, however. The South Carolina Supreme Court held in Williams Electric Co. v. Metric Constructors Inc. (1997) delay caused by fraud, misrepresentation or bad faith; delay caused by active interference; unreasonable delay giving rise to abandonment of the contract; or delay caused by gross negligence can give rise to recoverable damages.

Similarly, North Carolina courts have overlooked “no damage for delay” clauses and allowed parties to recover damages arising from delays that constitute abandonment of a contract; active interference with the contract; and delays resulting from fraud, bad faith or arbitrary action. Additionally, damages from delays not reasonably contemplated by the parties are recoverable.

Many delay provisions are accompanied by notice requirements, too. Most contracts that do allow parties to recover for delay related damages require the party claiming damages to give notice of the delay, or the source of the delay, as soon as they are aware of it. What constitutes notice and reasonable knowledge of the delay can be open to interpretation. Ambiguity is best avoided through specific provisions in the contract.

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South Carolina’s Workers’ Compensation Laws Have Changed to Benefit the Injured and their Employers

Ensuring compliance with workers’ compensation laws is consistently a concern among many states because of the impact noncompliance can have on injured employees and employers who follow the law. Noncompliance with workers’ compensation laws negatively affects those injured on the job, as well as law-abiding employers. Fortunately, the workers’ compensation laws of South Carolina are implemented relatively efficiently and result in more resolved cases for injured workers than many other states. Some recent changes in the state’s laws are designed to make the process more efficient.

Workers’ compensation insurance provides medical benefits and wage reimbursement for employees who become injured while on the job. The South Carolina Workers’ Compensation Act provides that injured employees are entitled to recover necessary medical treatment, loss of wages during a period of disability, and compensation for permanent disability or disfigurement. There are three types of work-related injuries that can qualify for workers’ compensation payments: physical injuries, mental injuries accompanied by physical injuries and mental injuries with no physical injuries.

In South Carolina, employees may collect workers’ compensation for all wages and benefits, including those from other employers. This gives South Carolina employees an advantage over neighboring North Carolina employees who may only collect workers’ compensation for wages earned from the specific job on which the injury occurred.

Who Is An Employee?

The South Carolina Workers’ Compensation Act defines “employee” as “every person engaged in an employment under any appointment, contract of hire or apprenticeship, express or implied, oral or written … but excludes a person whose employment is both casual and not in the course of the trade, business, profession, or occupation of his employer … .”

Every South Carolina employer and employee is presumed to be covered by the act. Employers covered by the act are required to maintain insurance to cover compensation or provide the South Carolina Workers’ Compensation Commission with proof they have the ability to pay the compensation for an injured employee.

There are a few exceptions to the workers’ compensation laws, including businesses employing fewer than four employees or having a total annual payroll of less than three thousand dollars in the previous calendar year, regardless of the number of employees. Employers who qualify for exemption may elect to come under the act and may subsequently withdraw with written notice to the Workers’ Compensation Commission.

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Whether Hands-free, Handheld, Texting or Talking, Distracted Driving Is Deadly

The Washington, D.C.-based National Transportation Safety Board (NTSB), an independent safety agency, recently recommended a total ban of all mobile-device use while driving. According to Deborah Hersman, the chairman of the NTSB, distraction-related crashes killed 3,092 people in 2010, “the equivalent of a regional jet crash every week.”

Every year, drivers–distracted by the use of mobile devices–cause 636,000 crashes, 342,000 injuries and 2,600 deaths. The financial toll is staggering: $43 billion per annum. While some politicians argue about the science behind distracted driving, experts agree: mobile-device use impairs driving ability. According to a study at Carnegie Mellon University, Pittsburgh, talking on a mobile device reduces the amount of brain activity related to driving by 37 percent. Further, recent studies show hands-free mobile devices are no safer to use while driving than handheld mobile devices. Distracted drivers have slower reaction times, and the odds of a crash are four times more likely when a driver uses a mobile device. Critically, many scientists believe these distractions make drivers as collision- prone as having a blood alcohol level of 0.08 percent, the legal limit.

Legal Landscape

In the last 10 years, courts have seen an “explosion” of distracted-driving cases.

In the last 10 years, courts have seen an “explosion” of distracted-driving cases.

In the last 10 years, courts have seen an “explosion” of distracted-driving cases. In the last five years, juries–emboldened by a “profits over safety” trial theme–have rendered numerous multimillion dollar verdicts, as evidenced by the sample verdicts in Figure 1, left.

The claims in these cases are easy to allege but difficult to disprove. This is because the precise time of the accident often is not known and the telematics data and mobile-device records—once obtained—may show or suggest that the employee was talking on his mobile device, texting and/or emailing in close proximity to the time of the accident. Even if there was no actual distraction, a clever lawyer will argue there is “circumstantial evidence” of driver distraction.

The typical distracted-driving case involves multiple types of claims, including driver negligence, vicarious liability, direct negligence and punitive damages.

Driver Negligence

In states that ban texting and/or the use of handheld cell phones while driving, an employee who is involved in an accident while violating these laws will be negligent per se. Under this doctrine, the mere act of using a mobile device while driving automatically makes the driver negligent.

For states that do not have texting and/or cell-phone bans, courts look at the reasonableness of the driver’s accident-causing behavior. In evaluating behavior, courts will consider state laws, federal regulations, voluntary standards, recognized best practices and common sense. For example, in Scott v. Matlack Inc., the court explained, “it is permissible for a trial court to admit [OSHA] regulations as evidence of the standard of care in the industry in a negligence action.” Likewise, in Peal by Peal v. Smith, the court observed, “the breach of a voluntarily adopted safety rule is some evidence of a defendant’s negligence.”

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