NEBRASKA
CONSTRUCTION LAW
TABLE OF CONTENTS
Preface and
Acknowledgements........................................................
xv
About the
Author................................................................................
xvii
CHAPTER ONE
LICENSING
1.1
INTRODUCTION............................................................................
1
1.2 OBTAINING A CERTIFICATE OF AUTHORITY –
OUT-OF-STATE FIRMS 2
1.3
CONTRACTOR LICENSING REQUIREMENTS..........................
2
1.3.1 Resident Contractors – Contractor Registration
Act..... 2
1.3.1.1 Scope and
Applicability.................................................
2
1.3.1.2 Registration
Requirements................................ 3
1.3.1.3 Penalties for
Noncompliance............................ 4
1.3.2 Nonresident Contractors – Registration by
Nonresident Contractors Act 5
1.3.2.1 Scope and
Applicability.................................................
5
1.3.2.2 Registration
Requirements................................ 6
1.3.2.3 Penalties for
Noncompliance............................ 7
1.4
ENGINEERS AND
ARCHITECTS.................................................
8
1.4.1 Engineers and Architects Regulation
Act................ 8
1.4.2 Design-Build Under the E&A
Act............................. 9
1.5 ELECTRICAL CONTRACTORS – NEBRASKA STATE ELECTRICAL
ACT 10
1.5.1 Scope and
Applicability.....................................................
10
1.5.2 State Electrical
Division......................................... 10
1.6 LOCAL REQUIREMENTS OF SPECIFIC CONTRACTORS 11
1.7
CONCLUSION........................................................................
12
CHAPTER TWO
BIDDING
2.1
INTRODUCTION..........................................................................
15
2.2 COMPETITIVE
BIDDING.......................................................
15
2.2.1 Private
Projects...........................................................
15
2.2.2 Public
Projects.............................................................
18
2.2.2.1 Statutory Provisions Regarding Competitive
Bidding 19
2.2.2.2 No Bid
Requirements...................................... 19
2.2.2.3 Lowest and/or Best Bid Awards ......................
20
2.2.2.4 Lowest Responsible Bid Awards.....................
20
2.2.2.4.1
Responsive............................................ 21
2.2.2.4.2
Responsible........................................... 23
2.2.2.4.3
Price.......................................................
25
2.2.2.5
Prequalification................................................
27
2.2.2.6 Unbalanced
Bids.............................................. 28
2.3 BID
ERRORS................................................................................
30
2.3.1 Contractor’s
Bid.................................................................
30
2.3.2 Subcontractor
Quotations..................................................
31
2.4 BIDDING
PROCEDURES......................................................
33
2.5 BID PROTESTS
...................................................................
34
2.5.1 Who Can
Protest.........................................................
34
2.5.2 Obtaining Public
Documents....................................... 35
2.5.3 Where to
Protest..........................................................
35
2.5.4 When to
Protest...........................................................
35
2.5.5 What to
Protest............................................................
36
2.5.5.1 Late
Bids................................................................
36
2.5.5.2 Bid
Responsiveness..............................................
36
2.5.5.3 Faulty Solicitation – Restriction on Competition and
Alternates 36
2.5.6 What Relief Is
Available............................................... 37
2.5.7 Impact on the Project from the Successful Bidder’s
Standpoint 38
2.5.7.1 Distinction Between Irregular and Ultra Vires
Contracts 38
2.5.7.2 Contracts Executed as an Ultra Vires Act Will
Preclude any Payments Under the Contract 39
2.5.7.3 An Irregular Contract Will Allow the Successful
Bidder to Recover Its Reasonable Costs But May Preclude the
Recovery of Overhead and Profit 39
2.5.7.4 The Successful Bidder Must Understand and Be
Prepared to Accept the Risks Associated with the
Project................................................ 42
2.6
CONCLUSION..............................................................................
42
CHAPTER THREE
THE
ARCHITECT/ENGINEER
3.1
INTRODUCTION..........................................................................
45
3.2 REGULATION OF
ARCHITECTURE AND ENGINEERING..... 45
3.2.1
Generally...........................................................................
45
3.2.2
Professional Landscape
Architects................................... 46
3.2.3 Regulation of
Design Professionals in Design-Build Projects. 46
3.3 PROCUREMENT OF
DESIGN PROFESSIONAL SERVICES. 47
3.3.1 Private
Projects.................................................................
47
3.3.2 Public
Projects.......................................................
47
3.3.2.1 State
Agencies................................................ 47
3.3.2.2
Counties..........................................................
48
3.3.2.3 Local
Bodies........................................................
48
3.3.2.4 Specialty
Projects................................................. 49
3.4 AGREEMENTS
BETWEEN THE OWNER AND THE DESIGN PROFESSIONAL
49
3.5 ARCHITECT-CONSULTANT
AGREEMENTS........................... 50
3.6 THE ARCHITECT/ENGINEER’S
LIABILITY............................... 50
3.6.1 Historical
Background.......................................................
51
3.6.2 Assignment of
Claims............................................ 52
3.6.3
Liability to the Owner Arising from Design Services.........
52
3.6.3.1 Contract Claims by the Owner........................
53
3.6.3.1.1 Improper/Defective Design............. 53
3.6.3.1.2 Implied or Express Warranty........... 53
3.6.3.1.3 Time to Perform Design Services... 54
3.6.3.1.4 Cost Estimates.................................
55
3.6.3.2 Tort Claims by the
Owner............................... 55
3.6.4 Claims By Other Project
Participants.......................... 56
3.6.4.1
Contract
Claims............................................... 56
3.6.4.2 Third-party Beneficiary
Claims........................ 56
3.6.4.3 Tort
Claims......................................................
57
3.6.5 Statutory or Regulatory Basis for Tort
Liability............ 58
3.6.5.1 Building
Standards........................................... 58
3.6.5.2
Americans with Disabilities Act (“ADA”)................ 59
3.6.5.3
Occupational Safety and Health Act..................... 59
3.7 LIABILITY ARISING FROM CONTRACT ADMINISTRATION
SERVICES 60
3.7.1 Statutory Protection From Site Safety
Claims............ 60
3.6.3.3 Inadequate
Inspection of Work.............................. 61
3.7.3 Shop Drawings
................................................................
62
3.7.4 Withholding Certification of Payment
Application............. 63
3.7.5 Improper Certification of Payment
Applications............... 63
3.6.3.6 Exculpatory
Clauses.............................................. 64
3.6.4 Liability to
the
Contractor...................................................
64
3.7 LEGAL AND
CONTRACTUAL DEFENSES TO LIABILITY........ 65
3.7.1 Statutory and Judicial Defenses to
Liability....................... 65
3.7.1.1 Statute of Limitations and Statute of Repose . 65
3.7.1.2 Economic Loss
Doctrine................................. 68
3.7.1.4 Impossibility /
Impracticability................................ 69
3.7.2 Contractual Defenses to
Liability....................................... 69
3.7.2.1 Contractual Waiver of
Subrogation....................... 69
3.7.2.2 Indemnification
Clauses........................................ 70
3.7.2.3 Limitations of Liability /
Damages.......................... 70
3.7.2.5 Requirement for a Certificate of
Merit.................. 72
3.8
CONCLUSION..............................................................................
72
CHAPTER FOUR
THE OWNER
4.1
Introduction....................................................................
81
4.2
Warranty of Plans and Specifications...............
81
4.2.1
The Spearin Doctrine and Related Nebraska
Cases.. 81
4.2.2
Superior Knowledge
Doctrine...................................... 84
4.2.3
Implied
Obligations......................................................
84
4.2.3.1
Implied Warranty of Workmanlike
Construction.....................................................
84
4.2.3.2
Commercial
Availability................................... 87
4.2.3.3
Sufficiency Of
Materials.................................. 87
4.2.3.4
Compliance with Codes and Covenants......... 87
4.3
Duty Not to Delay, Hinder, or Interfere with the
Contractor’s Performance 87
4.3.3
Specific Types of Owner-Caused
Delay.................... 89
4.3.3.4
Defective
Specifications.................................. 89
4.3.3.5
Untimely Issuance of Notice to Proceed......... 89
4.3.3.6
Failure to Make the Project Site Available...... 91
4.3.3.7
Owner’s Delay in Acting on Shop Drawings and
Submittals 93
4.3.3.8
Owner’s Delay in Supply or Removal of
Materials 94
4.3.3.9
Owner’s Issuance of Unreasonable or Improper Stop
Order 96
4.3.3.10
Owner’s Excessive Inspection and Unreasonable
Performance Demands 97
4.3.3.11
Owner’s Delay in Issuing Change Orders... 99
4.4
Owner’s Material Change in the Contract..... 100
4.5
Conclusion......................................................................
100
CHAPTER FIVE
THE
CONTRACTOR AND THE CONSTRUCTION CONTRACT
5.1
INTRODUCTION..................................................................
105
5.2
THE CONSTRUCTION
CONTRACT.................................. 105
5.2.1
Contract Pricing
Structure......................................... 106
5.2.2 Integration
Clause............................................................
107
5.2.3 Site
Visit...........................................................................
108
5.2.4 Order of Precedence
Clause.......................................... 108
5.2.5
Recitals............................................................................
109
5.2.6 Permits and
Fees.............................................................
109
5.2.7 Owner’s Right to Carry Out the
Work............................. 109
5.2.8 Review of Contract Documents and Field Conditions
by Contractor 109
5.2.9 Compliance with Codes and
Ordinances.................. 110
5.2.10 Contractor’s Construction
Schedule.......................... 110
5.2.11 Shop Drawings, Product Data and
Samples................... 111
5.2.12 Aesthetic
Determination..................................................
112
5.2.13 Claims and Disputes – Decision of Architect or
Engineer 112
5.2.14 Differing Site
Conditions............................................ 113
5.2.15. Changes in the
Work.................................................
113
5.2.16
Time.................................................................................
113
5.2.17 “Lien-Free”
Provisions...............................................
113
5.2.18 “Work Through Disputes”
Clause.............................. 114
5.2.19 Payments
.................................................................
115
5.2.19.1 Progress Payments and Retainage..................
115
5.2.19.2 Final
Payment...................................................
116
5.2.20 Statute of
Limitations.......................................................
117
5.2.20.1 Claims Against the
State........................................ 118
5.2.20.2 Claims Against
Counties......................................... 119
5.2.20.3 Municipal
Claims....................................................
119
5.2.20.3.1 Cities of the Metropolitan
Class..................... 119
5.2.20.3.2 Cities of the Primary
Class............................ 119
5.2.20.3.3 Cities of the First Class................ 119
5.2.20.3.4. Cities of the Second Class and Villages 120
5.2.21 Termination
.................................................................
120
5.2.22 Attorneys
Fees.................................................................
123
5.2.23 Contract
Interpretation.....................................................
123
5.2.24
Ambiguity.........................................................................
123
5.2.25 Reasonable
Construction................................................
124
5.2.26 Give Meaning to
All Terms.............................................. 124
5.2.27 Contra
Proferentem: Ambiguous Terms are Construed against the
Drafter 124
5.2.28 Missing Terms
and Details..............................................
125
5.3
CONCLUSION............................................................................
126
CHAPTER SIX
THE
SUBCONTRACTOR
6.1
INTRODUCTION........................................................................
131
6.2 DISTINCTION BETWEEN SUBCONTRACTORS AND SUPPLIERS
131
6.3
BIDDING.....................................................................................
132
6.3.1 Reliance on Subcontractor
Quotes................................. 132
6.4.1 Deductive Changes
.......................................................
134
6.5
Time OF
PERFORMANCE.......................................................
135
6.5.1 Actual
Acceleration..............................................
135
6.5.2
DELAY.............................................................................
136
6.6
PAYMENT.........................................................................................
136
6.6.1 “Pay When Paid”
Clauses............................................... 136
6.6.2 “Pay If Paid”
Clauses.......................................................
137
6.7
PROMPT PAYMENT
REQUIREMENTS.................................. 137
6.7.1 Nebraska Prompt Payment Act
.............................. 137
6.7.2 Prompt Payment In Private Contracts
.......................... 138
6.8
CRIMINAL
PENALTIES..............................................................
138
6.9 CONTRACTOR’S WARRANTY OF PLANS AND
SPECIFICATIONS 138
6.10 CONTRACTOR’S DUTY TO PROVIDE INFORMATION.. 139
6.11 CONTRACTOR’S DUTY NOT TO HINDER, DELAY OR
INTERFERE 139
6.12 ASSIGNMENT OF
SUBCONTRACT.................................. 140
6.13 SUBCONTRACTOR CLAIMS AND DISPUTES.................
140
6.13.1 Pass-Through and Liquidating Agreements..............
140
6.13.2 Pass Through of Subcontractor Claims Against the
State 141
6.13.3 Flow Down
Provisions...............................................
142
6.13.4 Site
Safety...........................................................
142
6.13.5 Hold Harmless and Indemnity
Clauses........................... 142
6.13.6 Subcontractor’s Liability to
Contractor...................... 143
6.13.7 Subcontractor’s Liability to the Owner or Subsequent
Owners 143
6.13.8
Termination..........................................................
144
6.14
CONCLUSION......................................................................
144
CHAPTER SEVEN
CHANGES IN THE WORK
7.1
INTRODUCTION........................................................................
149
7.2 THE CHANGES
CLAUSE....................................................
149
7.2.1 Changes Clause in Standard Form
Contracts.......... 149
7.2.2 Requirement for Written
Order........................................ 150
7.2.3 Notice
Requirement.............................................
153
7.2.4 Authority to Issue
Change................................... 154
7.3
CONSTRUCTIVE
CHANGES....................................................
158
7.3.1 Disputes over Contract Interpretation during
Performance 159
7.3.2 Government (Owner) Interference or Failure to
Cooperate 160
7.3.3 Defective Plans or
Specifications....................... 160
7.3.4 Nondisclosure of “Superior Knowledge”..............
161
7.3.5 Constructive
Acceleration................................... 161
7.4
DEDUCTIVE
CHANGES............................................................
162
7.5
LIMITATIONS ON CONTRACT CHANGES.............................
162
7.5.1 Cardinal Changes and Abandonment.................
162
7.5.2 Reservation of
Rights.......................................... 164
7.6
PRICING CHANGED
WORK.....................................................
164
7.6.1 The Cost of Changed
Work................................. 165
7.6.2 The Impact of Changed Work on Unchanged Work
Activities 166
7.6.3 Impacts of Multiple and Overlapping or Concurrent
Changes and Delays 166
7.7 CHANGE ORDER DOCUMENTATION AND ELEMENTS OF
PROOF 167
7.8
CONCLUSION............................................................................
168
CHAPTER EIGHT
Differing Site Conditions
8.1
INTRODUCTION........................................................................
173
8.2
PURPOSE OF DIFFERING SITE CONDITION CLAUSES .... 173
8.3 CONTRACTOR’S RIGHT TO RELY ON OWNER’S
REPRESENTATION OF CONDITIONS 176
8.3.1 Duty to Investigate
Site.................................................... 176
8.3.2 Duty to
Disclose...............................................................
177
8.3.3
Disclaimer........................................................................
177
8.4
NOTICE.......................................................................................
178
8.5
CONTRACTUAL
REMEDIES....................................................
179
8.5.1 Type I
Conditions.............................................................
179
8.5.2 Type II Differing
Conditions............................................. 181
8.6
ALTERNATIVE
REMEDIES.......................................................
181
8.7 CHANGED CONDITIONS NOT COVERED BY THE “CHANGED
CONDITIONS” CLAUSE 182
8.7.1 Acts of
God......................................................................
183
8.7.2 Conditions Subsequent to
Contract................................. 183
8.7.3 State
Law.........................................................................
183
8.8
CONCLUSION............................................................................
183
CHAPTER NINE
DAMAGES AND DELAYS
9.1
INTRODUCTION........................................................................
189
9.2
THE OWNER’S
DAMAGES.......................................................
189
9.2.1 Contractor’s Defective or Incomplete
Performance....... 189
9.2.2 Contractor’s Late
Completion.......................................... 190
9.2.2.1 Actual Damages – Lost
profits............................ 190
9.2.2.2 Liquidated
Damages............................................ 191
9.2.3.3 Duration Related Actual
Damages............................ 191
9.2.2.4 Limitations on Damages
..................................... 191
9.3
THE CONTRACTOR’S
DAMAGES........................................... 194
9.3.1 Late Payment
Damage...................................................
194
9.3.2 Termination
Damages.....................................................
196
9.3.3 Delay / Inefficiency
Damages......................................... 196
9.3.3.1 Non-Excusable
Delays........................................ 197
9.3.3.2 Excusable But Non-Compensable Delays ......... 197
9.3.3.3 Excusable and Compensable Delays.................
198
9.3.3.3.1... Delay In Issuing Notice To
Proceed....................................... 198
9.3.3.3.2... Delayed Administration Of Change Orders
199
9.3.3.3.3... Failure to Provide Site Access.... 200
9.3.3.3.4... Failure to Properly Schedule
Work
........................................... 200
9.3.3.3.5... Late Drawings.............................. 201
9.3.3.3.6... Work Suspensions....................... 201
9.3.4 Acceleration
Claims.........................................................
201
9.3.4.1 Actual or Ordered
Acceleration........................... 202
9.3.4.2 Constructive
Acceleration................................... 203
9.3.5 Concurrent
Delays...........................................................
204
9.3.6 Elements of Contractor’s
Damages................................ 205
9.3.6.1
Direct Job
Cost.................................................... 205
9.3.6.2 Home Office Overhead
Costs............................ 205
9.3.6.3 Inefficiency
Costs................................................ 205
9.3.6.4 Cost of Borrowed Funds
..................................... 205
9.3.6.5 Labor
Escalation..................................................
206
9.3.6.6 Profits
.................................................................
206
9.3.6.7 Punitive
Damages............................................... 206
9.4
NO-DAMAGE-FOR-DELAY
CLAUSES.................................... 206
9.5 VARIOUS DAMAGE PRINCIPLES AND THEORIES IN NEBRASKA
209
9.6
CONCLUSION............................................................................
210
CHAPTER TEN
LIENS AND BONDS
10.1
INTRODUCTION..................................................................
215
10.2 CONSTRUCTION LIENS – THE NEBRASKA CONSTRUCTION LIEN
ACT 216
10.2.1 Scope of NCLA.........................................................
216
10.2.2 Notice Requirements for Filing a
Lien....................... 217
10.2.3 Time Limitation for Recording a
Lien........................ 217
10.2.4 Required Contents of
Lien......................................... 218
10.2.5 Determining the Amount of the
Lien.......................... 218
10.2.6 Liens Recorded in Bad
Faith..................................... 219
10.2.7 Preventing Attachment of Liens and Bonding Over
Filed Liens 219
10.2.8 Amending or Waiving Lien
Rights............................. 220
10.2.9 Enforcement of Construction
Lien............................ 220
10.2.10 Determining Lien
Priority......................................... 221
10.2.11 Determining Lien Priority – Notice of
Commencement 223
10.3
BONDS..................................................................................
225
10.3.1 State and Local Projects – The Little Miller
Act......... 225
10.3.2 Federal Projects – The Miller
Act.............................. 226
10.3.3 Private Payment
Bonds............................................. 228
10.4
CONCLUSION......................................................................
229
CHAPTER ELEVEN
EFFECTIVE COLLECTION TECHNIQUES
11.1
INTRODUCTION..................................................................
233
11.2 PREJUDGMENT
ATTACHMENT....................................... 233
11.3 PREJUDGMENT
GARNISHMENT..................................... 235
11.4 POST JUDGMENT GARNISHMENT IN AID
OF
EXECUTION...................................................................
236
11.5 WRITS OF
EXECUTION......................................................
237
11.6 LIENS ARISING BY OPERATION OF
LAW....................... 237
11.7
DORMANCY, REVIVAL, AND EXPIRATION OF JUDGMENTS
238
11.8
CONCLUSION......................................................................
237
CHAPTER TWELVE
ARBITRATION, MEDIATION, LITIGATION, ALTERNATIVE DISPUTE
RESOLUTION & SETTLEMENT
12.1
INTRODUCTION..................................................................
241
12.2
ARBITRATION......................................................................
241
12.3
MEDIATION..........................................................................
244
12.4 OTHER ALTERNATIVE DISPUTE RESOLUTION
METHODS...........................................................................
244
12.4.1
Mini-Trials........................................................................
244
12.4.2 Summary Jury
Trials.......................................................
244
12.5
LITIGATION..........................................................................
245
12.5.1
Pleadings.........................................................................
245
12.5.2
Discovery.........................................................................
247
12.5.3
Settlement........................................................................
248
12.5.4 Prejudgment
Interest.......................................................
248
12.5.5 Summary
Judgments......................................................
250
12.5.6
Trial..................................................................................
250
12.5.7
Appeal..............................................................................
251
12.6
CONCLUSION......................................................................
252
CHAPTER THIRTEEN
BUSINESS ENTITY CHOICES
13.1 INTRODUCTION
.................................................................
255
13.2 STATE LAW CLASSIFICATIONS - CHOICE OF ENTITY. 256
13.2.1 Sole
Proprietorship....................................................
256
13.2.2 General
Partnership...................................................
256
13.2.3 Limited Liability
Partnership....................................... 257
13.2.4 Limited
Partnership....................................................
257
13.2.5 Limited Liability
Company......................................... 257
13.2.6 C
Corporation............................................................
257
13.2.7 S
Corporation.............................................................
257
13.3 TAX CLASSIFICATION OF
ENTITIES................................ 258
13.3.1 “Check-the-Box”
Regulations.................................... 258
13.3.1.1 Default
Rules........................................... 258
13.3.1.2 Single-Member
Entities........................... 258
13.3.1.3 Foreign
Entities........................................ 259
13.3.1.4 Change in
Classification.......................... 259
13.3.2 Implications of the Check-the-Box
Regulations........ 259
13.3.2.1 Use of LLCs.............................................
259
13.3.2.2 Single-Member
Entities........................... 259
13.3.2.3 Consolidated
Returns.............................. 259
13.3.2.4 Simplification of Organizational
Documents.................................................
259
13.4 TRANSFERS OF PROPERTY TO NEW ENTITIES...........
260
13.4.1 General Partnership and Limited
Partnership........... 260
13.4.2 Limited Liability
Company......................................... 260
13.4.3 C Corporation / S
Corporation................................... 261
13.5 ENTITY FORMATION AND DOCUMENTATION...............
261
13.5.1 General
Partnership...................................................
261
13.5.2 Limited
Partnership....................................................
262
13.5.3 Limited Liability
Company......................................... 262
13.5.4 S Corporation / C
Corporation................................... 262
13.6 ENTITY
OPERATIONS........................................................
262
13.6.1 General Partnership / Limited Liability
Partnership... 262
13.6.1.1
Management............................................ 262
13.6.1.2 Limitation on
Liability................................ 263
13.6.1.3 Transferability of
Interests....................... 263
13.6.1.4
Affiliates...................................................
263
13.6.1.5 Special
Allocations................................... 264
13.6.2 Limited
Partnership....................................................
264
13.6.2.1
Management............................................ 264
13.6.2.2 Limitation on
Liability................................ 264
13.6.2.3 Transferability of
Interests....................... 265
13.6.3 Limited Liability
Company......................................... 265
13.6.3.1
Management............................................ 265
13.6.3.2 Limitation on
Liability................................ 266
13.6.3.3 Transferability of
Interests....................... 266
13.6.3.4
Affiliates...................................................
266
13.6.3.5 Special
Allocations................................... 265
13.6.4 S
Corporation.............................................................
267
13.6.4.1
Management............................................ 267
13.6.4.2 Limitation on
Liability................................ 267
13.6.4.3 Transferability of
Interests....................... 268
13.6.4.4
Affiliates...................................................
268
13.6.4.5 Special
Allocations................................... 268
13.6.5 C
Corporation............................................................
268
13.6.5.1
Management............................................ 268
13.6.5.2 Limitation on
Liability................................ 269
13.6.5.3 Transferability of
Interests....................... 269
13.6.5.4
Affiliates...................................................
269
13.6.5.5 Special
Allocations................................... 269
13.7 DISTRIBUTIONS OF CASH AND
PROPERTY.................. 270
13.7.1 General Partnership / Limited
Partnership................ 270
13.7.1.1 Cash
Distributions.................................... 270
13.7.1.2 Distributions of
Property.......................... 270
13.7.1.3 Self-Employment
Tax............................. 271
13.7.2 Limited Liability
Company......................................... 271
13.7.2.1 Cash
Distributions.................................... 271
13.7.2.2 Distributions of
Property.......................... 271
13.7.2.3 Self Employment
Tax.............................. 271
13.7.3 S
Corporation.............................................................
271
13.7.3.1 Cash
Distributions.................................... 271
13.7.3.2 Distributions of
Property.......................... 273
13.7.3.3 Self-Employment
Tax............................. 273
13.7.4 C
Corporation............................................................
273
13.7.4.1 Cash
Distributions.................................... 273
13.7.4.2 Distributions of
Property.......................... 273
13.8 LIQUIDATION AND
TERMINATION................................... 274
13.8.1 General Partnership / Limited Liability
Partnership... 274
13.8.2 Limited
Partnership....................................................
275
13.8.3 Limited Liability
Company......................................... 275
13.8.4 S
Corporation.............................................................
275
13.8.5 C
Corporation............................................................
275
13.9 CURRENT ISSUES FOR CONTRACTORS AND DESIGN
PROFESSIONALS - AMERICAN JOBS CREATION ACT OF
2004....................................................
275
13.9.1 Deduction for Domestic
Producers................................. 276
13.9.2 S
Corporations.................................................................
276
13.10 PERSONAL LIABILITY FOR CORPORATE DEBTS......... 276
13.11
CONCLUSION......................................................................
277
CHAPTER FOURTEEN
INSURANCE
14.1
INTRODUCTION..................................................................
281
14.2 COVERAGES AND
EXCLUSIONS..................................... 281
14.2.1 Commercial General Liability
Policies............................. 281
14.2.2
Coverages.......................................................................
282
14.2.2.1 Bodily Injury or Property Damage
14.2.2.1.1 Bodily
Injury....................................... 283
14.2.2.1.2 Property Damage`.............................
283
14.2.2.2 Diminution in
Value........................................ 284
14.2.2.3 Loss of
Use.................................................... 285
14.2.2.4 Removal of Defective Work
......................... 286
14.2.3 Occurrence
.................................................................
288
14.2.3.1 Faulty Work as an
Occurrence..................... 288
14.2.3.2 Occurrence Must Actually Cause
Damage...................................................
289
14.2.3.3 ISO Additional Insured Endorsement...... 289
14.2.4
Exclusions........................................................................
291
14.2.4.1 Damage to Property
..................................... 291
14.2.4.2 Exclusion
(j)(5)............................................... 292
14.2.4.3 Exclusion
(j)(6)............................................... 292
14.2.4.4 Damage to Your
Product............................... 293
14.2.4.5 Damage to Your Work
.................................. 294
14.2.4.6 Damage to Property Not Physically
Injured
..................................................... 294
14.2.4.7.... Recall of Products, Work, or Impaired Property
296
14.2.4.8.... Endorsement Excluding Professional
Liability 297
14.2.5 Policy
Conditions.............................................................
298
14.2.5.1 Cooperation and Timely
Notice..................... 298
14.2.5.1.1 Payment
........................................... 298
14.2.5.1.2 Burden of Proof.................................
299
14.2.5.1.3 Attorneys’
Fees.................................. 299
14.2.5.2 Builder’s Risk
Policy...................................... 300
14.2.5.3 Professional Liability
Policy........................... 301
14.2.5.4 Wrap-Up Policy
............................................ 301
14.2.6 Additional Insured and Indemnity
Obligations................. 302
14.2.6.1 Insured
Obligations........................................ 302
14.2.6.2 Indemnity
Obligations.................................... 302
14.3
CONCLUSION......................................................................
303
CHAPTER FIFTEEN
Construction Lending
15.1 INTRODUCTION
.................................................................
307
15.2 LOAN
DOCUMENTATION..................................................
307
15.2.1 Notice of Duty to Pay
Claims.......................................... 308
15.2.2 Preserving Priorities of Subsequent Advances on the
Construction Loan 308
15.2.3 Loan Funding and
Disbursements................................... 310
15.2.4 Change
Orders................................................................
311
15.2.5 Lien Waivers
.................................................................
311
15.2.6 Final Inspection and Closing or
Sale............................... 311
15.3 THE LENDER’S RESPONSE TO LIEN
FILINGS............... 312
15.3.1 Responding to the Recording of a
Construction
Lien.......................................................
312
15.3.2 Enforcing Loan
Documents....................................... 313
15.3.3 Avoiding Involvement with Third Party
Disputes....... 313
15.3.4 Lender’s Legal Options in Response to a Construction
Lien 315
15.3.5 Securing the
Project..................................................
316
15.3.6 Enforcement
Options................................................
316
15.4 CONCLUSION 318
