MARYLAND CONSTRUCTION LAW
TABLE OF CONTENTS
 

PREFACE.. 13
ABOUT THE AUTHOR.. 16
ACKNOWLEDGEMENTS. 18
DEDICATION.. 19
 
CHAPTER ONE.. 21
LICENSING.. 21
1.1       INTRODUCTION.. 21
1.2       GENERAL CONSTRUCTION LICENSES. 21
1.3       HOME IMPROVEMENT CONTRACTING LICENSE. 22
1.3.1        Exceptions. 22
1.3.2        Qualifications. 23
1.3.3        Violations. 23
1.4       HEATING, VENTILATION, AIR CONDITIONING, AND REFRIGERATION   24
1.4.1        Exceptions. 24
1.4.2        Qualifications. 25
1.4.3        Local Licensing Requirements. 26
1.4.4        Violations. 27
1.5       PLUMBING AND GAS FITTING LICENSING.. 27
1.5.1        Exceptions. 27
1.5.2        Qualifications. 28
1.5.3        Violations. 28
1.6       ELECTRICAL LICENSING.. 28
1.6.1        Exceptions. 29
1.6.2        Qualifications. 29
1.6.3        Local Licensing Requirements. 29
1.6.4        Violations. 30
1.7       CONCLUSION.. 30
 
CHAPTER TWO.. 33
BIDDING.. 33
2.1       INTRODUCTION.. 33
2.2       COMPETITIVE BIDDING.. 34
2.2.1        Private Projects. 34
2.2.2        Public Projects. 34
2.2.2.1     Construction. 35
2.2.2.1.1      Bid Process – Invitations to Bid. 35
2.2.2.1.2      Bid Submissions. 35
2.2.2.1.3.     Bid Selection. 36
2.2.2.1.4.     Notice of Award. 36
2.3       BID ERRORS. 36
2.3.1        Enforceability of Bids. 36
2.3.1.1     Contractor's Bid. 36
2.3.1.2     Subcontractor/Supplier Quotations. 37
2.3.2        Bid Mistakes. 37
2.3.2.1     Unilateral Mistakes by Contractor 37
2.3.2.1.1      Mistakes of Fact 37
2.3.2.1.2      Mistakes of Judgment 38
2.3.2.1.3      Mistake of law.. 39
2.3.2.2     Mutual Mistakes. 39
2.3.2.3     Mistakes in Bids to Maryland State Agencies. 40
2.3.2.4     Practical Effects of Bid Mistakes. 40
2.3.2.5     Bid Bonds. 41
2.3.3        Relief from Bid Mistakes on Maryland Projects. 41
2.3.3.1     Minor Irregularities. 41
2.3.3.2     Bid Errors. 42
2.3.3.3     Unbalanced Bid. 42
2.3.4        Post-Award Relief 42
2.3.5        Federal Construction Contracts. 42
2.4       BID PROTESTS. 43
2.4.1        Where to Protest 43
2.4.2        When to Protest 43
2.4.3        Contents of Bid Protest 43
2.4.4        Procedure Following Submission of Bid Protest 44
2.4.5        Bid Protest Appeal from Procurement Agency Decision. 44
2.4.6        Bid Protest Appeal from MSBCA Decision. 44
2.5       CONCLUSION.. 44
 
CHAPTER THREE.. 49
THE ARCHITECT/ENGINEER.. 49
3.1       INTRODUCTION.. 49
3.2       STATE LAWS GOVERNING THE PRACTICE OF ARCHITECTURE & ENGINEERING  50
3.2.1        Statutory Regulation of Architects. 50
3.2.2        Statutory Regulation of Engineers. 51
3.2.3        Statutory Exemptions. 52
3.2.4        Penalties for Violations. 53
3.3       OWNER-ARCHITECT/ENGINEER AGREEMENT.. 54
3.3.1        Types of Agreements. 55
3.3.2        Limitation on Services. 56
3.3.3        Additional Services. 57
3.4       ARCHITECT-CONSULTANT AGREEMENTS. 58
3.5       THE ARCHITECT/ENGINEER'S RESPONSIBILITIES. 60
3.5.1        Design. 60
3.5.2        Bidding and Negotiation. 60
3.5.3        Construction. 61
3.5.3.1     Inspection. 61
3.5.3.2     Review of Applications for Payment 61
3.5.3.3     Review and Approval of Contractor Submittals. 62
3.5.3.4     The Architect as Judge. 62
3.5.3.5     Post Construction. 63
3.6       THE ARCHITECT/ENGINEER'S LIABILITY.. 63
3.6.1        Liability to the Owner 64
3.6.1.1     Exceeding Project Cost Limitations or Estimates. 64
3.6.1.2     Design Errors and Omissions. 65
3.6.1.3     Defective Plans and Specifications. 66
3.6.1.4     Inadequate Inspection of the Work. 67
3.6.1.5     Erroneous Certification of Payment 67
3.6.2        Liability to the Contractor 68
3.6.2.1     Inadequate Plans and Specifications. 68
3.6.2.2     Negligent Construction Administration. 69
3.6.3        Liability to Subcontractors. 69
3.6.4        Liability to the Surety. 69
3.7       PROFESSIONAL LIABILITY INSURANCE.. 70
3.8       CONCLUSION.. 70
 
CHAPTER FOUR.. 75
THE OWNER.. 75
4.1       INTRODUCTION.. 75
4.2       ADMINISTRATIVE RELIEF VS. BREACH OF CONTRACT   76
4.3       WARRANTY OF PLANS AND SPECIFICATIONS. 76
4.4       DUTY TO DISCLOSE SUPERIOR KNOWLEDGE.. 77
4.5       DUTY NOT TO DELAY, HINDER OR INTERFERE WITH THE CONTRACTOR'S PERFORMANCE   78
4.5.1        Owner's Expressed Duty Not To Delay. 79
4.5.2        Owner's Implied Duty Not To Delay. 79
4.5.3        Specific Types of Owner-Caused Delays. 79
4.5.3.1     Failure to Obtain Necessary Clearances or Permits. 80
4.5.3.2     Failure to Make the Project Site Available. 80
4.5.3.3     Owner's Delay in Supply or Removal of Materials. 80
4.5.3.4     Owner's Failure to Make Progress Payments. 81
4.5.3.5     Time For Payment to Subcontractors. 81
4.5.3.6     Owner's Delay in Issuing Notice to Proceed. 81
4.5.3.7     Owner's Delay in Administering Change Orders. 82
4.5.3.8     Owner's Failure to Timely Provide Information. 82
4.6       CONCLUSION.. 82
 
CHAPTER FIVE.. 87
THE CONTRACTOR.. 87
5.1       INTRODUCTION.. 87
5.2       BIDDING.. 87
5.3       THE CONSTRUCTION CONTRACT.. 88
5.3.1        Integration Clause. 89
5.3.1.1     Flow-Down or Pass-Through Provisions. 89
5.3.2        Site Visit 90
5.3.3        Order of Precedence Clause. 90
5.3.4        Permits and Fees. 92
5.3.5        Owner's Right to Carry Out the Work. 92
5.3.6        Review of Contract Documents and Field Conditions by Contractor 94
5.3.7        Compliance with Codes and Ordinances. 95
5.3.8        Contractor's Construction Schedule. 95
5.3.9        Shop Drawings, Product Data and Samples. 98
5.3.10      Aesthetic Determination. 99
5.3.11      Claims and Disputes. 99
5.3.12      Differing Site Conditions. 99
5.3.13      Changes in the Work. 100
5.3.14      Time. 100
5.3.15      Payments. 101
5.3.15.1       Schedule of Values. 101
5.3.15.2       Progress Payments. 102
5.3.15.3       Punchlist 103
5.3.15.4       Retainage. 104
5.3.15.5       Final Payment 105
5.3.15.5.1    Separate Contractors. 105
5.3.16      Insurance. 106
5.3.16.1       Property Insurance. 106
5.3.16.2       Loss of Use Insurance. 107
5.3.16.3       Commercial General Liability Coverage. 108
5.3.17      Statute of Limitations. 109
5.3.17.1       Generally. 109
5.3.17.2       Written Contract 109
5.3.17.2.1    Discovery Rule. 109
5.3.17.3       Oral Contract 109
5.3.17.4       Public vs. Private Contract Limitations Periods. 110
5.3.18      Termination. 110
5.3.18.1       Termination by Contractor 112
5.3.18.2       Termination by Owner 112
5.3.19      Attorney's Fees and Interest 127
5.4       CONCLUSION.. 127
 
CHAPTER SIX.. 131
THE SUBCONTRACTOR.. 131
6.1       INTRODUCTION.. 131
6.2       BIDDING.. 131
6.3       SUBCONTRACTING.. 133
6.3.1        Scope of Work. 133
6.3.2        Time. 134
6.3.3        Payment 134
6.3.3.1     "Pay When Paid" and “Pay if Paid” Clauses. 134
6.3.3.2     Prompt Payment Requirements. 135
6.3.3.2.1      Time For Payment 135
6.3.4        Contractor's Warranty of Plans and Specifications. 136
6.3.5        Contractor's Duty not to Hinder, Delay or Interfere. 136
6.3.6        Assignment of Subcontract 136
6.3.7        Arbitration. 137
6.3.8        Subcontractor Claims and Disputes. 137
6.3.9        Subcontract Changes. 137
6.3.10      Hold Harmless and Indemnity Clauses. 137
6.3.10.1       Indemnification of parties to the Contract 137
6.3.11      Insurance. 138
6.3.12      Subcontractor's Liability to Contractor 138
6.3.13      Termination. 139
6.3.14      Waiver of Consequential Damages. 140
6.3.15      Releases. 140
6.3.16      Attorney's Fees and Interest 140
6.4       CONCLUSION.. 141
 
CHAPTER SEVEN.. 145
CHANGES IN THE WORK.. 145
7.1       INTRODUCTION.. 145
7.2       CHANGES--WRITTEN VS. ORAL.. 145
7.2.1        Public Construction Projects. 145
7.2.1.1     Written Change Directive. 146
7.2.1.2     Oral Change Directive. 153
7.3       CHANGES CLAUSE - HOW DO THEY WORK?. 154
7.3.1        Agreed Changes. 156
7.3.2        Construction Change Directive. 158
7.3.3        Minor Changes. 162
7.4       WHO HAS AUTHORITY TO ORDER A CHANGE?. 162
7.5       CONSTRUCTIVE CHANGE.. 163
7.6       CARDINAL CHANGES. 163
7.7       DEDUCTIVE CHANGES. 164
7.8       NOTICE.. 165
7.9       CONCLUSION.. 166
 
CHAPTER EIGHT.. 169
DIFFERING SITE CONDITIONS. 169
8.1       INTRODUCTION.. 169
8.2       CONTRACTOR'S RIGHT TO RELY ON OWNER'S REPRESENTATION OF CONDITIONS  169
8.2.1        Duty to Investigate Site. 170
8.2.2        Duty to Disclose. 171
8.2.3        Disclaimers. 172
8.3       NOTICE.. 172
8.4       CONTRACTUAL REMEDIES. 175
8.4.1        Type 1 Conditions. 179
8.4.2        Type 2 Conditions. 180
8.5       CHANGED CONDITIONS NOT COVERED BY THE "CHANGED CONDITIONS" CLAUSE   181
8.5.1        Acts of God. 181
8.5.2        Manmade Conditions v. Naturally Existing Conditions. 181
8.6       CONCLUSION.. 182
 
CHAPTER NINE.. 185
DAMAGES AND DELAYS. 185
9.1       INTRODUCTION.. 185
9.2       THE OWNER'S DAMAGES. 186
9.2.1        Contractor's Defective or Incomplete Performance. 186
9.2.2        Contractor's Late Completion. 187
9.2.2.1     Liquidated Damages. 188
9.2.2.2     Actual Damages. 190
9.3       THE CONTRACTOR'S DAMAGES. 193
9.3.1        Late Payment Damage. 193
9.3.2        Termination Damages. 193
9.3.3        Delay Damages. 194
9.3.3.1     Owners-Caused/Compensable Delays. 196
9.3.3.1.1      Direct Job Cost 196
9.3.3.1.2      Home Office Overhead Costs. 197
9.3.3.1.3      Interruption Costs. 198
9.3.3.1.4      Lost Profits. 199
9.3.3.1.5      Acceleration Costs. 199
9.3.3.2     Excusable/Compensable Delays. 199
9.3.3.3     Excusable/Non-Compensable Delays. 200
9.3.3.4     Contractor Caused Delays. 204
9.3.3.5     Concurrent Delays. 204
9.4       "NO DAMAGE FOR DELAY" CLAUSE.. 204
9.5       PREJUDGMENT INTEREST.. 205
9.6       ATTORNEYS' FEES. 206
9.6.1        Contract 206
9.6.2        Equity. 207
9.7       MITIGATION OF DAMAGES. 207
9.8       PUNITIVE DAMAGES. 208
9.9       CONCLUSION.. 208
 
CHAPTER TEN.. 213
BONDS AND LIENS. 213
10.1     INTRODUCTION.. 213
10.2     BONDS. 213
10.2.1      Federal Construction Bond. 214
10.2.1.1       Parties Covered By Federal Payment Bonds. 215
10.2.1.1.1    First Tier Subcontractors and Suppliers. 216
10.2.1.1.2    Second Tier Subcontractors and Suppliers. 217
10.2.1.1.3    Parties Not Covered. 217
10.2.1.2       Notice Requirements. 218
10.2.1.2.1    Statutory language. 218
10.2.1.2.2    Ninety-Day Notice Requirement 219
10.2.1.3       Labor or Material Furnished in the Prosecution of the Work  221
10.2.1.3.1    Labor 221
10.2.1.3.2    Material 221
10.2.1.3.3    Furnished in the Prosecution of the Work. 221
10.2.1.4       Interest and Attorneys' Fees. 222
10.2.1.5       Subcontractor vs. Supplier 222
10.2.2      State Public Works Construction Bond. 223
10.2.2.1       Labor and Material 235
10.2.2.2       Delay/Other Costs. 235
10.2.2.3       Attorneys Fees/Interest 235
10.2.3      State Highway Construction Bond. 235
10.2.4      State Private Works Construction Bond. 236
10.3     LIENS. 238
10.3.1      Construction Liens. 238
10.3.1.1       Entitlement to a Construction Lien. 238
10.3.1.1.1    Who are the relevant parties and who may lien?. 240
10.3.1.1.2    What constitutes construction, rebuilding, repair or improvement on a permanent building or structure?  243
10.3.1.1.3    What property can be liened?. 244
10.3.1.1.4    Notice of Intent to File a Lien. 250
10.3.1.1.4.1    General Contractor Notice Requirements. 251
10.3.1.1.4.2    Subcontractor's Notice of Intent to File a Lien. 251
10.3.1.1.4.3    Form of Notice. 253
10.3.1.1.4.4    To Whom is Notice Given. 255
10.3.1.1.4.4.1    Corporation as Owner 255
10.3.1.1.4.4.2    Multiple Owners of the same property. 255
10.3.1.1.4.5.    Delivery. 256
10.3.1.1.4.6    Exceptions To Notice Requirements. 257
10.3.1.1.4.7    Owner's Options upon Receipt of a Notice. 258
10.3.1.1.5    Filing the Petition for a Mechanic's Lien. 258
10.3.1.1.5.1    Timing for Filing of the Petition. 258
10.3.1.1.5.2    What Must be contained in the Petition?. 258
10.3.1.1.5.3    Multiple Parcel Problem.. 261
10.3.1.1.5.3.1    Apportioning Materials. 261
10.3.11.5.3.2    Use of Materials at Site. 262
10.3.1.1.5.3.3    Multiple Lot Problems and the Bona Fide Purchaser 263
10.3.1.1.5.3.4    Lien Release and the Multiple Lot Case. 264
10.3.1.1.5.4    Contractor Lien Amounts. 264
10.3.1.1.5.5    Subcontractor Lien Amounts. 265
10.3.1.1.5.5.1    Commercial Buildings. 265
10.3.1.1.5.5.2    Single-family Dwellings. 266
10.3.1.1.5.6    Unfinished Buildings. 268
10.3.1.1.6    Establishment And Enforcement Of The Mechanic's Lien  268
10.3.1.1.6.1    Commencing the Action. 268
10.3.1.1.6.2    Proceedings. 269
10.3.1.1.6.2.1    Court Review.. 269
10.3.1.1.6.2.2    Show Cause Order 269
10.3.1.1.6.2.3    Answer 269
10.3.1.1.6.2.4    Timing. 269
10.3.1.1.6.2.5    Court Determination. 270
10.3.1.1.6.2.6    Joinder of Other Claims. 270
10.3.1.1.6.2.7    Trial Bond. 271
10.3.1.1.6.2.8    Final Order to Establish the Lien. 271
10.3.1.1.6.2.9    Bonding-Off and Release. 272
10.3.1.1.6.2.10    Entry of Satisfaction. 272
10.3.1.1.6.2.11    Statute of Limitations Upon Right to Enforce a Lien  272
10.3.1.1.6.2.12    Establish Boundaries to Liened Property. 272
10.3.1.1.7    Waiver of lien rights. 274
10.3.1.2       Priority. 274
10.3.1.3       Wrongful Filing of a Lien. 279
10.3.2      Lis Pendens Notice. 279
10.3.3      Wrongful filing of Lis Pendens. 284
10.4     CONCLUSION.. 284
 
CHAPTER ELEVEN.. 293
EFFECTIVE COLLECTION TECHNIQUES. 293
11.1     INTRODUCTION.. 293
11.2     COLLECTION STEPS. 293
11.2.1      Carefully Select Your Customer 293
11.2.2      Obtain Project Documentation. 295
11.2.3      Properly Prepare the Schedule of Values. 295
11.2.4      Properly Apply for Payment 295
11.2.5      Demand Payment When Due. 296
11.2.6      Repeatedly Demand Payment when Past Due. 296
11.2.7      Stop Work. 296
11.2.8      Demand Adequate Assurance. 297
11.2.9      Contact an Attorney. 297
11.2.10        File Suit 298
11.2.10.1     Federal Court 298
11.2.10.2     State Court 299
11.2.10.3     Limitations of Action. 299
11.3     OPEN ACCOUNT CLAIMS. 302
11.4     BAD CHECK CLAIMS. 303
11.5     COLLECTION ASSISTANCE.. 304
11.6     BANKRUPTCY CLAIMS. 305
11.6.1      Bonded Work. 305
11.6.2      Projects Where Money is Held by the Owner at the Time of Bankruptcy  306
11.6.3      Executory Contracts. 307
11.6.4      Assistance of an Attorney. 308
11.7     CONCLUSION.. 308
 
CHAPTER TWELVE.. 313
ARBITRATION, LITIGATION, OTHER FORMS OF ALTERNATIVE DISPUTE RESOLUTION & SETTLEMENT.. 313
12.1     INTRODUCTION.. 313
12.2     ARBITRATION.. 313
12.2.1      Speed of Resolution of Disputes. 316
12.2.2      Expertise of the Fact Finder 316
12.2.3      Expense. 317
12.2.4      Discovery of the Other Party's Case. 317
12.2.5      Motions Practice. 318
12.2.6      Appeal 318
12.2.7      The One-Line Decision. 319
12.2.8      Multiparty Disputes. 319
12.3     LITIGATION.. 320
12.3.1      Federal Court System.. 320
12.3.1.1       Limited Jurisdiction of Federal Courts. 320
12.3.1.1.1    Diversity Jurisdiction. 320
12.3.2      What Law Governs -- State or Federal?. 321
12.3.3.     Forum Selection. 321
12.3.4      Gambling on a Jury. 322
12.3.5      The State Court System.. 322
12.3.5.1       Pleadings. 323
12.3.6      Discovery. 325
12.3.6.1       Depositions. 325
12.3.6.2       Interrogatories and Requests for Production. 325
12.3.7      Trial 326
12.3.8      Appeals. 326
12.4     OTHER ALTERNATIVE DISPUTES RESOLUTION METHODS  327
12.4.1      Mediation. 328
12.4.2      Mini-Trials. 330
12.4.3      Summary Jury Trials. 330
12.5     SETTLEMENT.. 331
12.6     CONCLUSION.. 331