By Attorney Edward Jesson
Delays in construction are often unavoidable. This rang especially true over the last few years while the world has been dealing with the COVID-19 pandemic. Contractors have had to deal with material shortages, price increases, and difficulty finding labor, among many other issues. However, legal issues tend to arise when those delays start costing people involved in the project money.
The first thing to look at when evaluating whether you may have a claim for delay damages is the construction contract. Most contracts address delays, though the level of specificity will vary greatly. Generally speaking, the parties will be bound to whatever the contract says with regards to delay damages. Assuming that delay damages are recoverable, the burden is on the party claiming those damages to show: (1) what caused the delay; (2) that the person or entity claiming the damages was in no way responsible for the delay; and, (3) that the damages requested were, in fact, caused by the delay.
Under North Carolina law, delay damages can, for the most part, be quite easily categorized. For example, there are excusable and non excusable delays. Generally, excusable delays will be delays caused by circumstances outside of the contractor’s control—COVID-19 being a great example. An example of a non excusable delay is failure to properly schedule and coordinate the work. In most instances, parties will not be able to make a claim for excusable delays and may be able to make a claim for non-excusable delays.
There are also compensable and non compensable delays. A compensable delay would be a delay caused by circumstances within the control of the owner but not the contractor making the delay claim. For example, failure of the owner to provide materials which were required to be purchased by the owner which causes a delay in construction could be considered compensable delay—one that would entitle the contractor to additional time to complete the project or, under certain circumstances, monetary damages. Non compensable delays are, under most circumstances, going to be delays that do not allow anyone claim for monetary damages.
Of course, in order to make a claim for monetary damages from a delay you have to show that you have suffered actual financial damages. Examples of monetary delay damages could be an owner’s lost profits from not being able to open a business on time, or increased material costs due to a delay from the contractor. Examples of monetary damages for a contractor may include the costs of idle equipment and labor, extended project overhead, and potentially lost profits from jobs that the contractor could not take due to delays caused by the project owner.
There are many other aspects to delay damages under North Carolina law—many of which can be costly to owners and contractors alike. The good news is that many of these risks can be mitigated using effective contractual language. If you are curious whether your business is protected or if you have a delay issue, don’t hesitate to give the attorneys at Jesson & Rains a call.
By Associate Attorney Danielle Nodar
May is Small Business Month in Charlotte! As a small business, safeguarding the confidential information that makes you stand out from the competition is important to the long-term success of the business. Non-compete agreements are common tools used by businesses to help protect this kind of confidential and proprietary business information and allow for business to hire talented employees without worrying that the employee will take your idea and implement it elsewhere. These agreements generally restrict an employee from working for a competitor until a certain period passes and protect confidential information from being used by an ex-employee. However, with companies transitioning to a remote working environment and widespread unemployment, more businesses and lawmakers are re-evaluating the scope and legality of non-compete provisions.
Non-compete agreements are controlled by state law, meaning that each state has unique provisions for what is permissible in these agreements. In North Carolina, a non-compete agreement must meet the following requirements:
With the changes in the employment landscape in the last year, there has been a growing movement to limit or even abolish the use of non-compete agreements. As more workers are forced to find new jobs, have moved to remote working environments, or move to a state outside of their employer’s home base, the question of how and when to enforce non-competes has been more present with business owners and lawmakers. As non-competes are governed by state law, it also makes it difficult for employers with employees residing in multiple states to be able to maintain enforceable agreements without careful planning. For example, some states have limited noncompete agreements to apply only to employees making over $100,000 a year, or to be valid only when a business interest is being sold.
There is also a push for the federal government to step in and put some overarching limitations on non-compete agreements that limit these agreements in cases where a narrow group of defined trade secrets are trying to be protected by a business. While it is too soon to tell if federal laws impacting non-compete provisions are on the horizon, it is important for employers to be mindful of the importance of crafting a narrowly tailored non-compete provision that works to protect their business while still allowing for fair treatment of former employees. Exploring other legal options that could be used to protect confidential business information is also crucial. If you have questions about how to best protect your business’ proprietary and confidential information, please call Jesson & Rains!
By Attorney Kelly Jesson
Jesson & Rains, PLLC, is offering a couple of new business plan packages that include discounted legal services.
Our clients are busy and they sometimes forget to keep their information updated with the Secretary of State’s Office or file their annual reports; they pay for a registered agent who does nothing more than forward their mail; and they sometimes fall victim to scams like this and this.
We’re offering a yearly plan that includes serving as our client’s registered agent and filing their annual report, among other things. A description of the plan is attached to this email. This plan helps to ensure your privacy (if your business is ever sued, the lawsuit will be delivered to our office’s address); you will be less likely to fall victim to a scam (we will sort through and destroy junk mail); you will be more organized and have less paper (we will scan and forward your mail immediately to your attention after sorting); and we will ensure that corporate records and Secretary of State records are kept up to date.
We’re also offering an upgraded yearly plan that includes unlimited access to attorneys throughout the year. No more billing for .1 emails or .2 telephone calls. We want to encourage people to contact us anytime they need us instead of being afraid to get a bill from us.
This is a continued effort from us to offer flat fees instead of hourly billing. Annual reports are due April 15, and they can be filed now, so this is a great time to switch over to having Jesson & Rains handle it. Please contact us if you’re interested, and please forward to any busy business owners you think may need our help!
By Attorney Edward Jesson
It is often assumed when talking about purchasing a business that your only option is to purchase the business outright. However, there is a different solution which, depending on the circumstances, could have some benefits: purchasing the target business’s assets instead of the whole company.
When you purchase a business outright, be it all of the stock of a corporation or all of the membership interest in an LLC, you are buying everything. That includes all of the business’s assets but also includes all of the business’s liabilities, some of which could be unknown at the time of the purchase. In any business purchase agreement, there should be a “due diligence” period which will allow you to uncover as many of those hidden risks as possible, but it is nearly impossible to uncover every possible risk that exists.
Most purchase agreements will contain some form of indemnification clause providing that the seller will defend and insure the buyer from various liabilities. However, negotiating an indemnification provision that adequately protects the buyer can potentially increase the purchase price requested by the seller and can also be difficult and expensive to enforce if an issue does arise in the future.
However, when you purchase only the assets of a company you are buying the possessions of the business and putting them into a new business name. The buyer can (at least to a certain extent) dictate what liabilities of the selling business are being purchased which can assist in limiting the buyer’s liability and risk in moving forwards with the transaction. Another benefit of buying a business’s assets is that the buyer can also elect to purchase some, but not all, of the target business’s assets. For example, if you were buying a trucking company you may elect not to buy the old trucks that don’t have any useful life left.
There are downsides to an asset purchase. For example, contracts between the old business and its customers/vendors may need to be renegotiated in the new business’s name. There could also be similar implications with key employees depending on the terms of any employment agreements that were in place with the old business.
Whichever route you choose, it is important to work with a team of advisors who can assist you in the process. While not discussed in detail here, there are different tax implications depending on whether you purchase the business or just the assets, about which a CPA would need to advise.
If you’re thinking of purchasing a business, or a business’s assets, the attorneys at Jesson & Rains are ready to help you through the process.
By Attorney Edward Jesson
Hearings were recently scheduled on a proposed North Carolina state bill entitled “An Act to Provide Consumer Protections Related to Roofing Repair Contractors.”
If passed, the law would have a big effect on the roofing industry in North Carolina--written contracts between roofing contractors and consumers would now be required. The proposed bill would require the following provisions to be included in these contracts:
1. The roofing contractor’s contact information;
2. The name of the consumer;
3. The physical address of the property being worked on and a description of the structure being repaired;
4. A copy of the repair estimate that addresses:
a. a precise description and location of all the damage being claimed on the repair estimate;
b. an itemized estimate of repair costs, including the cost of raw materials, the hourly labor rate, and the number of hours for each item to be repaired; and,
c. a statement as to whether the property was inspected prior to the preparation of the estimate and a description of the nature of that inspection.
5. Date the contract was signed by the consumer;
6. A statement that the contractor shall hold in trust any payment from the consumer until the materials have been delivered to the job site or the majority of the work has been done;
7. A statement providing that the contractor shall provide a certificate of insurance to the consumer that is valid for the time during which the work is to be performed;
8. If the consumer anticipates that insurance funds will be used to pay for any portion of the job, a disclosure from the consumer that states that the consumer is responsible for payment if the insurance company denies the claim in whole or in part and a disclosure from the contractor that he or she has made no guarantees that the claimed loss will be covered by an insurance policy.
The new law, if passed, will also give the consumer the right to cancel the contract if the consumer’s insurance company denies the claim. Further, it will prohibit various practices from roofing contractors, including offering to pay insurance deductibles for the consumer or offering the consumer anything of value in order to display a sign or any other type of advertisement at the consumer’s property.
It is important to note that the proposed law specifically excludes licensed general contractors or subcontractors working underneath a licensed general contractor from the definition of “roofing repair contractors.”
While the new law would create an extra requirement that roofing contractors in NC may not be happy about, we always recommend having written contracts in place between contractors and the consumer. Too often the only written documentation is a cost estimate and, if there are any disputes, there are no provisions in these cost estimates for handling those disputes. The proposed law may also strengthen the reputation of the roofing industry by weeding out unscrupulous roofing contractors.
Jesson & Rains will continue to keep our clients updated on the passage of this law and are happy to assist with the drafting or review of any construction contracts. You can follow the status of the law yourself at: https://www.ncleg.gov/BillLookup/2019/S576.
By Attorney Edward Jesson
This week’s article deals with the responsibilities that contractors have with regards to the actual design of the building, which necessarily includes the building’s structural system. Generally, the contractor responsible for building the project, be it new construction or otherwise, is not responsible for the design aspects of the project unless we are talking about a design-build project. The design aspects will usually fall to a “design team,” often comprising of some combination of architects and engineers. Or, more often in the residential setting, the owner will provide plans and specifications to the contractor.
The following problem has come up time and time again: a general contractor finishes work on a project, built perfectly to the plans and specifications, only to find out that the plans and specifications were defective in some way, which has then caused issues with the final project (at the extreme end, these issues could be structural, rendering the completed project unfit for purpose). Invariably, on discovery that the project has some serious issues, the project’s owner will first turn to the general contractor to “fix it.” Of course, if “fixing it” involves starting from scratch, neither the owner nor the contractor wants to come out of pocket to pay for that.
Legally speaking, the courts throughout the United States have created a doctrine whereby the project owner impliedly warrants that the information, plans, and specifications that an owner provides to the general contractor are fit for purpose. In a residential setting, even if the owner used a design team, if the owner provided plans and specifications to the contractor, this doctrine would likely still apply. This doctrine is known as the Spearin Doctrine and arises from the case United States v. Spearin, which was argued in the United States Supreme Court in 1918.
What this essentially means is that, so long as the contractor complies with the plans and specifications supplied to it by the project owner, the contractor cannot be held legally responsible for structural defects if those plans and specifications are not adequate for the specific project. Contrast this, for example, with a design-build project, where the contractor or its consultants are partially responsible for the design aspect of the project, and you can see how Spearin would likely be inapplicable to those circumstances.
There are, of course, exceptions to this general rule. For example, if there is an express term contained in a contract that the contractor is responsible for any design defects, then it is likely that a contractor in that situation could be held legally responsible. Another exception is that of “reasonable reliance,” which means that if a design defect is so glaringly obvious that it could not be missed, a contractor would not then be able to later claim that they relied on the plans in order to avoid liability.
While generally not directly responsible for the design of structural systems (or, indeed, other areas of a project), that does not mean that a contractor cannot be held liable for deficiencies in the design. The best protection against issues such as the ones presented in this article are written contracts in place between all parties to a construction project, including the design team, and not just between the owner and general contractor.
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