CCL Construction Consultants continually writes blogs and case law summaries to stay up to date on the current trends and changes in construction law.
Below are some of our most recent examples:
Safety Violations Amounting to a Material Breach Permit Termination of a Construction Contract for Cause
Termination of a construction contract for convenience is generally only permitted when allowed by the terms of the contract itself. On the other hand, termination of a contract for cause, sometimes known as termination for default, may arise out of the terms of the contract or may originate from the principles of contract law. One of the more common reasons for terminating a construction contract for cause under the principles of contract law is due to one party’s material breach of the contract. A material breach occurs when one party fails to perform a substantial part of the contract or the contract’s essential terms and conditions, which prevents the contract from being completed or defeats the purpose of the contract. Whether a breach is material can a difficult question to answer that requires knowing the terms, conditions, and substance of the contract at issue.
For example, in M & M Electrical Contractor, Inc. v. Cumberland Electric Membership Corporation the owner terminated its construction with a contractor based on the contractor’s documented safety violations. The contractor argued its instances of performing work on live electrical lines without properly grounding its equipment was not material enough to justify termination. The terms of the construction contract required the contractor to adhere to all applicable safety laws, rules, and regulations, as well as the owner’s safety rules and procedures. However, the evidence established the contractor was aware of the owner’s grounding policy from the very beginning and was aware of a subsequent directive from the owner demanding the use of electrical grounds for all energized electrical work. Although the owner terminated the construction contract on only the second documented incident of a breach of safety protocols which came only three days after the first incident, the court concluded the contractor’s failure to comply with the owner’s safety policy and directive was of sufficient magnitude to constitute a material breach of the construction contract.
The case of M & M Electrical Contractor, Inc. v. Cumberland Electric Membership Corporation1 illustrates a material breach of construction contract due to safety violations. Other common areas of conflict in the construction industry which may justify a material breach include the failure to complete the work in a workmanlike manner, the failure to make payment without a good faith basis, the failure to follow the construction documents, and the failure to perform in a timely manner. Again, it’s not always easy to ascertain whether or not a breach is material to permit the non-breaching party to terminate a contract. Because there is no bright-line rule in determining whether a breach is material or not, a party seeking to terminate a construction contract due to a potential material breach should seek appropriate legal consultation.
1 2016 Tenn. App. LEXIS 842 (Tenn. Ct. App. Nov. 4, 2016).
When is a Design Professional is Liable for a Contractor’s Execution of Construction?
Parties involved in a construction project may choose to allocate some or all responsibility of the construction means, methods, and procedures to a design professional by assigning such duties through the terms of the construction contract. But the more common procedure in construction contracting is to require a design professional to render construction administration services. These administration services may include reviewing shop drawings, making site visits to check the progress or quality of work, rejecting nonconforming work, issuing certificates of payment, issuing change orders, or other types of supervisory and verification services. While administrative services allocate control over certain aspects of construction to the design professional, a design professional’s execution its construction administration services does not supersede a contractor’s exclusive control over the means, methods, and procedures of the construction process. This reasoning is because a design professional’s construction administration services are focused with how the construction product compares with the design intent, not how the construction process is being managed. Because design professionals are only responsible for the final construction product, design professionals are not liable for damages resulting from faulty or defective construction means, methods, or procedures – outside contractual language stating otherwise.
Additionally, a design professional can be held liable for the means, methods, and procedures of the construction where the design professional voluntarily exercises and assumes control over the means, methods, and procedures of construction. Whether a design professional has assumed a duty regarding the construction means, methods, and procedures is a factual question that requires a detailed examination of the circumstances.
The difficulty in discerning the division of responsibilities between design professionals and contractors regarding the construction means, methods, and procedures is exemplified in the case of McKean v. Yates Engineering Corporation.1 In McKean v. Yates Engineering Corporation, the Mississippi Appellate Court was posed with determining whether and when the architect’s supervisory actions went beyond the specific provisions of a construction contract, and consequently, the architect’s liability.
In the case, an engineer provided the general contractor with design drawings for temporary scaffolding to support the pouring of a second-story concrete slab. The general contractor built the temporary scaffolding before receiving the engineer’s final version of scaffolding design drawings and ignored essential features of the engineer’s scaffolding design. The architect, in accordance with its administrative duties, visited the construction site on a weekly basis. During the visits, the architect would walk around the construction site to observe how much work was completed in order to certify payments to the general contractor. Because the second-story finished concrete slab was part of the final product, the architect was responsible for ensuring the concrete slab adhered to the design intent. In accordance with its duty to ensure the construction was complying with the design intent, the architect inspected the rebar and the formwork before the second-story concrete slab was poured, but did not review the engineer’s scaffolding design drawings or inspect the scaffolding the general contractor constructed. The scaffolding later collapsed as the concrete was poured, injuring several construction workers. The construction workers alleged the architect negligently failed to inspect the scaffolding and failed to correct known deficiencies in the scaffolding.
The court examined the signed AIA-B141 standard form agreement between the architect and the owner, which specified the architect was not responsible for construction methods or safety precautions in connection with the construction work. While the construction contract stipulated architect was not responsible for the construction means, methods and procedures, the architect could still be liable if, through its actions, the architect assumed these duties. Thus, the answer to the allegations turned on whether the architect’s actions went beyond the provisions of the construction contract. Although the architect had the general authority to reject work that did not conform to the construction contract documents, the architect had no authority to stop the work. The architect’s conduct did not establish it undertook to supervise any aspect of the scaffolding and therefore had no duty to warn the construction workers the scaffolding—the general contractor’s means and methods of construction—was inadequate. In sum, the architect was not liable for the scaffolding—a means and method of the construction—by the terms of the construction contract and because the architect did not, through its conduct, exhibit, or assume the responsibilities of the construction means, methods, and procedures.
However, a lone dissenting judge struggled with the ruling by the majority. The dissenting judge highlighted testimony the scaffolding was inadequate to the most casual observer, commenting that it only seemed natural the design and inspection of the formwork extended to the scaffolding that supported the formwork. While this reasoning seems completely logical to individuals not familiar with the nuances of the construction industry, the fact the scaffolding was a temporary structure and means of the construction process meant the scaffolding was not a part of the final design product for which the architect was responsible.
The case later proceeded to the Mississippi Supreme Court,2 which affirmed the seven factors used by the appellate court to determine whether the architect’s supervisory powers went beyond the provisions of the construction contract. The factors applied were: (i) actual supervision and control of the work; (ii) retention of the right to supervise and control, (iii) constant participation in ongoing activities at the construction site, (iv) supervision and coordination of subcontractors, (v) assumption of responsibilities for safety practices; (vi) authority to issue change orders, and (vii) the right to stop the work. The Mississippi Supreme Court concluded the appellate court’s seven-factor test applied in determining whether the architect’s supervisory duty went beyond the specific provisions of the contract, but noted the factors were not exhaustive.
As illustrated above, determining where a design professional’s exact threshold of responsibility for control of construction means, methods, and procedures lies is both a determination of contract language and a finding of fact on whether a design professional has encroached on those responsibilities through conduct. From a risk-management point of view, one way to limit a design professional’s liability is by ensuring the design professional employees themselves understand the extent and limits of their responsibilities on each particular project. Such action can take the form of both a check and review on employees’ understanding of the exact scope of their contractual obligations and consultation regarding the applicable jurisdiction’s laws and legal frameworks.
1 No. 2013-CA-01807-COA, 2015 Miss. App. LEXIS 446 (App. Sep. 1, 2015), reh’g en banc denied, No. 2013-CA-01807-COA, 2016 Miss. App. LEXIS 116 (App. Mar. 1, 2016).
2 McKean v. Yates Eng'g Corp., No. 2013-CT-01807-SCT, 2016 Miss. LEXIS 385 (Sep. 15, 2016).
Construction Scheduling, the "Measured Mile" Analysis, and Expert Witnesses
Time is money. This saying holds especially true when it comes to construction projects. Accordingly, construction projects are always “under the gun” to get finished as quick as possible—usually at the behest of the owner in order to keep the cost of the project as cheap as possible. However, all parties involved in the construction process—owners, contractors, subcontractors, suppliers—have a vested interest in on-time performance. Nevertheless, delays in construction performance are among the most commonly litigated issues arising from construction projects.
Due to their complexity and the large number of involved parties, construction projects generally adhere to detailed schedules. Commonly used scheduling software in the construction industry includes Microsoft Project, SureTrak, Primavera P3, and Oracle P6, just to name a few. But construction schedules are only good when timely and accurately updated. If a construction project utilizes a schedule, the schedule will likely play a front and center role should a delay dispute arise.
When a construction delay results in productivity losses, measuring the cost of the delay can prove difficult. One way in which productivity losses can be demonstrated and proven is by using job-specific data by way of the “measured mile” analysis. The measured mile, or measured productivity method, compares the cost of the work accomplished during a disruption period to the cost of the work without a disruption. (See graphics below). However, difficulties arise as not all construction projects have either a period of uninterrupted performance by which to measure against or maintain sufficient records by which to measure productivity.
Image courtesy of Robson Forensic Image courtesy of Knowles Ltd
The measured mile approach to demonstrating productivity losses has generally been accepted by courts. However, utilizing the measured mile approach to measure productivity losses generally requires expert testimony. For example, in United States ex rel. Salinas Construction, Inc. v. Western Surety Co.1 a subcontractor utilized its primary owner as its sole witness on inefficiency damages for its claim for interference against the general contractor. The subcontractor’s lay witness had never performed a measured mile analysis, nor did the witness consult with any experts, attend any seminars, or read any books, pamphlets or other literature about the lost productivity method. The court permitted the subcontractor’s lay witness to testify from personal knowledge and provide lay opinion testimony based on basic measurements and simple math. The subcontractor’s lay witness subjectively decided which costs to consider, impacted versus unimpacted, and constructed a hypothetical world in which the subcontractor’s work on every day of the construction project went unimpacted by the general contractor’s interference. The “measured mile” was calculated by the subcontractor’s lay witness by choosing comparator days to determine a baseline cost-per-square foot, unimpacted the general contractor’s interference, based on how the witness believed the project should have gone and failed to control for variables not related to the general contractor’s interference. The court found the subcontractor’s lay witness had no experience employing the measured mile analysis and concluded the subcontractor required an expert to reliably select comparator days to thereby perform the measured mile analysis. Because the subcontractor did not utilize an expert to properly perform its measured mile analysis, the subcontractor failed to prove the interference approximated its inefficiency damages and ultimately lost the case.
As demonstrated in the case above, application of the measured mile analysis generally requires an expert witness, and the failure to utilize an expert witness in proving productivity losses can have costly consequences. Due to the highly sophisticated and technical nature of building and the number of parties involved in the construction process, construction delay and productivity claims will likely not disappear anytime soon. Here at CCL Construction Consultants, Inc., we have extensive experience with delay and productivity evaluations on projects throughout the U.S. and across the globe.
1 No. C14-1963JLR, 2016 U.S. Dist. LEXIS 88267 (W.D. Wash. July 7, 2016).
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