Construction litigation : representing the owner / 2nd ed.

Table Of Contents:

PART I INTRODUCTION

The Owner Contemplating Litigation and its Alternatives: An Overview

Overton A. Currie

James E. Stephenson

Philip E. Beck

The Construction Process

Construction: A People Process

Construction: A Dispute-Oriented Process

Construction: A Process That Demands Planning

Costs and Benefits of Legal and Contractual Decisions (or Indecisions)

Dispute Prevention

Contract Structures

General Contractor with Subcontractors

Multiple Primes

Construction Management

Design-Build

Hybrid and Multiple

The Participants---Possible Roles

Design Professional

Contractor

Subcontractors and Suppliers

Owner: Primary Rights and Obligations

Owner: Potential Liability for the Deficiencies of Others

Selection of Contract Documents---Forms

The 1987 AIA Contract Form Documents

Method of Payment

Arbitration versus Litigation

Need for Clarity

Risk Allocation VIA Contract Documents

Risk-Return Tradeoff

Project Delays

Construction Quality and Performance

Contract Changes

Differing Site Conditions

Risk Avoidance

Project Administration

Dispute Resolution

The Decision to Litigate

Assistance Available

The Role of the Attorney

The Role of this Book

PART II PARTIES TO LITIGATION

Liability of the Design Professional to the Owner

Kenneth I. Levin

The Basis of Liability

The Owner's Cause of Action---Contract versus Tort Liability

The Clark-Fitzpatrick Issue

Economic Loss Limitation

The Standard of Care: Negligence, Implied Warranty, or Strict Liability

Liability for Errors and Omissions of Consultants

Proof of Professional Negligence

Proximate Cause

Methods of Proof

Examples of Conduct Found to Constitute Professional Negligence

Areas of Liability and Damages

Liability for Estimating Errors

Liability for Errors in Design/Inspection/Shop Drawing Review Functions

Liability for Errors in the Certification of Payments

Liability for Delay Damages

Liability for Indemnity for Contractor Claims

Limitation of Liability/No Consequential Damages

Statutes of Limitations and Repose

Miscellaneous Defenses

Suing the Contractor for Construction Defects and Delays

Jesse B. Grove, III

Robert M. Blum

Introduction

Available Remedies

Suits for Damages for Construction Defects and Failures

Theories of Recovery against Contractors

Breach of Contract by Prime Contractor

Breach of Contract by Subcontractors

Express Warranties

Implied Warranties

Guarantees

Negligence and Strict Liability

Fraud

Limitations on Recovery---Statutes of Limitations

Statutes of Repose

Defenses---Compliance with Plans and Specifications

Interference and Contributory Negligence

Acceptance and Waiver

Impossibility

Delay Claims

Description of Delay Claims

Liquidated Damages

Actual Damages

Lost Profits

Extended Overhead

Costs of Owner's Materials

Interest and Financing Expenses

Depreciation

Other Expenses

Delay Damages on Multiple Prime Projects

Compensable and Excusable Delays

Termination of the Contractor

Termination for Convenience

Termination for Cause

Suing the Construction Manager

John B. Tieder, Jr.

Julian F. Hoffar

Thomas J. Powell

The Role of the Construction Manager

Construction Manager Defined

Forms of Construction Management Practice

Agency Construction Management

Guaranteed Maximum Price Construction Management

Extended Service Construction Management

Owner-Construction Manager Contract

Owner Construction Management

Use of Standard Forms

Allocation of Risk---Cost Control

Design Review

Value Engineering

Contractor Coordination

Purchasing

Construction Inspection

Determining CM Standard of Care

Design Professional or General Contractor

Licensing Requirements

Bond and Insurance Considerations

Bidding Requirements

Statutory and Contractual Standards of Care

Procurement Codes

Building Codes and Industry Standards

Limitations of Authority Vis-a-Vis Contractors

Agent versus Nonagent Independent Contractor

Theories of Recovery

Owner's Contractual Rights

Enforcement of CM's Obligations

Tort

Basis for Liability

Defective Design Generally

Patent Defects

Latent Design Defects

Third-Party Liability

Faulty Workmanship/Improper Inspection

Improper Certification of Progress Payments

Negligent Cost Estimates

Improper Schedule Preparation and Monitoring

Lack of Timely Construction Support/Supervision

Project Delays

Practical Considerations in Litigation Decisions

Issues for Evaluation

Cost

Evaluating Recovery Potential

Rule of Reason

Arbitration versus Litigation

Third-Party Practice

Limits to Recovery

Effect on Availability of Remedy

Contractual Limits

Statutes of Limitations

Accrual

Tolling

Statutory Termination of Perpetual Liability (Statutes of Repose)

Suing the Material Supplier

David R. Hendrick

Neil C. Schemm

Introduction

UCC Warranties

Breach of Express Warranty

Breach of Implied Warranty Theories

Lack of Privity and the Economic Loss Rule

Other Obstacles to Warranty Claims---Notice of Breach

Defense Based on Proximate Cause

Disclaimer of Warranties

Modification or Limitation of Remedies

Statute of Limitations

Legal Theories Founded on Principles of Negligence

Duty to Properly and Adequately Design and Manufacture a Product

Duty to Test and Inspect a Product

Duty to Warn of Risks in Connection with Usage of a Product

Defenses to Negligence Actions---Economic Loss Rule

Contributory and Comparative Negligence

Assumption of the Risk

Issue of Causation

Strict Liability in Tort---Elements of a Strict Liability Cause of Action

Defenses in Response to a Strict Liability Claim

Economic Loss Rule

Statutes of Limitations

Fraud and Tortious Misrepresentation

Conclusions and Suggestions

The Benefit of Surety Bonds from the Perspective of the Private Owner

Robert S. Peckar

Robert Hedinger

Introduction

Bond Types

Overview

Performance Bond and Payment Bond Defined

Bond Forms Used for Public Projects

Bond Forms Used for Private Projects

Comparison of AIA Bond Forms A311 and A312

Owner's Relationship with Surety

Beneficiaries under Performance and Payment Bonds

Bond Relationships on Multiprime Projects

Obligations of Surety to Owner

Owner Action That Discharges or Limits the Surety's Responsibility

Material Changes to the Contract

Reducing or Releasing Retainage

Paying for Defective Work

The Owner's Release of the Contractor or Acceptance of the Work

Illegal Construction Contract or Bad Faith by the Owner

Impossibility of Performance

Wrongful Termination

Damages That Can Be Sought from Surety Under the Performance Bond

Introduction

Direct Costs: Costs to Complete

Consequential Damages

Delay/Liquidated Damages

Loss of Use

Loss of Production or Profits

Attorney's Fees and Professional Fees

Interest

Other Consequential Damages

Limitations on the Surety's Liability

Preserving Owner's Rights and Defeating Surety Defenses

Negotiating a Favorable, Enforceable Contract with the Contractor

Proper and Prompt Notice of Deficient Performance by the Contractor

Demands for Surety Involvement

Compliance with Applicable Statute of Limitations

Strict Compliance with the Contract, Including All Payment Terms

Mitigation of Damages

Conclusion

Representing the Owner against the Bank

William F. Haug

Julianne Wheeler

Introduction

Representing the Owner against the Financing Bank

Negligent Disbursement of Loan Proceeds

The Lender's Duty to Disclose Information

The Lender's Duty to Advance Funds

Representing the Owner against the Builder's Financing Bank

Special Deposit

Controlling Creditor Liability

Statutory Liability---The Interstate Land Sales Full Disclosure Act

The Securities Acts

Conclusion

Representing the Owner in Defense of the Contractor's Claim

Kenneth M. Cushman

Robert E. Heideck

The Owner as Defendant

The Meaning of Effective Defense

Contract Provisions

Forum Selection

Risk Allocation in General

Risk Allocation for Unforeseen Conditions

Risk Allocation for Delays

Accord and Satisfaction and Release

Notice

Contract Administration

Knowing and Preserving the Contract

Spotting the Problem Areas

Building the Record

Paying Valid Claims Early but Only Once

Defending the Claim

Preparing and Organizing

Contesting Liability: Concurrent Delay Example

Attacking the Damages Claim

Conclusion

Representing the Foreign Owner

Richard A. Holderness

Introduction

Differences in Legal Systems and Business Practices

Detection and Prevention

Differences in Business Practices

Differences in Legal Systems

The Uniquely American System of Unrestrained, Unfettered, and Virtually Uncontrolled Discovery

The Bewildered Foreign Owner

Outside the United States

Potential Trouble

The Foreign Owner as Plaintiff

Who Makes the Decisions?

Who Is the Foreign Owner?

Foreign Corporate Structures and Strategies

Structure

Strategy

The Ultimate Question: Can an Adverse Judgment Be Enforced Overseas?

Discovery of Evidence Located in a Foreign Country

Applicable Statutory Provisions

Federal Courts' View

Foreign Countries' View

Watch Out

Conclusion

PART III LITIGATION CONSIDERATIONS

Insurance Coverage and the Decision to Litigate

Professor James W. Bowers

B. C. Hart

Introduction

Insolvency

Uncertainty

Risks to Solvency of Contractor Only

Bonded Contractor

Risks to Owner and Contractor: In General

Project Damaged or Destroyed: Builders Risk Policy

Named Perils and All Risk

Payment Disappointingly Small

Some Losses Not Included

Losses after Project Completion

Subrogation Actions

Possible Struggle over Claim Settlement

Injury of One Party by Another: Commercial General Liability Insurance

Structure of the CGL Policy

Liability Triggers: Occurrence versus Claims-Made Coverage

Limits of Liability

Risk of Property Damage Liability

Definition of Property Damage

Limitation to Accidental Damage

Damage to Excluded Property

Completed Operations

Vicarious Liability

Wrap-Up Insurance

Conclusion

Proving Liability and Damages

Robert F. Cushman

Wayne W. Suojanen

Introduction

Relationships Giving Rise to Liability and Damages

Liability

Contractor's Liability

Delay

Defective Work

Material Breach

Inadequate Scheduling and Coordination

Defective Design

Design Professional's Liability

Defective Design

Inadequate Supervision and Inspection

Construction Manager's Liability

Inadequate Supervision and Inspection

Inadequate Scheduling and Coordination

Defective Design

Damages

Delay

Liquidated Damages

Actual Damages

Defective Work

Material Breach

Defective Design

Defects That Can Be Corrected Economically

Defects That Cannot Be Corrected Economically

Summary

Computing the Loss

Charles F. G. Kuyk, III

Steps to Prevent Litigation

Project Documentation

The Owner's Theories of Damages

Proving the Loss

Quantifying and Substantiating Costs to Repair

Quantifying and Substantiating Diminution in Value

Quantifying and Substantiating Lost Profits

Excess Costs

Lost Revenue

Loss of Value

Period of Recovery

Discounting to Present Value

The Owner as Defendant

Typical Claims by Contractors

Methods of Proving the Claim

Owner's Defenses

Conclusion

Tax Considerations in Construction Litigation

William H. Giese

Introduction

Tax Treatment of Litigation Expenses

Fully Deductible Expenses

Capital Expenditures

Nondeductible Expenses

Allocation of Expenses

Taxable and Nontaxable Settlements and Judgments

The Year the Settlement Is Taxable

Structured Settlements

Benefits to the Plaintiff

Benefits to the Defendant

Deductibility of the Settlement

The Attorneys' Fee---Lump Sum or Structured

Conclusion

Use of Experts to Contain Costs

Stephen B. Cook

Introduction

What Is an Expert?

Potential Roles of Experts---Prelitigation Planning

Settlement Negotiations

Discovery

Trial Preparation

Document Management

Expert Witness Testimony

Locating the Expert

Hiring the Expert

Effective Use of Experts

Preemptive Use of Experts

Conclusion

Document Management for Construction Litigation

Jeff C. Parmet

Cornell D. Hills

Introduction

Document Management Objectives

Project Planning and Budgeting

Identifying Document Sources

Screening

Document Control

Information Control

Database Development

Using the Litigation Support System

Litigation Support Literature

Cost Containment in Construction Litigation

Jon A. Baughman

Robert F. Cushman

Irvin E. Richter

Introduction

Initial Investigation

Planning and Organizing

Use of Counsel Personnel

Use of Consultants

Use of Client Personnel

Litigation Budgeting

Document Control

Computer Use

Document Retrieval

Settlement

Containing Discovery

Coordination with Other Counsel

General Management---Spot Assignments

Subteams and Specialists

Keeping Current and Communicating

The Trial
Table of Cases
Index