TENNESSEE CONSTRUCTION LAW
Table of Contents
FOREWORD
xi
ACKNOWLEDGEMENTS
xii
ABOUT THE
AUTHORS xiii
CHAPTER ONE
SOURCES OF TENNESSEE CONSTRUCTION LAW
1.1. Statutes And Regulations
1.2. The Common Law
1.3. Local Ordinances
CHAPTER TWO
TENNESSEE BUSINESS ENTITY TYPES
2.1. Introduction
2.2. Sole Proprietorship
2.2.1 Structural Considerations
2.2.2 Tax Considerations
2.3. Partnerships
2.3.1 Structural Options
2.3.1.1 General Partnerships
2.3.1.2 Limited Partnerships
2.3.2 Partnership Tax Considerations
2.4. Joint Ventures
2.5. Limited Liability Company
2.5.1 Structural Considerations
2.5.2 Tax Considerations
2.5.3 LLC Advantages
2.6. Corporations
2.6.1 Structural Considerations
2.6.2 Tax Considerations
2.7. Piercing The Corporate Or LLC Veil
CHAPTER THREE
CLAIMS ARISING FROM WATER DRAINAGE
3.1. Temporary Nuisance Claims
3.2. Permanent Nuisance/Inverse Condemnation Claims
3.3. Injunctive Relief Claims
3.4. Summary
CHAPTER FOUR
DESIGN PROFESSIONAL AND SURVEYOR REGISTRATION AND LIABILITY
4.1. Design Professional Registration Statutes, Tennessee Code Annotated §§ 62-2-101, et seq.
4.1.1 Board Of Architectural And Engineering Examiners
4.1.2 Purpose
4.1.3 Qualifications
4.1.3.1 Architects
4.1.3.2 Engineers
4.1.3.3 Landscape Architects
4.1.3.4 Interior Designers
4.1.3.5 Firms
4.1.4 Exemptions
4.1.5 Enforcement
4.1.6 Investigation Of Potential Violations
4.2. Design Professional Rules And Regulations, 0120-02-.01, et seq. – “Rules Of Professional Conduct”
4.3. Expert Testimony By Design Professionals
4.4. Land Surveyors
4.4.1 Surveyor Practice Rights/Immunities
4.4.2 Qualifications
4.4.3 Unauthorized Practice
4.4.4 Offenses
4.4.5 Surveyor Statute Of Limitation/Repose
4.5. Design Professional Liability
4.5.1 Exposure To Suit Without Privity Of Contract
4.5.2 Standard Of Care Applicable To Design Professionals And Surveyors
4.5.3 Enforceability Of Limitation Of Liability Clauses
4.6. Actions By The Tennessee State Board Of Architectural And Engineering Examiners
CHAPTER FIVE
CONTRACTOR AND HOME INSPECTOR LICENSING, INDEMNITY AND PAYMENT
5.1. Contractor Licensing Statutes, Tennessee Code Annotated §§ 62-6-101 et seq.
5.2. Board For Licensing Contractors
5.3. Subcontractor Licensing
5.3.1 Who Is Required To Be Licensed?
5.3.2 Who Is Not Required To Be Licensed?
5.3.3 Classifications
5.3.4 Residential Contracting
5.3.5 Application For Licensure
5.3.6 Rules Of The Tennessee Board For Licensing Contractors
5.4. Construction Defect Statute, Tennessee Code Annotated § 66-36-101, et seq.
5.5. Retainage Statute, Tennessee Code Annotated § 66-34-103, 104
5.5.1 Payment of Retainage/Penalties
5.5.2 National Housing Act Preempts Tennessee Code Annotated § 66-34-103
5.6. Necessity Of Contractor License
5.6.1 Offenses
5.6.2 Enforcement
5.6.3 Exemptions
5.7. Unlicensed Contractors
5.7.1 Unlicensed Contractor – Definition
5.7.2 Unlicensed Contractor Ability To Obtain Payment – Civil And Criminal Liability
5.8. Construction Industry Indemnity
5.9. Home Improvement Contractors
CHAPTER SIX
BUILDING CODES AND PERMITS
6.1. Applicable Codes
6.2. Enforcement Of Codes
6.2.1 Enforcement Is Generally Localized
6.2.2 Building Inspectors
6.2.3 Certificates Of Occupancy
6.3. Building Permits
6.3.1 When Is A Permit Required
6.3.2 Process To Obtain A Permit
6.3.3 Other Permits
6.4. Buildings That Must Be Designed By A Registered Architect Or Engineer
CHAPTER SEVEN
BIDDING AND OTHER PROCUREMENT METHODS
7.1. Bid Statutes
7.2. Conflicts Of Interest
7.3. Public Contracting
7.4. Competitive Bidding
7.4.1 Lowest Responsible Bid/Lowest And Best Bid
7.4.2 Compliance With Bid Documents
7.4.3 Prequalification
7.4.4 Solicitation
7.5. Diversity Participation in Projects
7.6. Specification
7.7. Awarding The Contract
7.8. Rejection Of Bid
7.9. Example Of The Bidding Process - Metropolitan Government Of Nashville And Davidson County
7.10. Exemption From Competitive Bidding
7.11. Contracts Below The Threshold Amounts
7.12. Professional Service Contracts
7.13. Emergency Purchases
7.14. Challenging A Bid Award
7.15. Remedies
7.16. Bid Bonds
7.17. Construction Management, Tennessee Code Annotated §§ 49-2-203; 12-4-107
7.18. Public School Projects, Tennessee Code Annotated § 49-2-203
7.19. State Highway Construction Projects, Tennessee Code Annotated §§ 54-5-101 et seq.
7.20. Bid Mistakes
CHAPTER EIGHT
CONSTRUCTION CONTRACT LAW AND REMEDIES
8.1. Contract Interpretation Principles
8.2. Types Of Contracts – Written And Verbal
8.2.1 Implied Contracts And Duties
8.2.2 Enforcement Of Verbal Agreements/Statute Of Frauds
8.2.3 The Parol Evidence Rule
8.2.4 Intent Of The Parties
8.3. Common And Technical Meanings Of Contract Language
8.4. Contract Formation And Interpretation
8.4.1 Formation
8.4.2 Consideration
8.4.3 Controlling Law
8.4.4 Offer
8.4.5 Acceptance
8.4.6 Revocation Of Offer
8.4.7 Counter-Offer
8.4.8 Contract Enforcement - Defenses
8.4.9 Capacity To Contract
8.4.10 Authority
8.4.11 Unilateral Mistake
8.4.12 Mutual Mistake
8.4.13 Fraud
8.4.14 Misrepresentation
8.4.15 Duress
8.4.16 Undue Influence
8.4.17 Unconscionability
8.4.18 Failure To Execute Written Contract
8.4.19 Contract To Be Interpreted As A Whole
8.4.20 Course Of Performance Or Prior Dealings
8.4.21 Ambiguous Terms Construed Against The Drafter
8.4.22 Specific Over General Terms
8.4.23 Handwritten Terms Preferred Over Typed Or Printed Terms
8.4.24 Exclusion By Inclusion
8.5. Choice Of Law And Tennessee’s Forum Selection Clauses, Effect Of Tennessee Code Annotated § 66-11-208
8.5.1 Viability Of Tennessee Code Annotated § 66-11-208 Under Federal Arbitration Act, 9 U.S.C. § 11
8.6. “No Damage For Delay” Clauses
8.7. Contract Breach
8.7.1 Elements Of Breach Of Contract
8.7.2 First Material Breach Doctrine
8.7.3 Notice Of Claims; Notice Of Defect/Opportunity To Cure
8.7.4 Implied Duty Of Good Faith And Fair Dealing
8.7.5 “Cost Plus” Contracts
8.7.6 Spearin Doctrine In Tennessee
8.7.7 “Eichleay Formula” And “Loss Of Efficiency” Damages In Tennessee
8.7.8 “Economic Loss” Doctrine in Tennessee
8.8. Damages
8.8.1 Recovery Of Attorney Fees
8.8.2 Liquidated Damages
8.8.3 Prejudgment Interest
8.8.4 Quantum Meruit/Unjust Enrichment Claims
8.8.5 Damages Generally
8.8.6 Punitive Damages
8.9. Change Orders
8.10. “Paid When/If Paid” Clause Enforcement
CHAPTER NINE
LIMITATIONS OF ACTION AND CONSTRUCTION INDUSTRY STATUTE OF REPOSE
9.1. The “Accrual” Limitation Statutes
9.1.1 Slander, Personal Injury And Wrongful Death, Tennessee Code Annotated § 28-3-103, 104
9.1.2 Property Damage, Tennessee Code Annotated § 28-3-105
9.1.3 Breach Of Contract, Tennessee Code Annotated § 28-3-109
9.1.4 Actions Against Surveyors, Tennessee Code Annotated § 28-3-114
9.2. Construction Industry Statute Of Repose, Tennessee Code Annotated § 28-3-201 et seq.
9.2.1 Exceptions To Tennessee Construction Industry Statute Of Repose
9.3. Application Of Statutes Of Limitations And Statute Of Repose To State Of Tennessee And Subdivisions Of The State
9.3.1 Application To The State
9.3.2 Application To Subdivisions Of The State
9.4. Effect Of Tennessee Code Annotated § 28-1-114 On Otherwise Time Barred Cross Claims, Counter Claims, Third Party Claims
9.5. Tennessee Consumer Protection Act (“TCPA”), Tennessee Code Annotated § 47-18-101 et seq.
CHAPTER TEN
RISK MANAGEMENT: INSURANCE INDEMNITY
10.1. Types Of Insurance
10.2. Choice Of Law And General Rules Of Insurance Policy Interpretation Applied By Tennessee Courts
10.3. The Duty To Defend
10.4. The Duty To Indemnify
10.5. Policy Exclusions Generally
10.6. The Commercial General Liability Policy
10.6.1 CGL
10.6.1.1 Exclusion a – Expected Or Intended Injury
10.6.1.2 Exclusion b - Contractual Liability
10.6.1.3 Exclusion f – Pollution
10.6.1.4 Exclusion j - Damage To Property
10.6.1.5 Exclusion k - Damage To Your Product
10.6.1.6 Exclusion l - Your Work
10.6.1.7 Exclusion m - Damage To Impaired Property Or Property Not Physically Injured
10.7. Builders’ Risk
10.8. Professional Liability Coverage
10.9. Exclusion Issues
10.9.1 Claims Made/Claims – Occurrence Exclusions
10.9.2 Damage Exclusions (Mold)
10.9.3 The Additional Insured Considerations
10.10. Insurance And Contractual Indemnity Agreements
10.11. Punitive Damage Claims
10.12. Bad Faith And Tennessee Consumer Protection Act Claims Against Insurers
CHAPTER ELEVEN
BONDS, BOND CLAIMS, PROMPT PAY ACT CLAIMS
11.1. Types Of Bonds
11.1.1 Bid Bonds
11.1.2 Payment Bonds
11.1.3 Performance Bonds
11.1.4 Statutory V. Common Law Bonds
11.1.4.1 Highway Project Bonds
11.1.5 Miller Act Bonds
11.2. Bond Indemnity Agreements
11.3. Tennessee Prompt Pay Act
CHAPTER TWELVE
CONSTRUCTION LIENS AND LIEN CLAIMS
12.1. Definitions
12.1.1 Tennessee’s Lien Statute Structure, Tennessee Code Annotated §§ 66-11-101 et seq.
12.1.2 Critical Definitions And Procedures
12.1.3 Significance Of “Prime Contractor” And “Remote Contractor” Claimant Categories
12.1.4 General Lien Requirements
12.1.5 “Residential Real Property” – Lien Claim Restrictions
12.2. Lien Claim Requirements
12.2.1 Prime Contractor Lien Notice Requirements (Tennessee Code Annotated §§ 66-11-102, 103, 104, 105, 106)
12.2.2 Remote Contractor Lien – Notice Of Nonpayment Requirements (Tennessee Code Annotated §§ 66-11-115, 145)
12.2.3 Importance Of Notice Of Nonpayment For Remote Contractors
12.3. Enforcement Of Liens
12.3.1 Methods Of Enforcement (Tennessee Code Annotated §§ 66-11-126, 134)
12.3.2 Action On Contract Not Precluded (Tennessee Code Annotated § 66-11-125)
12.3.3 Suits Against Personal Representative (Tennessee Code Annotated § 66-11-127)
12.3.4 Enforcement Against Persons Adjudicated Incompetent (Tennessee Code Annotated § 66-11-128)
12.3.5 Demand For Enforcement Of Lien (Tennessee Code Annotated § 66-11-130)
12.3.6 Joinder Of Petitioners (Tennessee Code Annotated § 66-11-131)
12.3.7 Consolidation Of Actions (Tennessee Code Annotated §§ 66-11-132, 133)
12.3.8 Release Of Liens Required (Tennessee Code Annotated § 66-11-135)
12.4. Lien Priorities (Tennessee Code Annotated §§ 66-11-107, 108, 109, 110, 111, 112, 113, 114)
12.5. Notice Of Completion – Effect On Lien Claims (Tennessee Code Annotated § 66-11-143)
12.6. Damages Subject To Lien Claims (Tennessee Code Annotated § 66-11-120)
12.7. Use Of Payment Bond To Remove Private Project From Lien Statutory Scheme (Tennessee Code Annotated § 66-11-124 (C))
12.8. “Bonding Off” Filed Liens (Tennessee Code Annotated §§ 66-11-135, 136, 142)
12.9. Exaggeration Of Liens (Tennessee Code Annotated § 66-11-139)
12.10. Construction Of Liens (Tennessee Code Annotated § 66-11-148)
12.11. Service Of Lien Claims (Tennessee Code Annotated § 66-11-149)
12.12. Prohibited Liens: Tennessee Code Annotated § 66-11-150
12.13. Consequences Of Improper Liens And Misapplication Of Loan Proceeds: Tennessee Code Annotated §§ 66-11-137, 138, 139, 140
12.14. Miscellaneous Provisions (Tennessee Code Annotated §§ 66-11-141, 147)
12.14.1 Well-Drilling
12.14.2 Liens on Gas, Oil or Other Mineral Leaseholds
CHAPTER THIRTEEN
DISPUTE RESOLUTION
13.1. Tennessee Court System
13.1.1 General Sessions Courts
13.1.2 Chancery Courts
13.1.3 Circuit Courts
13.2. Arbitration
13.2.1 Tennessee Uniform Arbitration Act
13.2.2 Tennessee Uniform Arbitration Act In Practice
13.2.3 Enforcement Of Federal Arbitration Act In Tennessee Courts
13.2.4 Potential Disadvantages of Arbitration
13.3. Mediation
13.3.1 Commercial versus Residential Project Mediation – Considerations
13.3.2 Mediation Of Claims In/Outside Court Litigation Or Arbitration
13.3.3 Industry Groups – Practical Mediation Considerations
13.3.3.1 Designers
13.3.3.2 Prime Contractors
13.3.3.3 Subcontractors
13.3.3.4 Suppliers
13.3.3.5 Lien Claims
CHAPTER FOURTEEN
RESIDENTIAL CONSTRUCTION
14.1. Requirement Of Notice Of Defect/Opportunity To Cure
14.2. Application Of Lien Claims To Residential Projects – Restrictions
14.3. Implied Warranty of Habitability/Disclaimer Of Warranty
14.4. Home Improvement Contractors
14.5. Home Inspectors
14.5.1 Licensure
14.5.2 Home Inspector Limitation Of Liability
APPENDIX – PERTINENT TENNESSEE CONSTRUCTION INDUSTRY STATUTES AND REGULATIONS
CONSTRUCTION INDUSTRY CONTACT INFORMATION
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