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California Construction Contracts, Defects, and Litigation

The expert advice and analysis and practical forms you need for both transactional and litigation practice, including insurance and indemnity agreements. Authors include James Acret, Joan Cambray, Ted Senet, Richard Wittbrodt, Timothy R. Sullivan, and Gordon Hunt.

The expert advice and analysis and the practical forms you need for both transactional and litigation practice, including insurance and indemnity agreements. Authors include James Acret, Joan Cambray, Ted Senet, Richard Wittbrodt, Timothy R. Sullivan, and Gordon Hunt.

  • Drafting and enforcing construction contracts
  • Construction defect litigation: theories of tort and contract liability; insurance and indemnity
  • Management of design-build projects
  • SB 800 and the Calderon prelitigation procedures
  • Green building: LEED, energy consumption & greenhouse gas standards
  • Contractor licensing; remedies for unlicensed work
  • Public works contracts: bidding rules, disputes, and remedies
  • Arbitration, mediation, and case management
  • Architects and engineers: duties and liabilities
  • Sample attorney-drafted forms
  • Detailed coverage of bankruptcy issues in construction projects
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The expert advice and analysis and the practical forms you need for both transactional and litigation practice, including insurance and indemnity agreements. Authors include James Acret, Joan Cambray, Ted Senet, Richard Wittbrodt, Timothy R. Sullivan, and Gordon Hunt.

  • Drafting and enforcing construction contracts
  • Construction defect litigation: theories of tort and contract liability; insurance and indemnity
  • Management of design-build projects
  • SB 800 and the Calderon prelitigation procedures
  • Green building: LEED, energy consumption & greenhouse gas standards
  • Contractor licensing; remedies for unlicensed work
  • Public works contracts: bidding rules, disputes, and remedies
  • Arbitration, mediation, and case management
  • Architects and engineers: duties and liabilities
  • Sample attorney-drafted forms
  • Detailed coverage of bankruptcy issues in construction projects

1

Contractor Licensing; Remedies for Unlicensed Work

James Acret

Sara H. Kornblatt

  • I.  INTRODUCTION
    • A.  Scope of Chapter  1.1
    • B.  State Regulation of Contractors  1.2
    • C.  Reciprocity With Other States  1.2A
    • D.  Contractor Defined
      • 1.  Statutory Definition  1.3
      • 2.  Exceptions to Licensing Law
        • a.  Statutory Exemptions  1.3A
        • b.  Common Law Exceptions  1.3B
      • 3.  Classification of Contractors  1.4
        • a.  General Engineering Contractor  1.5
        • b.  General Building Contractor  1.6
        • c.  Specialty Contractor  1.7
        • d.  License Classifications in Public Works  1.7A
        • e.  Asbestos and Hazardous Waste Certifications  1.7B
        • f.  Overlapping Licenses  1.8
      • 4.  Partnerships, Corporations, and Joint Ventures  1.9
      • 5.  Limited Liability Companies (LLCs)  1.9A
  • II.  LICENSING REQUIREMENTS
    • A.  Qualifications for Contractor’s License
      • 1.  Knowledge and Experience Requirements  1.10
      • 2.  Use of Qualifying Individuals  1.11
      • 3.  Disassociation of Qualifying Individual  1.11A
      • 4.  License Bonds
        • a.  With Application  1.12
        • b.  Additional Bond Required for Unsatisfied Judgments  1.13
        • c.  After Suspension or Revocation  1.14
        • d.  Bond Claims  1.15
        • e.  License Bond Litigation  1.16
          • (1)  Statutes of Limitations  1.17
          • (2)  Bases of Liability  1.18
          • (3)  Responsible Managing Employee’s Bond  1.19
          • (4)  Disciplinary Bond  1.20
          • (5)  Effect of Unsatisfied Claims  1.21
        • f.  Form Provision: Allegation re Cause of Action Against Surety on License Bond  1.22
    • B.  When License Is Required
      • 1.  Covered Activities  1.23
      • 2.  Exempt Activities
        • a.  Employees, Architects, and Engineers  1.24
        • b.  Owner/Builders  1.25
        • c.  Finished Products and Home Improvement Goods  1.26
        • d.  Equipment Renters  1.27
        • e.  Small Operations  1.28
        • f.  Construction Managers (Private Works)  1.28A
  • III.  VIOLATIONS OF CONTRACTORS’ STATE LICENSE LAW  1.29
    • A.  Unlicensed Activities
      • 1.  Criminal Penalties
        • a.  Performing Work Without a License  1.30
          • (1)  Misdemeanor Liability  1.30A
          • (2)  Natural Disaster Areas  1.30B
        • b.  Advertising for Work  1.31
        • c.  Fraudulent Use of Another License Number  1.32
        • d.  Unlawful Sale of Equipment, Supplies, or Services  1.33
        • e.  Asbestos-Related Work  1.34
        • f.  Home Improvement Work  1.35
      • 2.  Injunctive Relief  1.36
      • 3.  Abatement Orders
        • a.  Citation Procedure  1.37
        • b.  Appeal  1.38
        • c.  Citations Relating to Public Works  1.39
      • 4.  Administrative Remedies; Fraudulent Use of Licenses  1.39A
      • 5.  Other Sanctions; Owner Liability
        • a.  Unlicensed Persons  1.40
        • b.  Licensed Persons Contracting With Unlicensed Persons  1.41
        • c.  Citation Procedure  1.42
        • d.  Liability of Owner Who Employs Unlicensed Contractor  1.43
          • (1)  Workers’ Compensation and Tort Liability  1.43A
          • (2)  Liability Under Cal-OSHA  1.43B
      • 6.  Unemployment Insurance Code Sanctions  1.44
    • B.  Licensed Activities
      • 1.  Grounds for Disciplinary Action  1.45
        • a.  Abandonment of Project  1.46
        • b.  Diversion of Funds  1.47
        • c.  Failure to Pay Subcontractors  1.48
        • d.  Departure From Work Standards or Plans  1.49
        • e.  Violation of Safety Requirements  1.50
        • f.  Violation of State and Local Laws  1.51
        • g.  Failure to Keep Records  1.52
        • h.  Refusal to Cooperate With Registrar of Contractors  1.53
        • i.  Misrepresentation to Obtain License  1.54
        • j.  Avoidance of Financial Obligations  1.55
        • k.  Aiding Evasion of Law  1.56
        • l.  Fraud  1.57
        • m.  Contracting Under Suspended or Expired License  1.58
        • n.  Acting Outside License Classification  1.59
        • o.  Contracting With Unlicensed Persons  1.60
        • p.  Lack of Diligence  1.61
        • q.  Withholding Money  1.62
        • r.  Use of Unenforceable Contract Provisions  1.63
        • s.  Disassociation of Qualifying Officer or Employee  1.64
        • t.  Failure to Obtain Local Permit  1.65
        • u.  Disciplinary Action by Another State  1.66
        • v.  Failure to Give Notices Required Under Construction Statutes
          • (1)  Subcontract Amount Exceeds $400  1.67
          • (2)  Subcontractor Owing Past Due Wages or Benefits; CC §3097(c)(6)  1.68
          • (3)  Contractor or Subcontractor Owing Past Due Wages or Benefits; CC §3097(k)  1.69
          • (4)  Home Improvements Contracts  1.70
        • w.  Failure to Reimburse License Bond Surety  1.71
        • x.  Failure to Maintain Workers’ Compensation Insurance  1.72
      • 2.  Investigation
        • a.  Authority of Registrar  1.73
        • b.  Sources of Information for Practitioners  1.74
      • 3.  Disciplinary Proceedings
        • a.  Generally  1.75
        • b.  Filing Deadlines  1.76
        • c.  Accusation Procedure  1.77
          • (1)  Pleadings  1.77A
          • (2)  Hearing  1.77B
          • (3)  Ruling  1.77C
          • (4)  Judicial Review  1.77D
          • (5)  Notice of Decision  1.77E
        • d.  Citation Procedure
          • (1)  Issuance  1.78
          • (2)  Licensee’s Right to Contest  1.79
          • (3)  Effect of Failure to Comply With Citation  1.80
        • e.  Arbitration  1.81
          • (1)  Violations Subject to Arbitration  1.81A
          • (2)  Notification to Parties  1.81B
          • (3)  Referral to the Arbitrator  1.81C
          • (4)  Procedures at Arbitration  1.81D
          • (5)  Entry of Award  1.81E
          • (6)  Compliance With Award  1.81F
      • 4.  License Suspension or Revocation
        • a.  Grounds  1.82
          • (1)  Failure to Comply With Registrar’s Order  1.82A
          • (2)  Failure to Maintain Workers’ Compensation Insurance  1.82B
          • (3)  Failure to Maintain Good Standing With the Secretary of State  1.82C
          • (4)  Misconduct During Probationary Period  1.82D
          • (5)  Failure to Comply With Citation  1.82E
        • b.  Reinstatement of Suspended License  1.83
      • 5.  Civil Liability for License Law Violations  1.84
  • IV.  UNLICENSED CONTRACTORS’ LITIGATION
    • A.  Rule: Recovery Not Permitted  1.85
      • 1.  No Defense in Equity  1.85A
      • 2.  Alternative Remedies  1.85B
    • B.  Refund of Payments May Be Ordered  1.86
    • C.  Proof of Licensure  1.87
    • D.  Certificate of Licensure Required  1.87A
    • E.  Exceptions
      • 1.  Parties Not Subject to Licensing Law  1.88
      • 2.  De Minimis Activity  1.89
      • 3.  Out-of-State Work  1.90
      • 4.  Offsets  1.91
      • 5.  Indemnity and Contribution  1.92
      • 6.  Fraud and Other Tort Actions  1.93
      • 7.  Breach of Warranty  1.94
      • 8.  Substantial Compliance  1.95
      • 9.  Use of Fictitious Business Name in the Contract  1.95A
      • 10.  Arbitration  1.95B
  • V.  HOME IMPROVEMENT CONTRACTORS  1.96
  • VI.  STATE LICENSING REQUIREMENTS; FEDERAL CONTRACT WORK  1.97

2

Drafting Construction Contracts

James Acret

Barbara R. Gadbois

  • I.  PRECONSTRUCTION CONTRACT REVIEW BY ATTORNEY
    • A.  Organizational and Project Planning Requirements  2.1
    • B.  Land Acquisition Factors  2.2
      • 1.  Land Use Laws  2.3
      • 2.  Hazardous and Toxic Waste Laws  2.4
      • 3.  Other Environmental Laws  2.5
      • 4.  Other Relevant Factors  2.6
    • C.  Contractor Selection Factors  2.7
  • II.  CONSTRUCTION CONTRACT PROCESS
    • A.  Bidding  2.8
      • 1.  Description and Preparation of Bidding Documents  2.9
      • 2.  Bidding Instructions  2.10
    • B.  Types of Construction Contracts  2.11
      • 1.  Contracts Classified by Method of Pricing
        • a.  Lump-Sum Contracts  2.12
        • b.  Cost-Plus Contract  2.13
        • c.  Cost-Plus With Guaranteed Maximum Price  2.14
      • 2.  Contracts Classified by Extent of Drawings and Specifications
        • a.  Complete Drawings and Specifications Furnished by Owner  2.15
        • b.  Design-Build Contracts
          • (1)  When Customarily Used  2.16
          • (2)  How Design-Build Contracts Work  2.17
        • c.  Fast-Track Contracts  2.18
    • C.  Contracting for Separate Construction Management  2.19
    • D.  Construction Contract Documents  2.20
      • 1.  Prime Contract  2.21
        • a.  Outline Specifications  2.21A
        • b.  Performance Specifications  2.21B
        • c.  Project Manual  2.21C
      • 2.  Attorney’s Role in Preparing Contract  2.22
      • 3.  Standard Construction Contracts  2.23
      • 4.  Mandatory Payment Bond  2.24
  • III.  CONTRACT FORMS AND PROVISIONS  2.25
    • A.  Using AIA Forms  2.26
    • B.  Rules of Interpretation  2.27
      • 1.  Unfair Contractual Provisions (Implied Covenant of Good Faith)  2.28
      • 2.  Unconscionable Provisions; Exculpatory Clauses  2.29
    • C.  Legal and Practical Considerations
      • 1.  Payments
        • a.  Progress Payments  2.30
        • b.  Retention  2.31
      • 2.  Independent Investigation  2.32
      • 3.  Substantial Completion  2.33
      • 4.  Delay Damages
        • a.  Delays Caused by Contractor  2.34
        • b.  Delays Beyond Contractor’s Control  2.35
        • c.  Liquidated Damages  2.36
      • 5.  Review of Drawings and Specifications  2.37
      • 6.  Mechanics Liens  2.38
      • 7.  Change Orders
        • a.  Written Change Orders  2.39
        • b.  Authorization of Change Orders  2.40
        • c.  Misleading Drawings and Specifications  2.41
        • d.  Waiver of Surety’s Right to Approve Change Orders  2.42
      • 8.  Allowances  2.43
      • 9.  Notice of Completion  2.44
      • 10.  Insurance  2.45
        • a.  Property Insurance  2.46
        • b.  Liability Insurance  2.47
        • c.  Subrogation  2.48
        • d.  Lender’s Control of Insurance Proceeds  2.49
        • e.  Payments Following Destruction  2.50
      • 11.  Warranty of Work and Correction Guaranty  2.51
      • 12.  Indemnity  2.52
      • 13.  Prohibition Against Assignment  2.53
      • 14.  Contractor’s License Notice  2.54
      • 15.  Governing Law  2.55
      • 16.  Right to Stop Work  2.56
      • 17.  Owner’s Right to Audit Contractor’s Books  2.57
    • D.  Basic Prime Contract Between Owner and Contractor and Additional Optional Clauses  2.58
      • 1.  Form: Introduction; Parties  2.59
      • 2.  Form: Description of Work  2.60
      • 3.  Form: Property Lines  2.61
      • 4.  Form: Payment (Lump-Sum)  2.62
      • 5.  Form: Time for Start and Completion  2.63
      • 6.  Form: Delay Beyond Contractor’s Control  2.64
      • 7.  Form: Liquidated Damages for Delay  2.65
      • 8.  Form: Drawings, Specifications, Permits, and Fees  2.66
      • 9.  Form: Payment by Contractor for Labor and Material  2.67
      • 10.  Form: Interpretation of Contract, Drawings, and Specifications  2.68
      • 11.  Form: Extra Work, Changes, and Deletions  2.69
      • 12.  Form: Allowances  2.70
      • 13.  Form: Completion and Occupancy  2.71
      • 14.  Form: Insurance  2.72
      • 15.  Form: Warranty of Work and Correction Guaranty  2.73
      • 16.  Form: Indemnity  2.74
      • 17.  Form: Arbitration  2.75
      • 18.  Form: Time of the Essence  2.76
      • 19.  Form: Cleanup  2.77
      • 20.  Form: Attorney Fees  2.78
      • 21.  Form: Assignment  2.79
      • 22.  Form: Other Documents  2.80
      • 23.  Form: Contractor’s License Notice  2.81
      • 24.  Form: Notice  2.82
      • 25.  Form: Integration  2.83
      • 26.  Form: Governing Law  2.84
      • 27.  Form: Signatures; Contractor’s License Number  2.85
      • 28.  Optional Additional Clauses
        • a.  Form: Independent Investigation  2.86
        • b.  Form: Right to Stop Work  2.87
        • c.  Form: No Right to Stop Work  2.88
        • d.  Form: Option to Terminate—Time of the Essence  2.89
        • e.  Form: Right to Demand Bond  2.90
        • f.  Form: Corrective or Repair Work  2.91
        • g.  Form: Right to Approve Financial Arrangements  2.92
        • h.  Form: Contract Not Conditioned on Financing  2.93
        • i.  Form: Contract Conditioned on Financing  2.94
        • j.  Form: Repossession of Materials  2.95
        • k.  Form: Personal Liability  2.96
        • l.  Form: Building Department Requirements  2.97
        • m.  Form: Payments Not Constituting Approval  2.98
        • n.  Form: Final Payment Waives Claims  2.99
        • o.  Form: Waiver of Surety’s Right to Approve Change Orders  2.100
    • E.  Home Improvement Contracts
      • 1.  Business and Professions Code Requirements
        • a.  Definitions  2.101
        • b.  Required Elements  2.102
        • c.  Required Notices  2.103
          • (1)  Commercial General Liability (CGL) Insurance Notice  2.103A
          • (2)  Workers’ Compensation Insurance Notice  2.103B
          • (3)  Extras and Change Orders Notices  2.103C
          • (4)  Mechanics Lien Warning  2.103D
          • (5)  Contractors State License Board (CSLB) Notice  2.103E
          • (6)  3-Day Right to Cancel  2.103F
          • (7)  Notice of Cancellation (3-Day)  2.103G
          • (8)  7-Day Right to Cancel  2.103H
          • (9)  Notice of Cancellation  2.103I
        • d.  Additional Requirements  2.104
        • e.  Extra Work and Change Orders  2.105
        • f.  Contracts Void for Failure to Comply  2.106
        • g.  Oral Contracts Upheld  2.107
        • h.  Arbitration  2.108
        • i.  Penalties for Violation  2.109
      • 2.  Form: Home Improvement Contract  2.110
      • 3.  Service and Repair Contracts  2.111
        • a.  Commercial General Liability (CGL) Insurance Notice  2.111A
        • b.  Workers’ Compensation Insurance Notice  2.111B
        • c.  Notice to Buyer  2.111C
        • d.  Additional Requirements  2.111D
      • 4.  Unruh Act  2.112
        • a.  Statutory Notice Requirements  2.113
        • b.  Form Provision: Payment and Financing  2.114
        • c.  Form Provision: Acknowledgment  2.115
      • 5.  Federal Truth in Lending Act  2.116
        • a.  Form Provision: Disclosure Provisions  2.117
        • b.  Rescission Rights
          • (1)  Consumer Rescission Rights  2.118
          • (2)  Form: Notice of Right of Rescission  2.119
    • F.  Construction Contracts for Single-Family Dwellings  2.120
    • G.  Specifications  2.121
  • IV.  BASIC SUBCONTRACT BETWEEN PRIME CONTRACTOR AND SUBCONTRACTOR  2.122
    • A.  Jurisdiction  2.123
    • B.  Subcontract
      • 1.  Form: Parties and Introductory Clause  2.124
      • 2.  Form: Description of Work  2.125
      • 3.  Form: Subcontractor Investigations  2.126
      • 4.  Form: Incorporation of Prime Contract  2.127
      • 5.  Form: Subcontract Payment  2.128
      • 6.  Form: Payment Schedule  2.129
      • 7.  Form: Effect of Payments  2.130
      • 8.  Form: Payments in Trust  2.131
      • 9.  Form: Commencement and Progress of Work; Delay  2.132
      • 10.  Form: Protection of Work and Property  2.133
      • 11.  Form: Extra Work, Changes, and Deletions  2.134
      • 12.  Form: Subcontractor’s Claims  2.135
      • 13.  Form: Guaranty of Work  2.136
      • 14.  Form: Bond Requirements  2.137
      • 15.  Form: Superintendent  2.138
      • 16.  Form: Cleanup  2.139
      • 17.  Form: Job Safety  2.140
      • 18.  Form: Taxes, Licenses, and Fees  2.141
      • 19.  Form: Labor Matters  2.142
      • 20.  Form: Arbitration  2.143
      • 21.  Form: Alternative Equipment, Material, or Method  2.144
      • 22.  Form: Insurance  2.145
      • 23.  Form: Indemnity  2.146
      • 24.  Form: Default and Termination  2.147
      • 25.  Form: Releases and Proof of Payment  2.148
      • 26.  Form: Attorney Fees  2.149
      • 27.  Form: Assignment  2.150
      • 28.  Form: Bankruptcy  2.151
      • 29.  Form: Notices  2.152
      • 30.  Form: Integration  2.153
      • 31.  Form: Governing Law  2.154
      • 32.  Form: Contractors’ License Notice, Signatures, and License Number  2.155
  • V.  HOME SOLICITATION CONTRACTS
    • A.  What Constitutes Home Solicitation Contract  2.156
    • B.  Exclusions  2.157
    • C.  Rules on Special Contracts
      • 1.  Contracts for Residential Repair After Disaster  2.158
      • 2.  Personal Emergency Response Unit  2.159

3

Design-Build

Gordon Hunt

  • I.  INTRODUCTION
    • A.  How Design-Build Differs From Design-Bid-Build  3.1
    • B.  Essential Elements of Design-Build  3.2
    • C.  History of Design-Build  3.3
    • D.  Types of Projects Using Design-Build  3.4
  • II.  ADVANTAGES AND DISADVANTAGES OF DESIGN-BUILD
    • A.  Potential Disadvantages to Owner  3.5
    • B.  Potential Advantages to Contractor  3.6
    • C.  Potential Disadvantages to Contractor  3.7
  • III.  STEPS IN SELECTING THE DESIGN-BUILDER
    • A.  Strategic Facility Planning; Program Definition  3.8
    • B.  Request for Qualifications  3.9
    • C.  Qualifications Statement  3.10
    • D.  Request for Proposal  3.11
    • E.  Proposal Submission and Review  3.12
    • F.  Evaluation and Selection of Successful Bidder  3.13
    • G.  Contract Award  3.14
    • H.  Documents and Construction  3.15
  • IV.  DESIGN-BUILD CONTRACT DOCUMENTS
    • A.  Importance of Defining Scope of Work  3.16
    • B.  Goals of Design-Build Contracts; Risk Allocation  3.17
    • C.  Standard Forms Used in Design-Build Projects  3.18
      • 1.  AIA Documents  3.19
      • 2.  EJCDC Contracts  3.20
      • 3.  AGC Documents  3.21
      • 4.  DBIA Documents  3.22
    • D.  Checklist: Contract Issues to Be Considered in Design-Build  3.23
    • E.  Checklist: Issues Owner Should Review in Preparing Contract Documents  3.24
    • F.  Drafting Provisions That Protect Owner  3.25
      • 1.  Form: Owner as Third Party Beneficiary  3.26
      • 2.  Form: Design-Builder’s Responsibility for Errors and Omissions  3.27
      • 3.  Form: Arbitration Within Owner’s Discretion  3.28
      • 4.  Form: Owner’s Right to Terminate  3.29
      • 5.  Form: No Damage for Delay  3.30
      • 6.  Form: Relationship of Trust and Confidence  3.31
      • 7.  Form: Design-Builder’s Obligation to Obtain Permits  3.32
      • 8.  Form: Errors and Omissions Insurance  3.33
  • V.  LIABILITY ISSUES IN DESIGN-BUILD
    • A.  Liability of Design-Builder  3.34
    • B.  Liability of Design Team  3.35
    • C.  Liability of Contractor  3.36
    • D.  Allocation of Liability Between Contractor and Designer  3.37
    • E.  Subcontractor’s Scope of Work  3.37A
  • VI.  LICENSING ISSUES  3.38
  • VII.  DESIGN-BUILD IN PUBLIC WORKS  3.39

4

Green Building

Jeffrey S. Conner

  • I.  DEVELOPMENT OF GREEN BUILDING  4.1
    • A.  Climate Change Concerns  4.2
    • B.  Climate Change Initiatives  4.3
    • C.  Green Building Proponents  4.4
    • D.  Checklist: Factors Influencing the Decision to Build Green  4.5
      • 1.  Cost Analysis  4.6
      • 2.  Department of Energy Protocol  4.6A
      • 3.  Incentives  4.7
      • 4.  Marketing and Public Relations Benefits and Risks  4.8
      • 5.  Green Cities  4.8A
    • E.  Deconstruction  4.8B
  • II.  RATING SYSTEMS  4.9
    • A.  LEED® Rating System  4.10
      • 1.  LEED® Professional Accreditation  4.11
      • 2.  LEED® Project Examples  4.12
    • B.  Green Globes Rating System  4.12A
      • 1.  Green Globes Professional Accreditation  4.12B
      • 2.  Green Globes Project Examples   4.12C
    • C.  Alternatives to Green Certification  4.13
  • III.  LEGAL ISSUES UNIQUE TO GREEN BUILDING
    • A.  Regulations  4.14
      • 1.  Federal Regulations
        • a.  Executive Order No. 13834  4.15
        • b.  Performance Standards  4.16
      • 2.  State Regulations  4.17
        • a.  Green Building and Emissions Initiatives  4.18
        • b.  Title 24 Standards  4.19
        • c.  Global Warming Solutions Act of 2006  4.20
        • d.  Additional Legislation and Regulations Affecting Green Building  4.21
        • e.  Green Building Standards Code (CALGreen)  4.21A
      • 3.  Local Regulation; San Francisco’s Example  4.22
    • B.  Contractor Liability  4.23
      • 1.  Design Specifications  4.24
      • 2.  Performance Specifications  4.25
      • 3.  Application to Green Building Certification  4.26
      • 4.  Workplace Injury  4.26A
    • C.  Landlord/Developer Liability  4.26B
      • 1.  Landlord Building Requirements  4.26C
      • 2.  Tenant Operations  4.26D
  • IV.  CARBON, RENEWABLE ENERGY, AND GREEN BUILDING  4.26E
    • A.  Renewable Energy  4.26F
      • 1.  Renewables Portfolio Standard (RPS)  4.26G
      • 2.  Checklist: Key Documents to Review for Purchase of Renewable Energy  4.26H
      • 3.  Checklist: Lenders’ Concerns for Financing Renewable Energy Projects  4.26I
      • 4.  Construction and Operational Contracts  4.26J
      • 5.  Interconnection Agreements  4.26K
      • 6.  Transmission Agreements  4.26L
      • 7.  Incentives  4.26M
      • 8.  Protection of On-Site Generation Fuel Source  4.26N
    • B.  Carbon Markets  4.26O
  • V.  RISK MANAGEMENT  4.27
    • A.  Finance and Insurance  4.28
    • B.  Construction  4.29
      • 1.  Checklist: Early Actions  4.30
      • 2.  Professional Assistance  4.31
      • 3.  Owner’s Mission Statement  4.32
        • a.  Example Approaches to Requests for Proposal and Requests for Qualifications
          • (1)  Requests for Proposal  4.33
          • (2)  Requests for Qualifications  4.34
        • b.  Example of Sustainability Goals  4.35
      • 4.  Scope of Requirements  4.36
    • C.  Contracting  4.37
      • 1.  Role of the Physical Contract  4.37A
      • 2.  Checklist: Advising Owners  4.38
      • 3.  Advising Contractors
        • a.  Scope of Contractor’s Work  4.39
        • b.  Checklist: Advising Contractors  4.40
      • 4.  Advising Design Professionals  4.41
        • a.  Areas of Concern to Design Professionals  4.42
        • b.  Checklist: Advising Design Professionals  4.43

5

Private Works Contracts: Disputes; Remedies for Breach of Contract

James Acret

Richard J. Wittbrodt

  • I.  SPECIAL CHARACTERISTICS OF CONSTRUCTION DISPUTES  5.1
  • II.  BIDDING DISPUTES
    • A.  Bidding Process  5.2
      • 1.  Closed Bidding  5.3
      • 2.  Open Bidding  5.4
      • 3.  Variables in Bidding  5.5
      • 4.  Subcontractor Bidding  5.6
      • 5.  Bid Depositories
        • a.  Requirements of Bid Depositories  5.7
        • b.  Courts Invalidated Bid Depositories  5.8
    • B.  Problem Areas
      • 1.  Between Owner and Prime Contractor
        • a.  Owner’s Rejection of Low Bidder  5.9
        • b.  Post-Bid Negotiations  5.10
        • c.  Acceptance of Nonresponsive Bid  5.11
        • d.  Acceptance of Late Bid  5.12
      • 2.  Between Prime Contractor and Subcontractors
        • a.  Bid Shopping; Bid Peddling; Bid Chiseling
          • (1)  Distinguish Bid Shopping, Bid Peddling, and Bid Chiseling  5.13
          • (2)  Unethical Conduct  5.14
          • (3)  Distinguish Pre-Bid and Post-Bid Shopping  5.15
        • b.  Subcontractor’s Withdrawal of Bid Before Acceptance (Promissory Estoppel)  5.16
        • c.  Computational Errors in Bid  5.17
          • (1)  Attempt to Withdraw Bid Before Acceptance  5.18
          • (2)  Attempt to Withdraw Bid After Acceptance
            • (a)  Right to Rescind Contract  5.19
            • (b)  Applicability of Promissory Estoppel  5.20
            • (c)  Reformation of Contract  5.21
            • (d)  Merchant’s Offer Irrevocable  5.22
        • d.  Contractor’s Obligation on Discovering Mistake or Omission  5.23
  • III.  DISPUTES AFTER CONTRACT IS FORMED
    • A.  Breach of Contract Versus Tort Remedies  5.24
    • B.  Disputes Involving Interpretation of Contract Terms  5.25
      • 1.  Interpretation by Parties  5.26
      • 2.  Terms Construed Against Party Drafting Agreement  5.27
      • 3.  Written Words Prevail Over Printed Forms  5.28
      • 4.  Reference to Deleted Words as Aid to Interpretation  5.29
      • 5.  Specific Language Controls Over General Language  5.30
      • 6.  Exclusion of One Category of Work May Include Others by Implication  5.31
      • 7.  Custom and Practice Aid Interpretation  5.32
      • 8.  Architect or Engineer as Arbiter of Contract Interpretation Disputes  5.33
        • a.  Contract Provision Limiting Court’s Role  5.34
        • b.  Attorney’s Role in Preserving Record  5.35
      • 9.  Parol Evidence Rule  5.36
      • 10.  Precedence Clauses  5.37
    • C.  Disputes Involving Extra Work
      • 1.  Extra Work  5.38
      • 2.  Contractor’s Obligation to Perform Extra Work  5.39
      • 3.  Contractor’s Position When Owner Wrongfully Requires Extras  5.40
        • a.  Proceeding Under Protest  5.41
        • b.  Stopping Work  5.42
        • c.  When Requested Work Is Severable  5.43
      • 4.  Requirement for Written Change Orders  5.44
        • a.  Oral Modification of Written Contract  5.45
        • b.  Waiver of Requirement That Change Order Be in Writing  5.46
        • c.  Oral Rescission of Requirement for Writing  5.47
        • d.  Estoppel  5.48
        • e.  Unjust Enrichment  5.49
        • f.  Quantum Meruit  5.50
        • g.  Payment Bond Action  5.51
      • 5.  Extras Ordered by Unauthorized Agent  5.52
      • 6.  Subcontractor’s Claim for Extra Charges
        • a.  Processing the Claim  5.53
        • b.  Prime Contractor Attempts to Avoid Inconsistent Decisions  5.54
        • c.  Rejection of Claims  5.55
      • 7.  Excessive Change Orders as Abandonment or Breach of Contract  5.56
    • D.  Ambiguities  5.57
      • 1.  Ambiguities Barring Enforcement of Contract  5.58
      • 2.  Ambiguities Not Barring Enforcement of Contract  5.59
    • E.  Mistakes  5.60
      • 1.  Mistakes in Drawings and Specifications  5.61
      • 2.  Mistaken Belief About Jobsite Conditions  5.62
    • F.  Disputes Involving Payment
      • 1.  Method of Payment  5.63
      • 2.  Withholding Progress Payments
        • a.  Prompt-Payment Statutes  5.64
        • b.  Contractor’s Right to Rescind  5.65
        • c.  Contractor’s Right to Stop Work Temporarily  5.66
        • d.  Damages for Wrongful Withholding of Progress Payments  5.67
        • e.  Owner’s Right to Withhold Progress Payments  5.68
        • f.  Advising Parties in Payment Disputes  5.69
      • 3.  Payments Depend on Existence of Fund  5.70
      • 4.  Effect of Estimates
        • a.  Estimates Not Guaranties  5.71
        • b.  Danger of Reliance on Another’s Estimate  5.72
        • c.  Liability of Architect for Incorrect Estimate  5.73
      • 5.  Damages for Failure to Pay Money  5.74
        • a.  Payment of Interest  5.75
        • b.  Impact of Unliquidated Offsets on Liquidated Claims  5.76
        • c.  Computation of Interest  5.77
        • d.  Usury Law Inapplicable to Overdue Commercial Accounts  5.78
      • 6.  Proper Application of Payments  5.79
        • a.  Right to Designate Account  5.80
        • b.  Misallocation of Payment  5.81
        • c.  Use of Joint Checks  5.82
          • (1)  Endorsement Acknowledgment  5.83
          • (2)  Mechanics Lien Release  5.84
      • 7.  Diversion of Funds  5.85
        • a.  Criminal Penalties  5.86
        • b.  Suspension or Revocation of License  5.87
      • 8.  Kickbacks  5.88
      • 9.  Front-End Loading  5.89
    • G.  Damages for Defective Performance
      • 1.  Measure of Damages  5.90
        • a.  Cost of Correction  5.91
        • b.  Loss of Market Value  5.92
        • c.  Exception to “Lesser Measure” Rule  5.93
        • d.  No Recovery for Decline in Market Values  5.94
        • e.  Residual Diminution in Value  5.95
      • 2.  Damages for Partial Performance  5.96
    • H.  Contractor Defenses
      • 1.  No Breach if Detailed Specifications Are Followed  5.97
      • 2.  No Breach if Mistakes in Specifications  5.98
      • 3.  Substantial Performance  5.99
      • 4.  Impossibility of Performance  5.100
    • I.  Disputes Involving Completion of Project  5.101
      • 1.  Bearing the Loss  5.102
      • 2.  Insurance Proceeds  5.103
    • J.  Disputes Involving Delay in Performance  5.104
      • 1.  Evidence of Delay
        • a.  Critical Path Scheduling  5.105
        • b.  Evidence of Cost Overruns  5.106
      • 2.  Contractor’s Damages for Delay  5.107
      • 3.  Total Cost and Modified Total Cost  5.108
        • a.  Delay Excused Under CC §1511  5.109
        • b.  Strict Application of No-Damage-for-Delay Clauses  5.110
      • 4.  Owner’s Damages for Delay  5.111
      • 5.  Liquidated Damages for Delay  5.112
    • K.  Disputes Involving Defense and Indemnity Obligations  5.112A
    • L.  Owner’s Right to Suspend Work on Project  5.112B
    • M.  Owner’s Right to Eject Contractor From Job  5.113
      • 1.  Review of Applicable Contractual Provisions  5.114
      • 2.  Scope of Contractor’s Liability on Ejection  5.115
      • 3.  Wrongful Ejection  5.116
      • 4.  Distinguish Termination of Performance From Rescission of Contract  5.117
  • IV.  CONSTRUCTION CONTRACT LITIGATION
    • A.  Relationships of Parties
      • 1.  Owner, Contractor, and Subcontractor  5.118
      • 2.  Owner Versus Subcontractor  5.119
        • a.  Recovery by Owner as Third Party Beneficiary  5.120
        • b.  Recovery by Owner on Tort Claim  5.121
      • 3.  Subcontractor Versus Owner or Contractor  5.122
      • 4.  Contractor Versus Subcontractor  5.123
      • 5.  Owner, Contractor, or Subcontractor Versus Supplier  5.124
      • 6.  Liability of Other Parties  5.125
    • B.  Pleading
      • 1.  Theories of Liability
        • a.  Damages Available in Contract Versus Tort Actions  5.126
          • (1)  No Liability for Conspiracy to Induce Breach of Own Contract  5.127
          • (2)  Contrasting Purposes of Contract Law Versus Tort Law  5.128
        • b.  Breach of Express Warranty  5.129
        • c.  Breach of Implied Warranty  5.130
      • 2.  Prayer for Damages  5.131
      • 3.  Insurance Coverage  5.132
    • C.  Venue  5.133
    • D.  Preparing for Trial
      • 1.  Relationship of Parties  5.134
      • 2.  Documents  5.135
      • 3.  Witnesses; Expert Witness Fees  5.136
    • E.  Statutes of Limitations
      • 1.  Applicable Statutes of Limitations  5.137
      • 2.  When Period Begins to Run  5.138
    • F.  Defenses Based on Breaches by Owner  5.139
  • V.  SPECIAL REMEDIES
    • A.  Statutory Remedies
      • 1.  Mechanics Liens  5.140
      • 2.  Stop Payment Notices  5.141
      • 3.  Bonds  5.142
      • 4.  Mandatory Payment Bonds  5.143
      • 5.  Effect of Releases  5.144
    • B.  Equitable Liens  5.145
    • C.  Actions After Settlement  5.146
    • D.  Contractor’s Recovery Under Project Bonds  5.146A
  • VI.  BANKRUPTCY AND THE CONSTRUCTION INDUSTRY
    • A.  Overview  5.147
    • B.  Automatic Stay
      • 1.  Impact on Construction Project  5.148
      • 2.  Violations  5.149
      • 3.  Relief From Stay  5.150
      • 4.  Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)  5.151
    • C.  Executory Contracts in Bankruptcy
      • 1.  Definition  5.152
      • 2.  Assumption  5.153
      • 3.  Assignment  5.154
      • 4.  Rejection  5.155
    • D.  Termination Clauses in Construction Contracts  5.156
    • E.  Issues When Owner Files Bankruptcy Case  5.157
      • 1.  Posting of Project Security by Owner; CC §§8700–8730  5.158
      • 2.  Stop Work Notice: CC §§8830–8848  5.159
        • a.  Remedy  5.160
        • b.  Procedure  5.161
        • c.  Effect  5.162
      • 3.  Mechanics Liens Issues
        • a.  Perfection  5.163
        • b.  Enforcement  5.164
      • 4.  Service of Bonded Stop Payment Notice  5.165
      • 5.  Chapter 11 Plan Considerations; Proof of Claim  5.166
    • F.  Issues When Contractor Files Bankruptcy Case  5.167
      • 1.  Payment and Performance Bonds  5.168
      • 2.  Termination  5.169
    • G.  Issues When Subcontractor or Supplier Files Bankruptcy Case
      • 1.  Was Subcontractor or Supplier Bonded?  5.170
      • 2.  Preference Liability of Contractors, Subcontractors, and Suppliers  5.171
      • 3.  What Is a Preference?  5.172
      • 4.  Defenses to Preference Claims  5.173
        • a.  Contemporaneous Exchange Defense  5.174
        • b.  Ordinary Course Defense  5.175
        • c.  Subsequent New Value Defense  5.176
        • d.  Exchange for Release of Lien  5.177
        • e.  Date of Transfers  5.178
    • H.  Sellers’ Remedies
      • 1.  Reclamation When Buyer Is Insolvent  5.179
      • 2.  Reclamation After Buyer Has Filed for Bankruptcy  5.180
      • 3.  Enforcing Reclamation Right  5.181
      • 4.  Goods in Transit  5.182
      • 5.  Administrative Claim for Goods Sold 20 Days Before Bankruptcy Filing  5.183

6

Public Works Contracts: Disputes and Remedies

James Acret

  • I.  HANDLING PUBLIC CONSTRUCTION DISPUTES  6.1
  • II.  SPECIAL CHARACTERISTICS OF PUBLIC CONTRACT LAW
    • A.  Similarity to Private Contracts  6.2
    • B.  Differences From Private Contracts
      • 1.  Formation of Contract  6.3
      • 2.  Security  6.4
      • 3.  Governing Statutes  6.5
      • 4.  Class of License Specified by Public Entity  6.6
      • 5.  Debarment  6.7
      • 6.  RICO Violation [Deleted]  6.8
      • 7.  Prevailing Wages  6.9
        • a.  Determination of Whether Project is a Public Work  6.9A
        • b.  Notification to Contractors of Public Work  6.9B
        • c.  Certified Payroll Records (CPRs)  6.10
        • d.  Requests for CPRs  6.11
        • e.  Duty to Disclose Copies of CPRs  6.12
        • f.  Apprenticeship Requirements  6.13
        • g.  Damages and Penalties for Prevailing Wage Violations  6.14
          • (1)  Contractor Public Works Registration  6.14A
          • (2)  Action By Worker Against the Employer  6.14B
          • (3)  Action by the Body Awarding the Contract  6.14C
          • (4)  Remedies of the Contractor Against the Subcontractor  6.14D
          • (5)  Action By the Labor Commissioner  6.14E
    • C.  Indemnity and Insurance  6.15
  • III.  BIDDING DISPUTES
    • A.  Bidding Process
      • 1.  Prequalification  6.16
      • 2.  Assembling the Bid  6.17
      • 3.  Common Bidding Mistakes—Waiver of Irregularity  6.18
      • 4.  Multiple Bids; Low Bidding  6.19
      • 5.  Competitive Bidding Statutes
        • a.  Statutory Policy and Requirements  6.20
        • b.  Procedure for Small Contracts  6.21
        • c.  Value Engineering  6.22
        • d.  Design-Build; Best Value  6.23
        • e.  Entities Subject to Competitive Bid Statutes  6.24
        • f.  Exemptions
          • (1)  Public Entities Not Covered  6.25
          • (2)  Contracts Not Covered  6.26
          • (3)  Failure to Produce an Advantage  6.27
        • g.  Job Order Contracts  6.28
      • 6.  Affirmative Action
        • a.  Eligibility for Federal Funds  6.29
        • b.  Conflict With Equal Protection  6.30
        • c.  Conflict With Statutory Requirements  6.31
        • d.  Impact of Proposition 209  6.32
      • 7.  Force Account  6.33
      • 8.  “Or Equal” Clause  6.34
      • 9.  Bid Depositories  6.35
      • 10.  Subletting and Subcontracting Fair Practices Act  6.36
        • a.  Substitution of Listed Subcontractor  6.37
        • b.  Remedy of Substituted Subcontractor  6.38
          • (1)  Type of Damages Recoverable  6.39
          • (2)  Writ of Mandamus  6.40
        • c.  Violation of Statute Deprives Prime Contractor of Contract Remedy Against Substitute Subcontractor  6.41
    • B.  Bid Withdrawals and Corrections
      • 1.  Prime Contractor: Relief of Bidder Statutes  6.42
        • a.  Mistaken Bids  6.43
        • b.  Attorney’s Role in Obtaining Relief for Mistaken Bids  6.44
      • 2.  Subcontractor: Promissory Estoppel
        • a.  Submission of Subbids Is Offer: No Immediate Acceptance  6.45
        • b.  Subcontractor’s Failure to Sign Contract; Justifiable Reliance on Bid  6.46
        • c.  Defenses to Promissory Estoppel  6.47
        • d.  Right to Rescind  6.48
    • C.  Rejection of Bids
      • 1.  Public Entity’s Discretion to Reject All Bids  6.49
      • 2.  Public Entity’s Reservation of Right to Reject Bids  6.50
      • 3.  Public Entity’s Discretion to Reject Low Bid  6.51
        • a.  Rejection of Lowest Responsible Bidder  6.52
        • b.  Procedure for Rejection  6.53
        • c.  Scope of Discretion  6.54
        • d.  Rejection of Unlicensed Bidder  6.55
        • e.  Liability
          • (1)  Public Employees Not Liable for Abuse of Discretion  6.56
          • (2)  Liability Based on Promissory Estoppel  6.57
    • D.  Awards
      • 1.  Irregular Bids  6.58
      • 2.  Illegal Award  6.59
      • 3.  Illegal Award After Challenge; Pub Cont C §5110  6.60
      • 4.  Bribery  6.61
  • IV.  PERFORMANCE DISPUTES
    • A.  Extra Work  6.62
      • 1.  State and Local Contracts  6.63
      • 2.  Mandatory Change Orders for Unexpected Subsurface and Other Physical Conditions; Pub Cont C §7104  6.64
      • 3.  Obstacles to Enforcement  6.65
      • 4.  Scope of Work Disputes  6.66
        • a.  Proper Authorization  6.67
        • b.  Extra Difficulty in Doing Work  6.68
        • c.  Requirements Contract: Excess Demand  6.69
        • d.  Numerous Disruptive Change Orders; Estimated Damages  6.70
        • e.  Abandonment Theory  6.71
        • f.  Total Cost  6.72
      • 5.  Extra-Work Claims Founded on Misrepresentation and Implied Warranty  6.73
        • a.  Defensive Clauses
          • (1)  Effective Use of Defensive Clauses  6.74
          • (2)  Overcoming Defensive Clauses  6.75
        • b.  Fraudulent Concealment  6.76
        • c.  Compensation for Relocation of Trunkline Utility Facilities  6.77
        • d.  Federal Changed-Condition Clauses  6.78
      • 6.  Interest on Extra-Work Claims  6.79
      • 7.  Performance Under Protest  6.80
      • 8.  Reliance on Public Agent’s Decisions  6.81
        • a.  Public Agent’s Authority  6.81A
        • b.  Challenging the Design Professional’s Decision  6.81B
      • 9.  Extra-Work Claims by Subcontractors  6.82
        • a.  Assigning Subcontractor’s Claim to the Contractor  6.82A
        • b.  Equitable Proration of Recovery Among Subcontractors  6.82B
    • B.  Deletions of Work by Public Entity  6.83
    • C.  Delay
      • 1.  Causes of Delay  6.84
      • 2.  Implied Covenant  6.85
      • 3.  Determining Damages
        • a.  Damages to Contractor  6.86
        • b.  Damages to Subcontractor—Pass-Through Claims  6.87
        • c.  Damages to Public and Public Entity  6.88
        • d.  Apportionment of Responsibility; Critical Path Scheduling  6.89
      • 4.  Written Notice; Requests for Extensions of Time  6.90
      • 5.  Liquidated Damages  6.91
        • a.  Division of Authority in Apportioning Liquidated Damages
          • (1)  Apportionment Not Permitted  6.92
          • (2)  Apportionment Permitted  6.93
          • (3)  Factors That May Affect Rule Against Apportionment  6.94
        • b.  Surety’s Liability  6.95
      • 6.  No-Damages-for-Delay Clause
        • a.  When Clause Enforced  6.96
        • b.  When Clause Not Enforced
          • (1)  Active Negligence  6.97
          • (2)  Unconscionable Advantage  6.98
          • (3)  Unreasonable Delay  6.99
          • (4)  Breach of Contract  6.100
          • (5)  Forfeiture  6.101
      • 7.  Prompt-Payment Statutes  6.102
      • 8.  False Claims Act
        • a.  Liability for Presenting or Failing to Disclose False Claim  6.103
        • b.  Plaintiffs’ Awards; Defendants’ Attorney Fees  6.104
        • c.  Assertion of Litigation Privilege  6.105
        • d.  Passive Beneficiaries  6.106
        • e.  Real Party in Interest  6.107
        • f.  Alleged Violation of Competitive Bidding Procedures Does Not Constitute a False Claim  6.108
    • D.  Contract Retention  6.108A
  • V.  CLAIMS AGAINST PUBLIC ENTITIES
    • A.  Claims Process
      • 1.  Submission of Claims  6.109
      • 2.  Time Period; Estoppel  6.110
      • 3.  Importance of Completeness of Claim and Compliance With Procedures  6.111
      • 4.  Settlement; Litigation; Arbitration  6.112
      • 5.  Validity of Written Notice Requirements  6.113
    • B.  Effect of Final Payment’s Acceptance  6.114
    • C.  Stop Payment Notices
      • 1.  Claims  6.115
      • 2.  Public Entity’s Role  6.116
      • 3.  Sureties’ Rights on Their Bonds  6.117
      • 4.  Effect of Releases  6.118
    • D.  Arbitration of Claims
      • 1.  Power to Submit to Arbitration  6.119
      • 2.  Statutory Obligation to Submit to Arbitration  6.120
        • a.  Initiating Arbitration  6.121
        • b.  Arbitration Procedure  6.122
      • 3.  Litigation  6.123

7

Arbitration

James Acret

Robert C. Field

  • I.  ARBITRATION VERSUS LITIGATION
    • A.  Deciding Between Arbitration and Litigation
      • 1.  Contractual Arbitration  7.1
      • 2.  Judicial Arbitration  7.2
      • 3.  Alternative Dispute Resolution (ADR) and Administrative Actions Against Licensees  7.3
    • B.  Effect of Federal Arbitration Act (FAA)  7.4
    • C.  Expenses Compared  7.5
      • 1.  Arbitrator Fees  7.6
      • 2.  Administrative Fees  7.7
      • 3.  Reporter Fees  7.8
      • 4.  Law and Motion; Discovery  7.9
      • 5.  Duration of Proceedings  7.10
      • 6.  Jury Trial  7.11
      • 7.  Efficiency  7.12
      • 8.  Appeal  7.13
    • D.  Noneconomic Factors
      • 1.  Arbitrator’s Expertise and Bias  7.14
      • 2.  Speed  7.15
      • 3.  Provisional Remedies  7.16
      • 4.  Rules of Evidence  7.17
      • 5.  Discovery  7.18
      • 6.  Availability of Punitive Damages  7.19
      • 7.  Multiple Parties  7.20
      • 8.  Weighing the Factors  7.21
  • II.  AGREEMENTS TO ARBITRATE
    • A.  Preprinted Form Provisions  7.22
    • B.  Party-Drafted Arbitration Provisions
      • 1.  Mediation or Review by Neutral as Prerequisite to Arbitration  7.23
      • 2.  Checklist: Drafting an Arbitration Clause  7.24
    • C.  Enforcing Arbitration Agreement
      • 1.  Agreements to Arbitrate Generally Enforceable  7.25
      • 2.  Contracts of Adhesion and Unconscionability Issues  7.26
      • 3.  Fraud in Inducement  7.27
    • D.  Waiver of Right to Arbitrate
      • 1.  California Waiver  7.28
      • 2.  Special Problems of Mechanics Lien Claimants  7.29
      • 3.  Federal Waiver  7.30
    • E.  Multiple-Party Disputes  7.31
      • 1.  Coordinating Arbitration and Litigation  7.32
      • 2.  Consolidation of Arbitration Proceedings  7.33
  • III.  SELECTING THE ARBITRATOR
    • A.  Methods of Selection  7.34
    • B.  Disclosures Required  7.35
    • C.  Consumer Arbitrations  7.36
    • D.  Designation of Arbitrators by Parties  7.37
    • E.  Considerations When Parties Select Arbitrators  7.38
    • F.  Ex Parte Arbitration  7.39
    • G.  Submission Agreements  7.40
    • H.  Checklist: Drafting Submission Agreement  7.41
    • I.  Replacement of Arbitrator  7.42
    • J.  Effect of Prior Mediation  7.43
  • IV.  COMPELLING ARBITRATION UNDER CALIFORNIA LAW
    • A.  Petition to Compel Arbitration
      • 1.  Statutory Authority  7.44
      • 2.  Petition Not Necessary When Agreement Is Self-Executing  7.45
      • 3.  Effect of Pending Action  7.46
    • B.  Appeal  7.47
    • C.  Compelling Arbitration After Suit Is Begun  7.48
    • D.  Court Appointment of Arbitrator  7.49
    • E.  Time and Place of Hearing  7.50
  • V.  PROVISIONAL REMEDIES
    • A.  Attachment  7.51
    • B.  Mechanics Lien  7.52
    • C.  Stop Payment Notice  7.53
    • D.  Lis Pendens  7.54
    • E.  Injunctive Relief  7.55
    • F.  Receiver  7.56
  • VI.  ARBITRATION HEARING
    • A.  Ground Rules
      • 1.  Preliminary Hearing  7.57
      • 2.  Multiple-Party Disputes; Case Management Order  7.58
      • 3.  Payment of Arbitrator’s Fees and Other Expenses  7.59
      • 4.  Arbitrator’s Role  7.60
      • 5.  Attorney’s Role  7.61
    • B.  Hearing Rights
      • 1.  Right to Hearing  7.62
      • 2.  Right to Counsel  7.63
      • 3.  Hearing by Affidavit  7.64
      • 4.  Effect of Default  7.65
    • C.  Physical Arrangements
      • 1.  Hearing Room  7.66
      • 2.  Stenographic Record  7.67
      • 3.  Interpreter  7.68
    • D.  Prehearing Preparation  7.69
    • E.  Arbitration Brief
      • 1.  Importance  7.70
      • 2.  When to Submit  7.71
    • F.  Preparing Witnesses and Evidence
      • 1.  Preparing Client as Witness
        • a.  Demeanor  7.72
        • b.  Cross-Examination  7.73
      • 2.  Preparing Witnesses  7.74
      • 3.  Preparing Expert Witnesses  7.75
      • 4.  Preparing Documentary Evidence  7.76
    • G.  Before Hearing Begins
      • 1.  Objections to Hearing; Waiver  7.77
      • 2.  Preparation of Hearing Room  7.78
    • H.  Hearing Procedure
      • 1.  Opening and Order of Hearing  7.79
      • 2.  Clerical Duties; Evidence Log  7.80
      • 3.  Delineating the Issues; Opening Statements  7.81
      • 4.  Postponements  7.82
    • I.  Presenting the Case
      • 1.  Burden of Proof  7.83
      • 2.  Evidence
        • a.  Introduction of Evidence  7.84
        • b.  Affidavits; Declarations
          • (1)  Definition  7.85
          • (2)  Authority for Use in Arbitration  7.86
          • (3)  Notice of Intent to Use  7.87
        • c.  Stipulations  7.88
        • d.  Subpoenas
          • (1)  Subpoenas for Attendance of Witnesses  7.89
          • (2)  Subpoena Duces Tecum  7.90
        • e.  Availability of Discovery  7.91
      • 3.  Order of Presentation; Cross-Examination  7.92
      • 4.  Motions; Summary Adjudication  7.93
      • 5.  Good Faith Settlement  7.94
      • 6.  Closing Arguments  7.95
    • J.  Closing the Hearing  7.96
    • K.  Reopening the Hearing  7.97
  • VII.  AWARD
    • A.  Requirements  7.98
    • B.  Damages  7.99
    • C.  Equitable Relief  7.100
    • D.  Costs and Attorney Fees in Arbitration  7.101
    • E.  Time for Making Award  7.102
    • F.  Service  7.103
    • G.  Correction of Award by Arbitrator  7.104
      • 1.  Grounds  7.105
      • 2.  Written Application  7.106
      • 3.  Arbitrator’s Decision  7.107
    • H.  Collateral Effect of Award
      • 1.  Res Judicata  7.108
      • 2.  Unconfirmed Award as Contract  7.109
  • VIII.  COURT REVIEW
    • A.  Confirmation, Vacation, or Correction of Award  7.110
    • B.  Powers of Reviewing Court  7.111
    • C.  Review Procedure
      • 1.  Governing Statutes  7.112
      • 2.  Petition to Confirm, Vacate, or Correct Award
        • a.  Who May File  7.113
        • b.  Contents  7.114
        • c.  Filing and Service; Time Limits  7.115
        • d.  Manner of Service  7.116
      • 3.  Response
        • a.  Who May File  7.117
        • b.  Contents  7.118
        • c.  Manner of Service; Time Limits  7.119
    • D.  Hearing
      • 1.  Venue  7.120
      • 2.  Previous Court Retains Jurisdiction  7.121
      • 3.  Consent Jurisdiction Over Out-of-State Parties  7.122
      • 4.  Time for Hearing; Notice  7.123
    • E.  Confirmation of Award; Entry of Judgment  7.124
    • F.  Correction of Award
      • 1.  Statutory Grounds  7.125
      • 2.  Application of Statutory Grounds  7.126
      • 3.  Procedural Requisites  7.127
      • 4.  Confirmation of Corrected Award; Entry of Judgment  7.128
    • G.  Vacation of Award
      • 1.  Limits on Court’s Reviewing Powers  7.129
      • 2.  Grounds
        • a.  Corruption or Fraud; Nondisclosure of Conflicts, Bias, Business Relationships  7.130
        • b.  Neutral Arbitrator’s Prejudicial Misconduct  7.131
        • c.  Arbitrator Exceeded Powers
          • (1)  Statutory Restriction  7.132
          • (2)  Arbitrator’s Affidavit as Proof  7.133
        • d.  Refusal to Postpone Hearing  7.134
        • e.  Refusal to Hear Material Evidence  7.135
        • f.  Conduct Contrary to State Arbitration Requirements  7.136
      • 3.  Procedural Requisites for Vacating Award  7.137
      • 4.  Order for Rehearing  7.138
  • IX.  APPEAL OF COURT ORDER
    • A.  Appealable Orders  7.139
    • B.  Trial Court’s Statement of Decision  7.140
    • C.  Manner of Taking Appeal; Matters for Review  7.141
  • X.  COSTS AND ATTORNEY FEES IN JUDICIAL PROCEEDINGS  7.142
  • XI.  FORMS
    • A.  Form: AAA Arbitration Clause  7.143
    • B.  Form: Long Form Arbitration Clause  7.144
    • C.  Form Provision: Arbitration Clause in Subcontract  7.145
    • D.  Form: Petition for Order Compelling Arbitration  7.146
    • E.  Form: Notice of Hearing on Petition  7.147
    • F.  Form: Order Compelling Arbitration  7.148
    • G.  Form: Notice of Motion to Stay Action  7.149
    • H.  Form: Declaration in Support of Motion to Stay Action  7.150
    • I.  Form: Memorandum in Support of Motion to Stay Action  7.151
    • J.  Form: Petition for Order Nominating Arbitrators  7.152
    • K.  Form: Order Nominating Arbitrators  7.153
    • L.  Form: Petition for Order Appointing Arbitrator  7.154
    • M.  Form: Order Appointing Arbitrator  7.155
    • N.  Form: Arbitration Award  7.156
    • O.  Form: Petition to Confirm Arbitration Award  7.157
    • P.  Form: Response to Petition; Application for Vacation of Award  7.158

8

Architects and Engineers

James Acret

Theodore L. Senet

  • I.  ROLE IN CONSTRUCTION PROCESS  8.1
    • A.  Architects
      • 1.  Scope of Duties and Responsibilities  8.2
      • 2.  Overlapping Responsibilities With Prime Contractor  8.3
        • a.  Traditional Design-Bid-Build Project  8.4
        • b.  Design-Build  8.5
        • c.  Prime Contractor as Supervisor; No Architect  8.6
        • d.  Owner or Construction Manager as Supervisor  8.7
      • 3.  Licensing Requirements [Deleted]  8.8
    • B.  Landscape Architects  8.9
    • C.  Engineers  8.10
    • D.  Evolving Role of Architects and Engineers
      • 1.  Role of Master Builder  8.11
      • 2.  Role of Design Professional During Construction  8.12
      • 3.  Specialization in the Design  8.12A
      • 4.  Integration of Design Into the Construction Process  8.12B
    • E.  Public Contracts  8.12C
      • 1.  Role of Owner [Deleted]  8.13
    • F.  Green Building  8.13A
  • II.  LIABILITY TO OWNER  8.14
    • A.  Standard of Care  8.14A
    • B.  Expert Testimony Establishes Standard of Care  8.14B
    • C.  Certificate of Merit Required [Deleted]  8.15
    • D.  Contractual Allocation of Liability Permitted [Deleted]  8.16
    • E.  Bases for Claims and Actions
      • 1.  Errors and Omissions in Plans and Specifications  8.17
      • 2.  Budgets and Estimates  8.18
      • 3.  Improper Supervision or Observation
        • a.  Architect’s Scope of Duty  8.19
        • b.  Engineer’s Scope of Duty  8.20
        • c.  Immunity After National Emergency [Deleted]  8.21
        • d.  Architects and Engineers: Liability for Negligent Testing  8.22
        • e.  Insurance Coverage [Deleted]  8.23
        • f.  Standard of Care [Deleted]  8.24
        • g.  Expert Testimony Establishes Standard of Competence [Deleted]  8.25
    • F.  Statutes of Limitations [Deleted]  8.26
  • III.  LIABILITY TO THIRD PARTIES
    • A.  To Prime Contractor
      • 1.  Negligence  8.27
      • 2.  Third Party Beneficiary Theory  8.28
      • 3.  Lack of Privity as a Defense [Deleted]  8.29
    • B.  To Remote Homeowners  8.30
    • C.  To Neighbors  8.31
    • D.  To Customers  8.32
    • E.  To Employees  8.33
    • F.  To Tenants  8.34
  • IV.  OTHER LIABILITY THEORIES
    • A.  Strict Liability  8.35
    • B.  Equitable Indemnity and Comparative Contribution  8.36
    • C.  Statutory Liability for New Homes  8.36A
  • V.  DEFENSES TO CLAIMS AND ACTIONS
    • A.  Certificate of Merit Required  8.36B
    • B.  Limitations of Liability and Express Indemnification  8.36C
    • C.  Lack of Privity and the Economic Loss Rule  8.36D
    • D.  Statutes of Limitations  8.36E
    • E.  Immunity After National Emergency  8.36F
  • VI.  INSURANCE
    • A.  Professional Liability Insurance  8.36G
    • B.  General Liability Insurance  8.36H
    • C.  Builders Risk Insurance  8.36I
  • VII.  PAYMENT ISSUES
    • A.  Conditional on Occurrence of Event  8.37
    • B.  Oral Agreement Contradicts Written Contract  8.38
    • C.  Architect’s Failure to Sign Contract Is Not a Defense  8.39
    • D.  Architect’s and Engineer’s Right to Lien  8.40
    • E.  Architect's Right to Withhold Consent to Use of Design for Nonpayment  8.40A
  • VIII.  LICENSING AND REPORTING REQUIREMENTS  8.41
  • IX.  CERTIFICATION FOR ADA INSPECTIONS  8.42

9

Handling Disputes During Construction

Richard A. Holderness

  • I.  PRELIMINARY CONSIDERATIONS  9.1
    • A.  Preliminary Review of Applicable Statutes  9.2
      • 1.  Checklist: Public Projects  9.3
      • 2.  Checklist: Public and Private Projects  9.4
      • 3.  Checklist: Construction Terminology  9.5
    • B.  Principal Parties and Their Relationships  9.6
      • 1.  Checklist: Principal Parties  9.7
      • 2.  Relationships Among Parties  9.8
    • C.  Owner and Contractor: Importance and Terms of the Written Contract  9.9
    • D.  Owner and Contractor: Available Methods and Procedures for Dispute Resolution  9.10
      • 1.  Checklist: Review Resolution Methods  9.11
      • 2.  Checklist: Review Contract  9.12
      • 3.  Checklist: Review Statutes  9.13
      • 4.  Check Time Frames  9.14
    • E.  Owner and Contractor: State License Requirements
      • 1.  When Contractor’s License Is Required  9.15
      • 2.  Joint Venture Licenses  9.16
      • 3.  Checklist: Who Needs a Contractor’s License  9.17
      • 4.  Checklist: Who Does Not Need a Contractor’s License  9.18
      • 5.  Checklist: Licensing Qualifications  9.19
      • 6.  Who Can Qualify  9.20
      • 7.  Consequences of Working Unlicensed
        • a.  Unlicensed Contractor Cannot Sue to Recover Unpaid Compensation  9.21
        • b.  Unlicensed Contractor Must Refund Compensation Paid  9.22
      • 8.  Civil and Criminal Penalties  9.23
  • II.  BIDDING DISPUTES
    • A.  Prime Contractor: Bidding Terms and Procedures  9.24
      • 1.  Checklist: Bidding Process in General  9.25
      • 2.  Distinct Features of Public Project Bidding  9.26
      • 3.  Private Project Bidding  9.27
    • B.  Prime Contractor and Subcontractor: Rights and Remedies Under the Subcontractors’ Listing Law (Public Project)
      • 1.  Purpose of Subcontractors’ Listing Law  9.28
      • 2.  Requirements of Subcontractors’ Listing Law  9.29
        • a.  Substitution Procedure  9.30
        • b.  Accidental Listing  9.31
    • C.  Subcontractor: Options for Withdrawing Bid  9.32
      • 1.  Liability for Withdrawal  9.33
      • 2.  When Subcontractor Is Not Liable  9.34
    • D.  Supplier: Options for Withdrawing Bid  9.35
      • 1.  Distinguish Written and Oral Bids  9.36
      • 2.  If Supplier Withdraws Late  9.37
    • E.  Prime Contractor: Confirm Supplier Bid or Offer, if Required  9.38
    • F.  Owner: Obligations to Low Bidder
      • 1.  Private Projects  9.39
      • 2.  Public Projects  9.40
    • G.  Prime Contractor: Options for Withdrawing Bid  9.41
      • 1.  Private Projects  9.42
      • 2.  Public Projects  9.43
      • 3.  When Bid Is Improperly Withdrawn After Deadline  9.44
    • H.  Prime Contractor: Alternatives if Bid Cannot Be Withdrawn  9.45
      • 1.  Private Projects  9.46
      • 2.  Public Projects  9.47
    • I.  Private Owner: Respond to Prime Contractor’s Attempt to Withdraw After Acceptance
      • 1.  Owner’s Possible Responses  9.48
      • 2.  Drawbacks to Refusing Request  9.49
      • 3.  Checklist: Owner’s Steps if Contractor Refuses to Proceed  9.50
    • J.  Prime Contractor: Remedies if Owner Improperly Rejects Bid  9.51
      • 1.  Lawsuit for Wrongful Rejection  9.52
      • 2.  Lawsuit for Fraudulent Rejection  9.53
      • 3.  Difficulty in Recovering Damages  9.54
    • K.  Prime Contractor: Protest the Bid, if Appropriate  9.55
      • 1.  Public Project  9.56
      • 2.  Private Project  9.57
      • 3.  Contractor’s Strategy in Bid Protest  9.58
      • 4.  Advantage of Early Protest  9.59
      • 5.  Checklist: Proceeding With Bid Protest  9.60
    • L.  Owner’s Response to Bid Protest
      • 1.  Checklist: Owner’s Actions  9.61
      • 2.  Effect of Rejecting All Bids  9.62
  • III.  PERFORMANCE DISPUTES: OVERVIEW  9.63
    • A.  Checklist: Contract Interpretation  9.64
    • B.  Likely Areas of Dispute  9.65
  • IV.  PERFORMANCE DISPUTES: EXTRA WORK
    • A.  Contractor and Owner: Dispute Over “Extra Work”
      • 1.  Nature of Extra Work  9.66
      • 2.  Review Contract; Claims, Representations  9.67
    • B.  Contractor: Satisfy Contractual Requirements Before Performing Extra Work
      • 1.  Contractual Prerequisites  9.68
      • 2.  Exceptions to Prerequisites  9.69
    • C.  Contractor and Owner: Compensation for Extra Work  9.70
      • 1.  When Contract Speaks to Compensation  9.71
      • 2.  When Contract Is Silent  9.72
    • D.  Contractor: Options in Dispute Over Extra Work  9.73
      • 1.  Performance Under Protest  9.74
      • 2.  Refusal to Perform Extra Work  9.75
      • 3.  When Extra Work Is of Great Magnitude  9.76
    • E.  Owner: Options in Dispute Over Extra Work  9.77
      • 1.  Hire Another Contractor  9.78
      • 2.  Eliminate Extra Work  9.79
      • 3.  Terminate the Contract  9.80
  • V.  PERFORMANCE DISPUTES: ABANDONMENT OF CONTRACT
    • A.  Owner: Abandonment of Written Construction Contract  9.81
      • 1.  How Abandonment Occurs  9.82
      • 2.  Detriment to Owner  9.83
      • 3.  Checklist: Owner’s Measures to Prevent a Claim of Implied Abandonment  9.84
    • B.  Contractor: Additional Construction Costs Resulting From Abandonment of Contract  9.85
      • 1.  Advantages for Contractor  9.86
      • 2.  Disadvantages for Contractor  9.87
  • VI.  PERFORMANCE DISPUTES: DELETION OF WORK  9.88
  • VII.  PERFORMANCE DISPUTES: DIFFERING SITE CONDITIONS  9.89
    • A.  When Contractor Is Responsible  9.90
    • B.  When Contractor Is Not Responsible  9.91
  • VIII.  PERFORMANCE DISPUTES: DEFECTIVE WORK  9.92
    • A.  When Contractor Is Liable  9.93
    • B.  Checklist for Owner: Evaluate Options When Defective Work Is Discovered  9.94
    • C.  Checklist: Owner’s Actions When Defect Discovered Before Project Completion  9.95
    • D.  Checklist: Owner’s Actions When Defect Discovered After Project Completion  9.96
    • E.  Contractor: Response to Owner’s Notice of Defective Work  9.97
      • 1.  Checklist: Action Following Receipt of Disputed Notice of Defect  9.98
      • 2.  Risks to Contractor of Refusing to Correct Defect  9.99
  • IX.  PERFORMANCE DISPUTES: DELAYS
    • A.  Owner and Contractor: Issues Arising From Construction Delays  9.100
      • 1.  Contractual Provisions Relating to Delay  9.101
        • a.  “No-Damage-for-Delay” Clauses  9.102
        • b.  Liquidated Damages Clauses  9.103
      • 2.  Liability
        • a.  Neither Party Is Responsible for Delay  9.104
        • b.  Owner Is Responsible for Delay
          • (1)  Damages Recoverable by Contractor  9.105
          • (2)  Proof of Damages  9.106
        • c.  Contractor Is Responsible for Delay
          • (1)  Liquidated Damages  9.107
          • (2)  If No Liquidated Damages  9.108
        • d.  Owner and Contractor Are Both Responsible for Delay
          • (1)  Private Project  9.109
          • (2)  Public Project  9.110
    • B.  Contractor: Options if Owner Causes Delay  9.111
      • 1.  Checklist: Contractor’s Actions if Owner Is Responsible for Delay  9.112
      • 2.  When Contractor Can Recover Acceleration Damages  9.113
    • C.  Owner: Options if Contractor Causes Delay  9.114
      • 1.  Checklist: Owner’s Actions if Contractor Is Responsible for Delay  9.115
      • 2.  Available Damages  9.116
  • X.  PERFORMANCE DISPUTES: IMPOSSIBILITY OF PERFORMANCE
    • A.  Contractor: Impossibility Excuses Performance  9.117
    • B.  Destruction of Work  9.118
  • XI.  PERFORMANCE DISPUTES: TERMINATION OF CONTRACT
    • A.  Owner: Termination of Contractor’s Performance When Appropriate  9.119
    • B.  When Termination Is Justified  9.120
    • C.  Wrongful Termination  9.121
  • XII.  PERFORMANCE DISPUTES: ARCHITECT AND ENGINEER LIABILITY
    • A.  Roles of Architect and Engineer in Construction Context  9.122
    • B.  Bases for Architect or Engineer Liability
      • 1.  Negligence  9.123
      • 2.  Intentional Torts  9.124
      • 3.  Claims for False Representations  9.125
      • 4.  Duty to Cooperate  9.126
  • XIII.  PAYMENT DISPUTES
    • A.  Owner and Contractor: Payment of Contractors and Subcontractors as Required by Contract and Statute  9.127
      • 1.  Checklist: Contract Requirements  9.128
      • 2.  Prompt-Payment Statutes
        • a.  Checklist: Owner’s Prompt-Payment Statutes (Progress Payments)  9.129
        • b.  Checklist: Contractor’s Prompt-Payment Statutes (Progress Payments)  9.130
        • c.  Checklist: Retention Proceeds (Owner and Contractor Payment)  9.131
    • B.  Contractor: Prohibition Against Diversion of Funds  9.132
    • C.  Contractor: Options if Owner Fails to Make Progress Payments  9.133
      • 1.  Rescind Contract  9.134
      • 2.  Continue Working  9.135
      • 3.  Suspend Performance  9.136
    • D.  Contractor: Claiming Interest When Appropriate  9.137
    • E.  Contractor: Additional Sources for Payment of Claims  9.138
      • 1.  Nonremedy Sources of Payment
        • a.  Surety, Insurance, Duty to Defend  9.139
        • b.  Project Funding Source  9.140
      • 2.  Other Remedies  9.141
        • a.  Private Project Remedies
          • (1)  Mechanics Lien  9.142
          • (2)  Stop Payment Notice  9.143
          • (3)  Payment Bond  9.144
        • b.  Public Project Remedies  9.145
          • (1)  Stop Payment Notice  9.146
          • (2)  Payment Bond  9.147

10

Construction Tort Liability

James Acret

Michael B. Geibel

  • I.  PARTIES; VICARIOUS LIABILITY; IMMUNITIES
    • A.  Potential Plaintiffs; Scope of Chapter  10.1
    • B.  Potential Defendants  10.2
    • C.  Expert Testimony  10.3
    • D.  Liability for Acts of Employees and Independent Contractors  10.4
    • E.  Public Agency Liability
      • 1.  Statutory Immunities  10.5
      • 2.  Liability in Construction Disputes  10.6
  • II.  PROPERTY DAMAGE TORTS
    • A.  Earth-Moving Activities; Subsidence  10.7
    • B.  Dig Safe Act of 2016  10.7A
    • C.  Water Diversion  10.8
    • D.  Public Utilities  10.8A
    • E.  Construction Defects  10.9
    • F.  Design Defects  10.10
    • G.  Right to Repair Act  10.10A
  • III.  PERSONAL INJURIES
    • A.  Liability of Material or Tool Manufacturers  10.11
    • B.  Liability of Owners and Contractors
      • 1.  To Workers on Construction Site
        • a.  Negligence and Strict Liability for Dangerous Condition on Worksite  10.12
        • b.  Workers’ Compensation  10.13
        • c.  Independent Contractor Defense
          • (1)  Principal Generally Not Liable for Acts of Independent Contractor  10.14
          • (2)  Exceptions: Control Over Activity; Failure to Require Precautions  10.15
          • (3)  Exception: Peculiar Risk Doctrine (Privette-Toland)  10.16
      • 2.  To Tenants, Visitors, and Customers  10.17
      • 3.  To Children: Attractive Nuisance Doctrine  10.18
      • 4.  Injuries on Public Projects  10.19
        • a.  Highway Construction  10.20
        • b.  Public Drawings and Specifications  10.21
        • c.  Bribery  10.22
  • IV.  FRAUD AND NEGLIGENT MISREPRESENTATION
    • A.  Basis of Claims  10.23
    • B.  Measure of Damages  10.24
    • C.  Public Entity Defendants  10.25
    • D.  Defamation  10.26
  • V.  CONTRACTUAL LIABILITY  10.27
  • VI.  GENERAL DEFENSES
    • A.  Lack of Privity Not a Defense  10.28
    • B.  Economic Loss Defense  10.29
    • C.  Completed and Accepted Doctrine  10.29A
    • D.  Statutes of Limitations and Repose  10.30
    • E.  Several Liability; Noneconomic Damages  10.31
  • VII.  INDEMNITY
    • A.  Contractual Indemnity  10.32
    • B.  Equitable Indemnity; Comparative Liability  10.33
    • C.  Good Faith Settlement  10.34
  • VIII.  ROLE OF INSURANCE IN TORT ACTIONS  10.35
    • A.  General Liability Insurance
      • 1.  Property Damage and Defective Work  10.36
      • 2.  Personal Injury Coverage  10.37
      • 3.  Hazardous Waste Coverage  10.38
    • B.  Property Insurance  10.39
      • 1.  Builders’ Risk Insurance  10.40
      • 2.  Homeowners’ Insurance
        • a.  Named-Peril Versus All-Risk Policy  10.41
        • b.  Overcoming Policy Exclusions: Efficient-Proximate-Cause Analysis  10.42
        • c.  Collateral Source Rule  10.43
        • d.  Statute of Limitations; Progressive Loss  10.44

11

Construction Defects: Theories of Liability and Statutes of Repose

Jon T. Anderson

  • I.  SUMMARY OF DEFECT ACTION
    • A.  Potential Parties; Causes of Action  11.1
    • B.  Privity Versus Nonprivity; Limitations on Damage Theories  11.2
    • C.  “Construction Defect” Defined  11.3
    • D.  Toxic Mold as Construction Defect  11.4
    • E.  Appointment of Special Masters for Mediation, Discovery, and Settlement Conferences  11.5
  • II.  STATUTES OF REPOSE  11.6
    • A.  Purpose of Statutes  11.7
    • B.  Scope of Statutes of Repose
      • 1.  Actions and Parties Covered
        • a.  Patent Defect Actions  11.8
        • b.  Latent Defect Actions  11.9
      • 2.  Distinguishing Patent From Latent Defect  11.10
    • C.  Impact on Statute of Limitations; Two-Step Analysis  11.11
    • D.  Beginning and Tolling of Statutory Periods  11.12
    • E.  Avoiding Defense of Statute of Repose  11.13
  • III.  SUBSTANTIVE GROUNDS FOR LIABILITY
    • A.  Liability to Plaintiffs in Privity  11.14
      • 1.  Breach of Contract  11.15
        • a.  Damages: Repair Cost Versus Diminution in Value  11.16
        • b.  Defenses  11.17
      • 2.  Express Warranty
        • a.  Under Common Law  11.18
        • b.  Statutory Warranties  11.19
        • c.  Defenses  11.20
      • 3.  Negligence  11.21
        • a.  Pleading Both Tort and Contract Claims  11.22
        • b.  Emotional Distress Damages  11.23
      • 4.  Implied Warranty  11.24
        • a.  Types of Warranties in Defect Actions
          • (1)  Fitness for Intended Purpose  11.25
          • (2)  Reasonably Workmanlike Construction
            • (a)  New Construction; First Buyers  11.26
            • (b)  Exceptions  11.27
        • b.  Not Applicable to Professional Services  11.28
      • 5.  Strict Liability  11.29
      • 6.  Other Torts Against Parties in Privity  11.30
    • B.  Liability to Third Parties  11.31
      • 1.  Negligence  11.32
      • 2.  Strict Liability
        • a.  Scope of Theory
          • (1)  Applies Only to Mass-Produced Housing  11.33
          • (2)  Potential Defendants
            • (a)  Builder/Seller of New Construction Is Liable  11.34
            • (b)  Manufacturer of Component Part Is Liable  11.35
            • (c)  Design Professionals Are Not Liable  11.36
          • (3)  Defects Covered  11.37
        • b.  Homeowners’ Association Claims  11.38
        • c.  Strict Products Liability  11.39
        • d.  Reasonableness Standard  11.40
        • e.  Measure of Damages  11.41
        • f.  “Economic Loss” Recovery  11.42
        • g.  Available Defenses  11.43
        • h.  Indemnity; Multiple Tortfeasors  11.44
      • 3.  Nuisance; Environmental Torts  11.45
    • C.  Fraud; Nondisclosure of Defects  11.46
    • D.  Attorney Fees; CCP §1021.5  11.47

12

Construction Defects: Insurance and Express Indemnity

Timothy L. Pierce

  • I.  ROLE OF INSURANCE COVERAGE IN CONSTRUCTION DEFECT LITIGATION  12.1
    • A.  AIA Form A201 General Conditions Regarding Insurance and Form 2017 Exhibit A, Insurance and Bonds  12.2
    • B.  Differences Between 2007 Form A201 and 2017 Form A201 With 2017 Exhibit A  12.2A
      • 1.  Owner’s Coverage  12.3
        • a.  Owner’s Property Insurance
          • (1)  Risks/Perils to Be Covered  12.3A
          • (2)  Property Insurance Limits  12.3B
          • (3)  Cancellation of Owner’s Property Insurance  12.3C
          • (4)  Required Period of Insurance   12.3D
        • b.  Optional Property Insurance for the Owner  12.3E
        • c.  Liability Insurance for the Owner  12.3F
      • 2.  Contractor’s Coverage
        • a.  Required and Optional Coverages  12.4
        • b.  Cancellation or Expiration of Contractor’s Liability Insurance  12.4A
        • c.  Completed Operations Coverage  12.5
        • d.  Certificates of Insurance   12.6
        • e.  Additional-Insured Provision  12.7
        • f.  Deductibles or Self-Insured Retentions  12.7A
        • g.  Optional Coverages for the Contractor  12.7B
    • C.  2017 AIA Sustainable Projects Exhibit  12.7C
  • II.  FORMS OF COVERAGE
    • A.  ISO Versus Manuscript Policies  12.8
    • B.  Commercial General Liability  12.9
    • C.  Businessowners Liability  12.10
    • D.  Owner’s and Contractor’s Protective Liability  12.11
    • E.  Architect’s and Engineer’s Professional Liability  12.12
    • F.  Contractor’s Professional Liability  12.13
    • G.  Design-Build Professional Liability  12.14
    • H.  Construction Management Professional Liability  12.15
    • I.  CIP, OCIP, PCIP, and Wrap-Up Insurance  12.16
    • J.  First Party Coverage  12.17
    • K.  Subcontractor Default Insurance  12.17A
  • III.  COMMERCIAL GENERAL LIABILITY INSURING AGREEMENT  12.18
    • A.  What Constitutes Property Damage  12.19
      • 1.  Property Damage Incorporation Theory
        • a.  Pre-1973 Policy; Diminution in Value Is Property Damage  12.20
        • b.  Post-1973 Policy; Diminution in Value May Not Be Property Damage  12.21
        • c.  What Constitutes “Tangible Property”  12.22
      • 2.  Defective or Faulty Materials  12.23
        • a.  Lack of Physical Injury to Other Property  12.24
        • b.  Physical Injury to Other Property  12.24A
        • c.  Hazardous Materials  12.24B
      • 3.  Loss of Use as Property Damage  12.25
      • 4.  No Coverage for Prophylactic Costs  12.26
    • B.  Bodily Injury  12.27
      • 1.  Emotional Distress Unaccompanied by Physical Injury or Manifestations  12.28
      • 2.  Emotional Distress Accompanied by Physical Injury or Manifestations  12.29
    • C.  Damages Must Be Caused by an Occurrence
      • 1.  “Occurrence” Defined  12.30
      • 2.  Occurrence Based on “Accident”  12.31
      • 3.  “Accidental” and “Negligent” Are Not Synonymous  12.32
        • a.  Examples of Conduct Held to Be “Accidental”  12.33
        • b.  Examples of Conduct Held Not to Be “Accidental”  12.34
      • 4.  Negligent Construction or Negligent Design  12.35
      • 5.  Failure to Disclose; Misrepresentation on Sale  12.36
    • D.  Legal Liability of Insured; Contracts Assumed by Insured  12.37
  • IV.  TRIGGER OF COVERAGE  12.38
    • A.  Continuous or Progressive Loss  12.39
    • B.  ISO Anti-Montrose Provisions  12.39A
    • C.  Continuous Trigger Theory Applied to Construction Defects  12.40
    • D.  “Known Injury or Damage” Provisions in Post-1999 ISO CGL Policies  12.41
    • E.  Non-ISO Anti-Montrose Provisions  12.42
  • V.  OVERVIEW OF EXCLUSIONS  12.43
    • A.  Exceptions  12.44
    • B.  Burden of Proof  12.45
    • C.  Effect of Exclusions on Duty to Defend  12.46
  • VI.  EXCLUSIONS IN CGL POLICY  12.47
    • A.  Exclusion b re: “Contractual Liability”  12.48
      • 1.  Exception for “Insured Contracts”  12.49
      • 2.  Defense Costs as “Damages”  12.50
      • 3.  Contractual Liability Endorsement  12.51
      • 4.  Limiting Endorsements  12.52
    • B.  Exclusions Relating to Damage to Property
      • 1.  Exclusion j(1) re: “Owned Property”  12.53
      • 2.  Exclusion j(2) re: “Premises Alienated”  12.54
      • 3.  Exclusion j(3) re: Property Loaned to Insured  12.55
      • 4.  Exclusion j(4) re: Property in Insured’s Care, Custody, or Control  12.56
      • 5.  Exclusion j(5) re: “Performing Operations,” “Work,” or “Work Product”  12.57
        • a.  Work in Progress  12.58
        • b.  Nondefective Work Damaged by Defective Work  12.59
        • c.  “That Particular Part”  12.60
        • d.  Arising Out of “Your Work”  12.61
        • e.  Sidetrack Agreement  12.62
      • 6.  Exclusion j(6) re: “Faulty Work”  12.63
        • a.  Work in Progress  12.64
        • b.  Nondefective Work Damaged by Defective Work  12.65
        • c.  “That Particular Part”  12.66
        • d.  “Your Work”  12.67
        • e.  Sidetrack Agreement  12.68
    • C.  Products-Completed Operations  12.69
      • 1.  Injury or Damage Must Occur After the Insured’s Work Is Completed But During the Policy Period  12.70
      • 2.  “Put to Its Intended Use”  12.71
      • 3.  “Abandoned”  12.72
      • 4.  Products-Completed Operations Exclusion  12.73
    • D.  Exclusion k re: “Your Product”  12.74
    • E.  Exclusion l re: “Work Product”  12.75
    • F.  Exclusion m re: “Impaired Property”  12.76
    • G.  Exclusion n re: “Product Recall” or “Sistership”  12.77
    • H.  Confusing Terminology Regarding the “Business Risk,” “Work Product,” or “Work” Exclusions  12.78
    • I.  The “Pollution” Exclusion  12.79
    • J.  The “Professional Services” Exclusion  12.80
    • K.  Exclusions Added by Endorsement  12.81
      • 1.  The Wrap Exclusion  12.82
      • 2.  Exclusions for Preexisting Damage, Prior Damage, or Continuous or Progressive Damage, or Claims in Progress  12.83
      • 3.  Cross-Suits or “Insured-Versus-Insured” Exclusion  12.84
      • 4.  Cross-Liability Exclusion  12.85
      • 5.  Condominium Exclusion  12.86
      • 6.  Earth Movement or Subsidence Exclusions  12.86A
      • 7.  Contractors Special Conditions or Contractors Warranty Endorsement  12.86B
  • VII.  ADDITIONAL-INSURED ENDORSEMENTS  12.87
    • A.  Types of Endorsements  12.88
      • 1.  The CG 20 10 Additional-Insured Endorsement  12.89
        • a.  “Arising Out of” Versus “Caused, in Whole or in Part, By”  12.90
        • b.  “Ongoing Operations”  12.91
        • c.  “Acts or Omissions”  12.92
      • 2.  Blanket Additional-Insured Endorsements  12.93
      • 3.  The Former CG 20 09 Additional-Insured Endorsement  12.94
      • 4.  Completed Operations Coverage for Additional Insureds  12.95
      • 5.  Three Major Changes in ISO Additional Insured Endorsements  12.95A
        • a.  Coverage Is Provided “Only to the Extent Permitted by Law”  12.95B
        • b.  Coverage Provided Is “Not Broader Than” the Coverage Required by the Indemnity Contract  12.95C
        • c.  Coverage Is Provided for No More Than the Amount Required by Contract or the Policy Limits, “Whichever Is Less”  12.95D
      • 6.  Primary and Noncontributory Endorsement  12.95E
      • 7.  Specially Drafted Additional-Insured Endorsements  12.96
    • B.  Establishing Endorsement Coverage; Certificate of Insurance  12.97
    • C.  Limits of Additional-Insured Coverage  12.98
      • 1.  Duty to Indemnify May Be Limited to Named Insured’s Sole Negligence  12.99
      • 2.  Duty to Defend Entire Action  12.100
      • 3.  Duty to Defend “Vicarious” Insureds  12.101
  • VIII.  ALLOCATING RISKS IN CONSTRUCTION CONTRACTS THROUGH INDEMNITY PROVISIONS  12.102
    • A.  Statutory Definition of Indemnity  12.103
    • B.  Indemnity for “Loss” Contrasted With Indemnity for “Liability”  12.104
    • C.  Indemnity Agreements Are Unilateral  12.105
    • D.  “Indemnify” Contrasted With “Hold Harmless”  12.106
    • E.  Older Rule Categorizing Indemnity Clauses as Type I, II, or III  12.107
    • F.  Modern Rule Rejecting Type I, II, and III Classifications  12.108
    • G.  Limitations for Sole Negligence and Willful Misconduct  12.109
    • H.  Applicable Statutory Limitations  12.109A
    • I.  Exceptions to Statutory Limitations  12.109B
    • J.  Public Agencies  12.109C
    • K.  Privately Owned Real Property  12.109D
    • L.  Limitations on Indemnification Agreements in Residential Construction Contracts  12.110
    • M.  Wrap-Up Insurance  12.110A
    • N.  Definitions of Negligence
      • 1.  “Sole Negligence” Defined  12.110B
      • 2.  “Willful Negligence” Defined  12.110C
      • 3.  “Active” and “Passive Negligence” Defined  12.110D
    • O.  Interpretation of Indemnity Clauses  12.111
    • P.  Indemnitor’s Duty to Defend  12.112
    • Q.  No Adjudication of Fault or Payment of Claim Is Required Before Indemnitor Must Pay Defense Fees and Costs  12.113
    • R.  Attorney Fees to Enforce Indemnity Agreements  12.114
    • S.  Defenses to Indemnity Agreements  12.115
    • T.  Effect of Express Indemnity on Equitable Indemnity Rights  12.116
  • IX.  POLICY LIMITS
    • A.  Per Claim and Aggregate Policy Limits  12.117
    • B.  Self-Insured Versus Deductible  12.118
    • C.  “Burning Limits”  12.119
    • D.  Consent to Settle and “Hammer Clause”  12.120

13

Construction Defects: Contribution, Equitable Indemnity, and Good Faith Settlement

Robert B. Thum

  • I.  EQUITABLE REMEDIES AVAILABLE IN CONSTRUCTION DEFECT ACTIONS  13.1
  • II.  CONTRIBUTION AND TOTAL EQUITABLE INDEMNITY
    • A.  Joint and Several Liability; Development of Contribution  13.2
    • B.  Shifting Liability; Equitable Indemnity  13.3
  • III.  COMPARATIVE EQUITABLE INDEMNITY
    • A.  Historical Development of Doctrine  13.4
    • B.  Applicability to Construction Cases  13.5
    • C.  Shortfalls; Insolvent, Uninsured Defendants  13.6
    • D.  Enforcing Equitable Indemnity Rights
      • 1.  Cross-Complaint Versus Separate Suit  13.7
      • 2.  Burden of Proof; Cross-Actions  13.8
      • 3.  Certificate of Merit  13.9
      • 4.  Statutes of Limitations and Repose  13.10
      • 5.  Indemnity Against Nonsettling Tortfeasor Limited to Economic Damages  13.11
  • IV.  GOOD FAITH SETTLEMENT
    • A.  Statutory Development; CCP §877  13.12
    • B.  Statutory Interpretation  13.13
    • C.  Balancing Interests: Value of Good Faith Settlement  13.14
    • D.  Effect of Order Declaring Good Faith Settlement
      • 1.  Settling Party Released From Liability to Nonsettling Parties
        • a.  Contribution Proceedings  13.15
        • b.  Indemnity Actions and Cross-Complaints  13.16
      • 2.  No Automatic Dismissal of Settling Party  13.17
      • 3.  No Waiver of Settling Party’s Indemnity Rights Against Nonsettling Parties  13.18
      • 4.  Parties Not Joined in Suit and Nonparticipating Insurers
        • a.  New Party’s Ability to Sue Earlier Settling Parties for Indemnity  13.19
        • b.  Earlier Settling Party’s Ability to Sue New Parties for Indemnity  13.20
      • 5.  Effect of Liability Allocation on Future Indemnity Claims  13.21
    • E.  Adjudication of Good Faith Issues
      • 1.  Motion and Hearing; CCP §877.6  13.22
      • 2.  Reasonable-Range Standard; Tech-Bilt Factors  13.23
        • a.  Plaintiff’s Total Recovery  13.24
        • b.  Settling Defendant’s Liability  13.25
        • c.  Collusion and Other Misconduct  13.26
      • 3.  Nonsettling Party’s Right of Offset
        • a.  Money Actually Paid to Plaintiff  13.27
        • b.  Nonmonetary Consideration to Plaintiff
          • (1)  Court Usually Fixes Cash Value  13.28
          • (2)  Valuation Not Always Required  13.29
        • c.  Nonsettling Party’s Comparative Fault Does Not Reduce Offset  13.30
        • d.  Offset May Eliminate Nonsettling Party’s Liability and Preempt Plaintiff’s Designation as Prevailing Party  13.30A
        • e.  Offset Not Applicable to Payment of Noneconomic Damages  13.31
      • 4.  Sliding Scale (Mary Carter) Agreements  13.32
      • 5.  Allocating Liability Against Nonsettling Cross-Defendants
        • a.  Allocation Is Not Res Judicata  13.33
        • b.  Prorata Allocation Among Claims Allowed  13.34
        • c.  Allocations Made by Settling Parties Presumed Valid  13.35
  • V.  FORMS
    • A.  Form: Cross-Complaint for Breach of Contract, Breach of Express and Implied Warranties, Negligence, Strict Liability, Contribution, and Indemnity  13.36
    • B.  Form: Order Determining Good Faith Settlement and Dismissing Cross-Actions  13.37

14

Construction Defects: Case Management and Mediation

George D. Calkins

  • I.  SCOPE OF CHAPTER  14.1
  • II.  CASE MANAGEMENT  14.2
    • A.  Appointment of Special Master or Referee  14.3
    • B.  Possible Case Management Tools  14.4
    • C.  Purpose and Contents of Case Management Order (CMO)  14.5
    • D.  Result of Ineffective Case Management  14.6
    • E.  Initial Organizational Meeting  14.7
    • F.  Case Management From Plaintiff’s Perspective
      • 1.  Owner’s Initial Evaluation  14.8
      • 2.  Counsel’s Initial Investigation  14.9
      • 3.  Early Retention of Consultants or Experts  14.10
      • 4.  Calderon Procedures for Common Interest Developments; Right to Repair Act  14.11
      • 5.  Evaluating Appropriate Legal Theories  14.12
      • 6.  Liability of Successors-in-Interest  14.13
      • 7.  Class Actions  14.14
      • 8.  Homeowner Matrix  14.15
    • G.  Case Management From Developer’s or General Contractor’s Perspective
      • 1.  Initial Investigation  14.16
      • 2.  Tender of Defense and Indemnity—Insurance and Subcontract  14.17
      • 3.  Appointment of Special Master  14.18
      • 4.  Negotiations With Plaintiff  14.19
      • 5.  Developer Mediation and Defense Strategies
        • a.  Litigation Alternatives  14.20
        • b.  Checklist: Initial Preparation of Case  14.21
        • c.  Defense Response  14.22
    • H.  Case Management From Subcontractor’s Perspective  14.23
      • 1.  Checklist: Crucial Issues When Interviewing Subcontractor  14.24
      • 2.  Checklist: Claims and Document Analysis  14.25
      • 3.  Checklist: Insurance Tenders; Additional-Insured Requirements  14.26
      • 4.  Checklist: Evaluating Claim  14.27
      • 5.  Scope of Defect Investigation  14.28
      • 6.  Checklist: Expert Meetings  14.29
    • I.  Insurance Carrier’s Role in Case Management  14.30
  • III.  DISCOVERY
    • A.  Use of Experts
      • 1.  Qualifications and Requirements  14.31
      • 2.  Cost of Experts  14.32
      • 3.  Federal Requirements on Expert Witness Testimony  14.33
      • 4.  California Approach to Admissibility of Expert Testimony  14.34
    • B.  Document Depository and Management  14.35
    • C.  Discovery Stay  14.36
    • D.  Plaintiff’s Testing and Identification of Defects  14.37
    • E.  Plaintiff’s Presentation of Defect Case  14.38
    • F.  Defense’s Site Inspections and Testing  14.39
    • G.  Developer’s Demands to Subcontractors; Liability Allocation Meeting  14.40
  • IV.  MEDIATION: ROADMAP FOR CONSTRUCTION DEFECT ACTIONS
    • A.  What Is Mediation?  14.41
    • B.  When to Mediate  14.42
    • C.  Facts Necessary to Resolve Disputes  14.43
    • D.  Creating Atmosphere for Success  14.44
    • E.  Peripheral Parties  14.45
    • F.  Mediator’s Role
      • 1.  Selecting the Mediator  14.46
      • 2.  Mediator’s Strategies  14.47
      • 3.  Authority to Compel Parties to Participate in Mediation or Submit Dispute to Referee  14.48
      • 4.  Confidentiality of Mediation  14.49
      • 5.  Mediator’s Fees  14.50
    • G.  Participation of Insurance Carriers  14.51
      • 1.  Full Identification of Coverage and Authorized Representatives  14.52
      • 2.  Remedies for Nonparticipation of Carriers  14.53
    • H.  Mediation Protocol  14.54
      • 1.  Creating Value Through Integrated Bargaining  14.55
      • 2.  Distinguishing Interests, Positions, and Issues  14.56
      • 3.  Competitive Versus Integrative Problem Solving  14.57
  • V.  FINAL MEDIATION PROCESS  14.58
    • A.  Impediments to Final Resolution  14.59
    • B.  Preliminary Meetings and Planning  14.60
    • C.  Joint Mediation Session  14.61
    • D.  Private Caucus Sessions  14.62
    • E.  Risk-Based Phase of Mediation  14.63
    • F.  Shifting Mediation Strategies  14.64
    • G.  Analyzing Solutions  14.65
  • VI.  MEDIATION FROM PLAINTIFF’S PERSPECTIVE
    • A.  Preparation for Mediation  14.66
    • B.  Plaintiff’s Premediation Checklist  14.67
    • C.  Mediation Process  14.68
    • D.  Settlement  14.69
  • VII.  MEDIATION FROM DEVELOPER’S OR GENERAL CONTRACTOR’S PERSPECTIVE  14.70
  • VIII.  MEDIATION FROM SUBCONTRACTOR’S PERSPECTIVE  14.71
  • IX.  SETTLEMENT  14.72

15

Prelitigation and Litigation Requirements Unique to New Residential Construction

James Acret

Joan M. Cambray

  • I.  INTRODUCTION
    • A.  “Right to Repair Act” and “Calderon Procedures” Defined  15.1
    • B.  Legislative Motive and Intent in Enacting Right to Repair Act  15.2
  • II.  DOES RIGHT TO REPAIR LAW APPLY?  15.3
    • A.  Factors Determining Whether Right to Repair Act Applies
      • 1.  Type of Construction  15.4
      • 2.  Effective Date of the Act; Retroactivity  15.5
      • 3.  Parties Covered
        • a.  Homeowners, Associations, Subsequent Homeowners, and Insurers  15.6
        • b.  Builders; Strict Liability  15.7
        • c.  General Contractors, Subcontractors, Material Suppliers, Product Manufacturers, and Design Professionals; Negligence Requirement  15.8
    • B.  Act Does Not Cover Actions Brought by Parties Other Than Homeowners  15.9
    • C.  Violation of One or More Functionality Standards  15.10
    • D.  Exclusivity of Right to Repair Act  15.11
    • E.  Exclusions From Right to Repair Act
      • 1.  Manufactured Products  15.12
      • 2.  Fit and Finish Warranties  15.13
      • 3.  Enhanced Protection Agreements  15.14
      • 4.  Excluded Causes of Action  15.15
    • F.  Advantages and Disadvantages of Coming Within the Purview of Right to Repair Act  15.16
  • III.  ACTIONABLE DEFECTS
    • A.  Defect Must Violate Functionality Standard  15.17
    • B.  Liability and Causation Standards  15.18
  • IV.  FUNCTIONALITY STANDARDS
    • A.  Water Standards  15.19
    • B.  Manufactured Products, Useful Life Standards  15.20
    • C.  Heating and Air-Conditioning Standards  15.21
    • D.  Other Standards  15.22
    • E.  Health and Safety Standards  15.23
    • F.  Catchall Standard  15.24
    • G.  Mold  15.25
  • V.  ENHANCED PROTECTION AGREEMENTS  15.26
    • A.  Other Provisions of Act That May or May Not Apply  15.27
    • B.  Procedure to Enforce or Challenge an EPA
      • 1.  Enforcement by Builder  15.28
      • 2.  Challenge by Homeowner  15.29
  • VI.  FIT AND FINISH WARRANTY  15.30
  • VII.  STATUTES OF LIMITATIONS AND REPOSE
    • A.  Outside Right to Repair Act  15.31
    • B.  Under Right to Repair Act  15.32
    • C.  Accrual of Statutes of Repose  15.33
    • D.  Close of Escrow  15.34
    • E.  Duration of Statutes of Repose  15.35
    • F.  Extension of Statutes of Repose  15.36
  • VIII.  PRELITIGATION PROCEDURE REQUIREMENT UNDER RIGHT TO REPAIR ACT  15.37
    • A.  Mandatory Procedure  15.38
    • B.  Associations: Additional Prelitigation Requirements  15.39
    • C.  Effect of Builder’s Failure to Give Proper Notice  15.40
    • D.  Alternative Nonadversarial Contractual Procedure Exception  15.41
  • IX.  PRELITIGATION PROCEDURES
    • A.  Homeowner or Association or Insurer Notice of Claim  15.42
      • 1.  Contents of Notice of Claim  15.43
      • 2.  Form: Notice of Claim  15.44
    • B.  Customer Service and Warranty Requests Distinguished  15.45
    • C.  Subsequently Discovered Claims  15.46
      • 1.  Detached Single-Family Residence  15.47
      • 2.  Attached Housing  15.48
    • D.  Builder’s Preliminary Prelitigation Obligations
      • 1.  Prelitigation Procedure Deadlines
        • a.  Short and Strict Timelines  15.49
        • b.  Chart: Prelitigation Procedure Deadlines  15.50
        • c.  Diagram: Right to Repair Act Decision Tree  15.51
        • d.  Written Agreements to Extend Deadlines  15.52
      • 2.  Response to Notice of Claim: Acknowledgment of Receipt  15.53
      • 3.  Form: Acknowledgment of Notice (CC §913)  15.54
      • 4.  Builder’s Inspections and Testing  15.55
      • 5.  Notice to Other Parties  15.56
      • 6.  Timing of First Inspection  15.57
      • 7.  Timing of Second Inspection  15.58
      • 8.  Builder’s Document Production  15.59
        • a.  Chart: Document Production Deadlines  15.60
        • b.  Construction-Related Documents  15.61
        • c.  Timing  15.62
        • d.  Copying and Costs  15.63
        • e.  Obtaining Documents From Other Sources  15.64
        • f.  Maintenance, Manufactured Product, and Warranty Documents  15.65
        • g.  Technical Documents  15.66
        • h.  Repair-Related Documents  15.67
    • E.  Offers by Builder to Repair or Settle  15.68
      • 1.  Builder’s Offer to Repair
        • a.  Contents of Offer  15.69
        • b.  Form: Offer to Repair (CC §917)  15.70
        • c.  No Release  15.71
        • d.  Statement of Reasons for Repairs Not Performed  15.72
      • 2.  Homeowner’s Response to Offer to Repair  15.73
        • a.  Timing  15.74
        • b.  Alternative Contractors; Additional Inspection; Homeowner’s Selection of Contractor  15.75
        • c.  Prerepair Mediation  15.76
        • d.  Repairs Following Mediation  15.77
      • 3.  Effect of Homeowner’s Refusal to Permit Repairs  15.78
      • 4.  Effect of Homeowner’s Consent to Repairs
        • a.  Repairs  15.79
        • b.  When Repairs Must Begin  15.80
        • c.  No Release or Waiver  15.81
      • 5.  Postrepair Mediation  15.82
      • 6.  Homeowner Action After Repair  15.83
      • 7.  Cash Offer in Lieu of Repair; Release  15.84
  • X.  HOMEOWNER ACTIONS  15.85
    • A.  Contractual Provisions for Binding ADR or Mediation  15.86
    • B.  Stay Based on Homeowner’s Failure to Comply With Prelitigation Procedures  15.87
    • C.  Association Claimants  15.88
    • D.  Pleading Considerations
      • 1.  Application of Right to Repair Act to Homeowners  15.89
      • 2.  Claims Against Design Professionals and Engineers  15.90
      • 3.  Affirmative Defenses  15.91
    • E.  Evidentiary Issues
      • 1.  Strict Liability for Builders  15.92
      • 2.  Repair Efforts; Conduct of the Parties  15.93
    • F.  Damages  15.94
      • 1.  Detached Single-Family Homes  15.95
      • 2.  Builder’s Offset  15.96
  • XI.  COMMON INTEREST DEVELOPMENT PRELITIGATION PROCEDURES
    • A.  Objective: Avoiding Litigation  15.97
    • B.  Summary of Calderon Procedures  15.98
    • C.  180 Days to Settle Before Filing Suit  15.99
    • D.  Tolling of Statutes of Limitations and Repose  15.100
    • E.  Step-by-Step Calderon Procedures
      • 1.  Notice of Commencement of Legal Proceedings  15.101
      • 2.  Chart: Calderon Procedure Deadlines  15.102
      • 3.  Preliminary Meetings and Discovery
        • a.  Respondent’s Meeting With Association’s Board  15.103
        • b.  Preliminary Exchange of Construction Documents, Maintenance Records, and Inspection Reports  15.104
      • 4.  Involving Other Potentially Responsible Parties and Insurers
        • a.  Respondent’s Notice to Subcontractors, Design Professionals, and Insurers  15.105
        • b.  Response to Notice; Statement of Insurance  15.106
        • c.  Request to Be Designated as Peripheral Party  15.107
        • d.  Petition for Release on Showing of No Potential Responsibility  15.108
      • 5.  Selection of Dispute Resolution Facilitator
        • a.  Initial Meet and Confer  15.109
        • b.  Qualifications of Facilitator  15.110
        • c.  Costs of Facilitator  15.111
        • d.  Disqualification of Facilitator  15.112
        • e.  Notice of Facilitator and Input From Later-Added Parties  15.113
      • 6.  Initial Case Management Meeting
        • a.  Scheduling Meeting  15.114
        • b.  Notice of Meeting  15.115
        • c.  Data Compilation  15.116
        • d.  Case Management Statement  15.117
          • (1)  Document Depository  15.118
          • (2)  List of Specific Defects  15.119
          • (3)  Facilitated Dispute Resolution Sessions  15.120
          • (4)  Notice to Insurers  15.121
      • 7.  Resolution of Disputes; Appointment of Referee; Good Faith Settlement Hearing
        • a.  Allowable Relief  15.122
        • b.  Meet and Confer Before Filing Petition  15.123
        • c.  Filing Petition and Response  15.124
      • 8.  Settlement Offer; Director’s Meeting; Member’s Meeting
        • a.  Respondent’s Offer to Settle and Request to Meet With Board  15.125
        • b.  Meeting to Discuss Offer and Test Results  15.126
        • c.  Notice to Owners of Settlement  15.127
        • d.  If Board Rejects Offer, Owners Meet  15.128
      • 9.  Filing Suit on Defect Claims
        • a.  Nonsettlement; Complaint  15.129
        • b.  Limits on Additional Testing or Inspection
          • (1)  Motion Required [Deleted]  15.130
          • (2)  When Additional Defects Are Alleged [Deleted]  15.131
        • c.  Inadmissibility of Dispute Resolution Communications  15.132
        • d.  Settlement   15.133
        • e.  Order of Discovery [Deleted]  15.134
    • F.  Noncompliance; Judicial Relief; Dismissal of Action; Other Remedies  15.135
  • XII.  RIGHT TO REPAIR ACT AND CALDERON PROCEDURE INTERPLAY  15.136

CALIFORNIA CONSTRUCTION CONTRACTS, DEFECTS, AND LITIGATION

(1st Edition)

November 2018

TABLE OF CONTENTS

 

File Name

Book Section

Title

CH01

Chapter 1

Contractor Licensing; Remedies for Unlicensed Work

01-022

§1.22

Form Provision: Allegation re Cause of Action Against Surety on License Bond

CH02

Chapter 2

Drafting Construction Contracts

02-054

§2.54

Contractor’s License Notice

02-059

§§2.59-2.100

Introduction; Parties

 

§2.60

Description of Work

 

§2.61

Property Lines

 

§2.62

Payment (Lump-Sum)

 

§2.63

Time for Start and Completion

 

§2.64

Delay Beyond Contractor’s Control

 

§2.65

Liquidated Damages for Delay

 

§2.66

Drawings, Specifications, Permits, and Fees

 

§2.67

Payment by Contractor for Labor and Material

 

§2.68

Interpretation of Contract, Drawings, and Specifications

 

§2.69

Extra Work, Changes, and Deletions

 

§2.70

Allowances

 

§2.71

Completion and Occupancy

 

§2.72

Insurance

 

§2.73

Warranty of Work and Correction Guaranty

 

§2.74

Indemnity

 

§2.75

Arbitration

 

§2.76

Time of the Essence

 

§2.77

Cleanup

 

§2.78

Attorney Fees

 

§2.79

Assignment

 

§2.80

Other Documents

 

§2.81

Contractor’s License Notice

 

§2.82

Notice

 

§2.83

Integration

 

§2.84

Governing Law

 

§2.85

Signatures; Contractor’s License Number

 

§2.86

Independent Investigation

 

§2.87

Right to Stop Work

 

§2.88

No Right to Stop Work

 

§2.89

Option to Terminate—Time of the Essence

 

§2.90

Right to Demand Bond

 

§2.91

Corrective or Repair Work

 

§2.92

Right to Approve Financial Arrangements

 

§2.93

Contract Not Conditioned on Financing

 

§2.94

Contract Conditioned on Financing

 

§2.95

Repossession of Materials

 

§2.96

Personal Liability

 

§2.97

Building Department Requirements

 

§2.98

Payments Not Constituting Approval

 

§2.99

Final Payment Waives Claims

 

§2.100

Waiver of Surety’s Right to Approve Change Orders

02-103D

§2.103D

Mechanics Lien Warning

02-103E

§2.103E

Contractors State License Board (CSLB) Notice

02-103F

§2.103F

3-Day Right to Cancel

02-103G

§2.103G

Notice of Cancellation (3-Day)

02-103H

§2.103H

7-Day Right to Cancel

02-103I

§2.103I

Notice of Cancellation

02-110

§2.110

Home Improvement Contract

02-111C

§2.111C

Notice to Buyer

02-114

§2.114

Form Provision: Payment and Financing

02-115

§2.115

Form Provision: Acknowledgment

02-117

§2.117

Form Provision: Disclosure Provisions

02-119

§2.119

Notice of Right of Rescission

02-124

§§2.124-2.155

Parties and Introductory Clause

 

§2.125

Description of Work

 

§2.126

Subcontractor Investigations

 

§2.127

Incorporation of Prime Contract

 

§2.128

Subcontract Payment

 

§2.129

Payment Schedule

 

§2.130

Effect of Payments

 

§2.131

Payments in Trust

 

§2.132

Commencement and Progress of Work; Delay

 

§2.133

Protection of Work and Property

 

§2.134

Extra Work, Changes, and Deletions

 

§2.135

Subcontractor’s Claims

 

§2.136

Guaranty of Work

 

§2.137

Bond Requirements

 

§2.138

Superintendent

 

§2.139

Cleanup

 

§2.140

Job Safety

 

§2.141

Taxes, Licenses, and Fees

 

§2.142

Labor Matters

 

§2.143

Arbitration

 

§2.144

Alternative Equipment, Material, or Method

 

§2.145

Insurance

 

§2.146

Indemnity

 

§2.147

Default and Termination

 

§2.148

Releases and Proof of Payment

 

§2.149

Attorney Fees

 

§2.150

Assignment

 

§2.151

Bankruptcy

 

§2.152

Notices

 

§2.153

Integration

 

§2.154

Governing Law

 

§2.155

Contractors’ License Notice, Signatures, and License Number

CH03

Chapter 3

Design-Build

03-023

§3.23

Checklist: Contract Issues to Be Considered in Design-Build

03-024

§3.24

Checklist: Issues Owner Should Review in Preparing Contract Documents

03-026

§§3.26-3.33

Owner as Third Party Beneficiary

 

§3.27

Design-Builder’s Responsibility for Errors and Omissions

 

§3.28

Arbitration Within Owner’s Discretion

 

§3.29

Owner’s Right to Terminate

 

§3.30

No Damage for Delay

 

§3.31

Relationship of Trust and Confidence

 

§3.32

Design-Builder’s Obligation to Obtain Permits

 

§3.33

Errors and Omissions Insurance

CH04

Chapter 4

Green Building

04-005

§4.5

Checklist: Factors Influencing the Decision to Build Green

04-026H

§4.26H

Checklist: Key Documents to Review for Purchase of Renewable Energy

04-026I

§4.26I

Checklist: Lenders’ Concerns for Financing Renewable Energy Projects

04-030

§4.30

Checklist: Early Actions

04-038

§4.38

Checklist: Advising Owners

04-040

§4.40

Checklist: Advising Contractors

04-043

§4.43

Checklist: Advising Design Professionals

CH07

Chapter 7

Arbitration

07-024

§7.24

Checklist: Drafting an Arbitration Clause

07-041

§7.41

Checklist: Drafting Submission Agreement

07-143

§7.143

AAA Arbitration Clause

07-144

§7.144

Long Form Arbitration Clause

07-146

§7.146

Petition for Order Compelling Arbitration

07-147

§7.147

Notice of Hearing on Petition

07-148

§7.148

Order Compelling Arbitration

07-149

§7.149

Notice of Motion to Stay Action

07-150

§7.150

Declaration in Support of Motion to Stay Action

07-151

§7.151

Memorandum in Support of Motion to Stay Action

07-152

§7.152

Petition for Order Nominating Arbitrators

07-153

§7.153

Order Nominating Arbitrators

07-154

§7.154

Petition for Order Appointing Arbitrator

07-155

§7.155

Order Appointing Arbitrator

07-156

§7.156

Arbitration Award

07-157

§7.157

Petition to Confirm Arbitration Award

07-158

§7.158

Response to Petition; Application for Vacation of Award

CH09

Chapter 9

Handling Disputes During Construction

09-003

§9.3

Checklist: Public Projects

09-004

§9.4

Checklist: Public and Private Projects

09-005

§9.5

Checklist: Construction Terminology

09-007

§9.7

Checklist: Principal Parties

09-011

§9.11

Checklist: Review Resolution Methods

09-012

§9.12

Checklist: Review Contract

09-013

§9.13

Checklist: Review Statutes

09-017

§9.17

Checklist: Who Needs a Contractor’s License

09-018

§9.18

Checklist: Who Does Not Need a Contractor’s License

09-019

§9.19

Checklist: Licensing Qualifications

09-025

§9.25

Checklist: Bidding Process in General

09-050

§9.50

Checklist: Owner’s Steps if Contractor Refuses to Proceed

09-060

§9.60

Checklist: Proceeding With Bid Protest

09-061

§9.61

Checklist: Owner’s Actions

09-064

§9.64

Checklist: Contract Interpretation

09-084

§9.84

Checklist: Owner’s Measures to Prevent a Claim of Implied Abandonment

09-094

§9.94

Checklist for Owner: Evaluate Options When Defective Work Is Discovered

09-095

§9.95

Checklist: Owner’s Actions When Defect Discovered Before Project Completion

09-096

§9.96

Checklist: Owner’s Actions When Defect Discovered After Project Completion

09-098

§9.98

Checklist: Action Following Receipt of Disputed Notice of Defect

09-112

§9.112

Checklist: Contractor’s Actions if Owner Is Responsible for Delay

09-115

§9.115

Checklist: Owner’s Actions if Contractor Is Responsible for Delay

09-128

§9.128

Checklist: Contract Requirements

09-129

§9.129

Checklist: Owner’s Prompt-Payment Statutes (Progress Payments)

09-130

§9.130

Checklist: Contractor’s Prompt-Payment Statutes (Progress Payments)

09-131

§9.131

Checklist: Retention Proceeds (Owner and Contractor Payment)

CH13

Chapter 13

Construction Defects: Contribution, Equitable Indemnity, and Good Faith Settlement

13-036

§13.36

Cross-Complaint for Breach of Contract, Breach of Express and Implied Warranties, Negligence, Strict Liability, Contribution, and Indemnity

13-037

§13.37

Order Determining Good Faith Settlement and Dismissing Cross-Actions

CH14

Chapter 14

Construction Defects: Case Management and Mediation

14-021

§14.21

Checklist: Initial Preparation of Case

14-024

§14.24

Checklist: Crucial Issues When Interviewing Subcontractor

14-025

§14.25

Checklist: Claims and Document Analysis

14-026

§14.26

Checklist: Insurance Tenders; Additional-Insured Requirements

14-027

§14.27

Checklist: Evaluating Claim

14-029

§14.29

Checklist: Expert Meetings

14-067

§14.67

Plaintiff’s Premediation Checklist

14-069

§14.69

Settlement

CH15

Chapter 15

Prelitigation and Litigation Requirements Unique to New Residential Construction

15-044

§15.44

Notice of Claim

15-054

§15.54

Acknowledgment of Notice (CC §913)

15-070

§15.70

Offer to Repair (CC §917)

APP

Appendixes

APPENDIXES

APP-A

APP-A

Prime Contract Between Owner and Contractor: Cost Plus Percentage With Guaranteed Maximum

APP-B

APP-B

Case Management Order

 

Selected Developments

November 2018 Update

Beginning January 1, 2018, the Registrar of Contractors may issue a letter of admonishment to an applicant, licensee, or registrant in lieu of a citation if there is probable cause to believe the applicant, licensee, or registrant has committed acts or omissions that are grounds for denial, suspension, or revocation of a license or registration. The new provisions delineate what must be contained in the letter and the provide the recipient with the opportunity to request a conference to contest the letter. Bus & P C §7124.6(c). See §1.78.

Effective January 1, 2019, Bus & P C §7099.8(b)(3) was added to provide that a person wishing to contest a citation from the Registrar of Contractors must, within 15 days after service of the citation, file a written request for an administrative hearing and may also contest the citation by submitting a written request for an informal citation conference to the chief of the enforcement division. If an informal citation confernece is held, the request for an administrative hearing is deemed withdrawn. See §1.79.

In United Riggers & Erectors, Inc. v Coast Iron & Steel Co. (2018) 4 C5th 1082, 1092, the California Supreme Court held that withholding payment of retention is only permitted for disputes related to the retention payment itself. The court held that CC §8814 requires prompt payment by a prime contractor to a subcontractor once the prime contractor has been paid by the owner for the subcontractor’s work. See §§2.31, 5.64, 5.68, 6.102.

Executive Order 13693 (Mar. 19, 2015), entitled “Planning for Federal Sustainability in the Next Decade,” which directed federal agencies to establish agency-wide energy efficiency and renewable energy targets with the goal of reducing greenhouse gas emissions relative to a fiscal year 2008 baseline, was revoked by Executive Order 13834 (May 17, 2018). Executive Order 13834 stated goals for federal agencies related to energy and environmental performance, such as reducing building energy use and water consumption, meeting statutory requirements for use of renewable energy. Specific guidance implementing the goals of EO 13834 has not yet been issued. See §4.15.

The California Energy Commission updated standards will go into effect on January 1, 2020, and will focus on four key areas:

  • 1.

    Smart residential photovoltaic systems;

  • 2.

    Updated thermal envelope standards (preventing heat transfer from the interior to exterior and vice versa);

  • 3.

    Residential and nonresidential ventilation requirements; and

  • 4.

    Nonresidential lighting requirements.

See §4.19.

In Global Modular, Inc. v Kadena Pac., Inc. (2017) 15 CA5th 127, the court held that the insurance policy exclusion for damage to property during operations applies only to damage caused during actual construction activities; the exclusion for property that must be repaired or replaced due to incorrectly performed work only applies to the portions of work incorrectly performed, and not to the entire project. See §5.103.

In Oltmans Constr. Co. v Bayside Interiors (2017) 10 CA5th 355, the court held that a general contractor was precluded from recovering indemnity for liability incurred as a result of its own active negligence, but could be indemnified for the portion of liability attributable to the fault of others (e.g., the subcontractor). See §5.112A.

In McMillin Mgmt. Servs., L.P. v Financial Pac. Ins. Co. (2017) 17 CA5th 187, the court held that when a general liability insurance policy provides for coverage of liability “arising out of ongoing operations,” the insurance company has a duty to defend the general contractor in a construction defect action even though the action commences after the homeowners move into the development. See §§5.112A, 12.61, 12.91.

If neither party achieves a complete victory on all the contract claims, it is within the discretion of the trial court to determine which party prevailed on the contract or whether, on balance, neither party prevailed sufficiently to justify an award of attorney fees. In determining whether a party has prevailed in a contract dispute, the court must compare the relief awarded on the contract claims with the parties’ demands on those same claims and their litigation objectives. Marina Pacifica Homeowners Ass’n v Southern Cal. Fin. Corp. (2018) 20 CA5th 191. See §5.123.

A nuisance claim that is not based solely on construction defects may not be barred by the 10-year statute of repose under CCP §337.15. Estuary Owners Ass’n v Shell Oil Co. (2017) 13 CA5th 899. See §§5.138, 10.30, 11.9, 11.13, 11.45.

Effective January 1, 2019, Pub Cont C §22032 is amended to authorize public projects of $60,000 or less to be performed by employees of a public agency, and to authorize public projects of $200,000 or less to be let to contract by informal procedures Public projects of more than $200,000 must be let to contract by formal bidding procedures. See §§6.21, 6.26, 6.33.

In addition to designating in the bid the name and address of each subcontractor that will perform work exceeding one half of 1 percent of the prime contractor’s total bid, the bidder on a public project must also designate the California contractor’s license number and public works contractor registration number. Pub Cont C §4104(a)(1). See §6.36.

In West Coast Air Conditioning Co. v Department of Corrections & Rehabilitation (2018) 21 CA5th 453, the court upheld an award of $250,000 in bid preparation costs to a second low bidder under promissory estoppel theory when the second low bidder was not awarded the contract even though the second low bidder had obtained an order that the low bidder’s bid was nonresponsive and a permanent injunction prevented the low bidder from continuing to perform the contract on the project. See §6.52.

In McMillin Albany LLC v Superior Court (2018) 4 C5th 241, the California Supreme Court held that the pre-litigation procedures under the Right to Repair Act apply to all claims, including common law claims, for property damage and economic loss arising from construction defects, but do not apply to common law claims for personal injury, breach of contract, or fraud. See §§8.36A, 8.36D, 9.96, 10.2, 10.10A, 10.29, 11.42, 14.11, 15.2, 15.8, 15.10, 15.11, 15.15, 15.24, 15.31, 15.42, 15.89.

In Curtis Eng’g Corp. v Superior Court (2017) 16 CA5th 542, after an attorney failed to file the certificate of merit under CCP §411.35 within the 60-day window permitted, and instead waited several months after filing the complaint and after the limitations period had expired before filing the certificate, the court held that the relation-back doctrine did not apply, concluding that importing the relation-back doctrine into the statutory certificate of merit procedures would render meaningless the requirements and purpose of the statute. See §8.36B.

In Acqua Vista Homeowners Ass’n v MWI, Inc. (2017) 7 CA5th 1129, the court held that a pipe supplier for a condominium development project could not be held strictly liable to the homeowners under the provisions of the Right to Repair Act because the homeowners had not introduced any evidence at trial showing that the leaky and corroded piping system was caused by the pipe supplier’s negligence or breach of contractual obligation. See §§10.2, 15.8, 15.18.

The California Supreme Court, in Kim v Toyota Motor Corp. (2018) 6 C5th 21, held that evidence of industry custom and practice may be relevant and admissible in a strict products liability action, at the discretion of the trial court, depending on the nature of the evidence and the purpose for which the party seeking its admission offers the evidence. See §10.3.

In People v ConAgra Grocery Prods. Co. (2017) 17 CA5th 51, the trial court ordered defendant lead paint manufacturers (and a successor entity) to pay $1.5 billion into a fund to abate homes in California with interior lead paint. The appellate court reversed and remanded to the trial court to recalculate the amount of the fund by limiting the abatement to pre-1951 homes and hold an evidentiary hearing concerning the receiver, but otherwise rejected defendants’ arguments that the nuisance and abatement findings were improper. See §11.45.

In Global Modular, Inc. v Kadena Pac., Inc. (2017) 15 CA5th 127, 137, the court held that because the phrase “are performing operations” in an exclusion used the active, present tense, the exclusion

applies only to damage caused during physical construction activities. Had the policy drafters intended the exclusion to apply more broadly to damage to any of the insured’s work in progress, we would expect the provision to say something along the lines of, “property damage to that particular part of real property on which your operations are not yet complete” or even “property damage to your work arising out of your operations.”

See §§12.57, 12.60, 12.64, 12.66.

In All Green Elec., Inc. v Security Nat’l Ins. Co. (2018) 22 CA5th 407, allegations in a negligence complaint by a customer that the insured electrical contractor failed to install bolt and other electrical components in an electrical cabinet for the customer’s medical office, leading to the loss of use of the customer’s mammography unit, fell within the impaired property exclusion. See §12.76.

In Pulte Home Corp. v American Safety Indem. Co. (2017) 14 CA5th 1086, the court held that the insurers had a duty to defend under an additional insured endorsement that limited coverage to liability arising out of the named insured’s “ongoing operations” because there was a possibility that some property damage occurred while the named insureds were still working on the project. See §12.91.

About the Authors

JAMES ACRET, author of chaps 1–2, 6, 8, and 10 and coauthor of chaps 5, 7, and 15, earned his B.A. in 1951 from the University of California, Los Angeles, and his J.D. in 1957 from the University of California, Los Angeles, School of Law. In his distinguished 50-year career, Mr. Acret handled scores of trials, mediations, and arbitrations, representing contractors, owners, architects, engineers, developers, and sureties. He is an experienced construction industry arbitrator and mediator and was a member of the committee that rewrote the California Mechanics’ Lien Law in 1969. He has lectured on construction law at law schools and professional associations and is the author of numerous books on construction law. Mr. Acret also wrote a chapter in California Mechanics Liens and Related Construction Remedies (3d ed Cal CEB) and was a panelist on many CEB construction law programs. Mr. Acret announced his retirement in late 2007.

JON T. ANDERSON, author of chap 11, is a member of Thelen Reid & Priest in San Francisco. He received his A.B. in 1962 from the University of Kansas, his M.A. in 1970 from Harvard University, and his J.D. in 1970 from Harvard Law School. Mr. Anderson served as general counsel for the National Security Agency and has practiced with Mochtar, Karuwin & Komar in Jakarta, Indonesia. He practices in the areas of construction, government contracts, and administrative law. He has written chapters and articles on architect-engineer liability, major construction case minitrials, and changes resulting from impossibility or impracticability of performance in construction change-order claims.

GEORGE D. CALKINS, author of chap 14, is a member of Cox, Castle & Nicholson LLP in Los Angeles and practices construction law with an emphasis on investigation, litigation, trial, arbitration, mediation, and settlement of all forms of construction disputes. Mr. Calkins has tried or arbitrated hundreds of construction cases and has taught construction law and dispute resolution courses for various trade and legal associations, including the Associated General Contractors, the Southern California Defense Counsel, the California Continuing Education of the Bar, and the California Judges Association. He has taught numerous university extension courses on the legal aspects of construction management and has published various articles on construction disputes, construction defect claims, alternative dispute resolution, and mediation of construction disputes. He received his B.A. in 1968 from the University of California, Los Angeles, and his J.D. in 1973 from Loyola University School of Law with a fellowship to teach legal communications.

JOAN M. CAMBRAY, coauthor of chap 15, is an experienced real estate and commercial litigator in the Oakland office of Wendel, Rosen, Black & Dean. She represents homebuilders, developers, contractors, and property owners, helping them to successfully resolve disputes in a variety of complex real estate and business litigation matters. Ms. Cambray has handled numerous cases involving real estate contracts, various home builder and construction issues, commercial contracts, mortgages, trust deeds, foreclosures, escrow, title insurance, real and personal property secured transactions, guaranties, and a variety of lender-related issues. She is a frequent lecturer and author for legal education programs and publications as well as an instructor for Boalt Hall’s Real Estate Transactions course.

JEFFREY S. CONNER, author of chap 4, is a San Francisco-based attorney with 20 years of experience in domestic and international construction and real estate law, claims consulting, and real estate development. Mr. Conner has managed complex construction litigation and real estate transactional matters on both private and public projects and gained significant experience in assisting contractors and owners with preventative risk management. He has actively represented many of the largest contractors and owners in the United States and has been involved in numerous noteworthy “megaprojects.” Mr. Conner combines this legal experience with practical business experience garnered from the various retail and residential projects he has developed on his own. Mr. Conner is a frequent speaker at construction industry events and has been featured in numerous newspaper and magazine articles. He currently serves as the chair of the California Bar Association’s Construction & Commercial Law Subsection, and vice-chair of the Real Property Section. Mr. Conner earned his B.S. degree from the University of California, Berkeley, and his law degree from the University of San Francisco School of Law.

ROBERT C. FIELD, coauthor of chap 7, is a full-time neutral and serves as an arbitrator, mediator, and special master in both federal and state courts. Formerly, he was the managing partner of Field, Richardson & Wilhelmy of Walnut Creek. His practice emphasized construction, real property, commercial law, and related litigation and arbitration. Between 1961 and 1995, he was an instructor at the University of California Extension in business, commercial, and construction law and was a frequent speaker at seminars. He has written chapters on arbitration for other publishers. Mr. Field is a member of the American Arbitration Association’s Panel of Commercial and Construction Arbitrators and Mediators. He received his B.A. in 1957 from the University of California, Berkeley, and his J.D. in 1960 from the University of California, Hastings College of the Law.

BARBARA R. GADBOIS, LEED® AP, coauthor update author of chap 2, is a partner at Gibbs Giden Locher Turner Senet & Wittbrodt LLP. She received her undergraduate degree from Northwestern University in 1982 and her J.D. degree from the University of California, Los Angeles, School of Law in 1985. Ms. Gadbois frequently lectures for legal education programs on design, construction, public works, and prevailing wage issues throughout California. She is a U.S. Green Building Council LEED® AP. Ms. Gadbois is consistently recognized as a leading construction lawyer by many independent legal guidebook publications, including the most recent editions of Chambers USA Directory of Leading Lawyers(2007–2013) and Los Angeles Magazine’s “Southern California Super Lawyers” (2008–2013), and the 2013 list of Los Angeles’ Women Leaders in the Law. She has been recognized in The Legal 500, U.S. real estate and construction section, for 4 consecutive years and was highlighted as an “outstanding lawyer” who is “highly recommended” in 2012. She has published several articles relating to construction contracting and recently served as an adjunct professor of law at Loyola Law School in Los Angeles. She currently represents a variety of public agencies, private owners, and contractors in development, construction, and claims resolution for sports venues, hotels, commercial and residential developments, and public works projects.

MICHAEL B. GEIBEL, coauthor and update author of chap 10, is a partner in the insurance defense department at Gibbs Giden Locher Turner Senet & Wittbrodt LLP. He received his undergraduate degree from the University of California, Los Angeles, and his J.D. from Loyola Law School, Loyola Marymount University, Los Angeles. Mr. Geibel has been selected for inclusion in “Southern California Super Lawyers” by Los Angeles Magazine for 5 consecutive years. An active trial lawyer for 20 years, he is a member of the Association of Southern California Defense Counsel and has also served as an expert witness and mediator.

RICHARD A. HOLDERNESS, author of chap 9 (formerly CEB’s Action Guide of the same title), is a partner in the firm of Seyfarth Shaw, where he specializes in public and private construction law and is chair of Seyfarth’s West Coast Construction Group. He is a graduate of the University of San Francisco School of Law, magna cum laude. Mr. Holderness formerly chaired the Legal Advisory Committee of the Associated General Contractors and the Construction Law Subsection of the Real Property Law Section of the California State Bar. He has published numerous books and articles on a wide range of topics related to construction law and is a frequent lecturer to various construction-related professional organizations. He has been selected by the American Arbitration Association to serve as an arbitrator and mediator on its Large Complex Case Panel for construction disputes.

GORDON HUNT, author of chap 3, is a member of the firm Hunt, Ortmann, Blasco, Palffy & Rossell, Inc., in Pasadena and has been an authority on construction law and litigation for more than 35 years. He has served as chairman of the Real Property Section of the Los Angeles County Bar Association (1976–1977) and of the Legal Advisory Committee of the Associated General Contractors of California (1985). Mr. Hunt has lectured for California Continuing Education of the Bar; trade associations; the Bar Associations of Los Angeles County, Orange County, San Bernardino County, and Beverly Hills; and for many construction industry groups. He has authored numerous works on construction law. He is the author of Handling Mechanics Liens and Related Remedies (Private Works) (Cal CEB Action Guide) and is the chief consultant for California Mechanics Liens and Related Construction Remedies (3d ed Cal CEB).

SARA H. KORNBLATT, coauthor and update author of chap 1, is a partner at Gibbs Giden Locher Turner Senet & Wittbrodt LLP. She concentrates her practice in the development and management of construction projects, including the drafting and negotiation of bid and contract documents, procurement issues, public works, competitive bidding requirements, bid protest issues, prequalification, project delivery methods, including design-build projects, risk allocation in contracts, claims avoidance, and project closeout. She received her B.A. from Wittenberg University, Springfield, Ohio, in 1992 and her J.D. from Loyola Law School in 2008.

TIMOTHY L. PIERCE, original author of chap 12, is a partner in the Los Angeles office of Thelen Reid & Priest. Mr. Pierce is a member of the firm’s Construction and Government Contracts practice group. His practice focuses on the construction industry, including risk management issues, and he represents insureds in insurance coverage disputes. Mr. Pierce graduated from Virginia Tech with B.S. (1980) and M.S. (1982) degrees in Mechanical Engineering and was employed as a manufacturing engineer with Hewlett-Packard before attending law school. He received his J.D. in 1988 from the University of Santa Clara. Mr. Pierce is a member of the American Bar Association and the Fiscal, Insurance & Risk Management and the Legal Advisory committees of the Associated General Contractors of California. He writes and speaks regularly on risk management issues in the construction industry.

THEODORE L. SENET, LEED® AP, coauthor and update author of chap 8, is a named partner of the law firm Gibbs Giden Locher Turner Senet & Wittbrodt LLP. He received his undergraduate degree from the University of California, Santa Barbara, and his J.D. from Loyola Law School. He is a U.S. Green Building Council LEED® AP and is a director of the Los Angeles Chapter of the U.S. Green Building Council. He currently represents corporate owners, developers, public entities, commercial general contractors, design professionals, and residential builders in complex construction litigation, class action litigation, environmental claims, insurance claims, and major tort litigation. He has been involved in planning, development, construction, risk management, and dispute resolution on numerous major projects, including high-rise buildings, hospitals, airports, power and processing plants, refineries, manufacturing facilities, and large residential developments. He has written numerous articles on construction, insurance, and real property law. He has been a principal speaker at numerous MCLE-approved seminars and has served on many panel programs. He is a member of the American Bar Association, Tort and Insurance Practice Section, and the ABA’s Forum on the Construction Industry.

ROBERT B. THUM, author of chap 13, is a partner in the Construction and Government Contracts practice group of Thelen Reid & Priest in San Francisco. He received his A.B. in 1967 from Princeton University and his J.D. in 1970 from Cornell Law School. Mr. Thum is a member of the American Bar Association’s Litigation and Public Contract Law Sections and the Forum Committee on the Construction Industry. He has written articles and chapters and provided seminars on construction law practice. Mr. Thum serves on the National Panel of Construction Arbitrators of the American Arbitration Association and has served as a neutral arbitrator for the California State Public Works Arbitration Program, administered by the State Office of Administrative Hearings. Mr. Thum has taught construction and claims courses at the University of California, Berkeley, and at San Francisco State University, and he has served on the Editorial Board of the Journal of Construction Accounting & Taxation.

RICHARD J. WITTBRODT, coauthor and update author of chap 5, is the managing partner of Gibbs Giden Locher Turner Senet & Wittbrodt LLP. He received his undergraduate degree from the University of Michigan and his J.D. from Pepperdine University. He also has an MBA from Golden Gate University. He was recognized as a leading construction lawyer by Chambers USA Directory of Leading Lawyers, recognized in The Legal 500, U.S. real estate and construction section, and is a member of the Governing Committee for the ABA Forum on Construction Law. His emphasis is in construction and commercial litigation, including prosecuting and defending claims of delay, disruption, defective construction, mechanics liens, and stop notice foreclosure actions for both public and private projects. He is a U.S. Green Building Council LEED® AP. In the commercial area, he has substantial experience in securing and defending preliminary remedies (including writs of attachment and possession and injunctions) and secured transactions. He is a frequent lecturer to construction and commercial industry associations.

About the 2018 Update Authors

KAVEH BADIEI, update author of chaps 3 and 9, is a partner at Ralls Gruber & Niece LLP in San Mateo. He received his B.S. degree in Civil Engineering from the University of California, Irvine, and his J.D. degree from the University of California, Hastings College of the Law. His practice focuses on construction, real estate, and general business matters. In these areas, Mr. Badiei advises his clients on contract preparation and administration, dispute avoidance, and resolution. Mr. Badiei has represented property owners, developers, general contractors, and subcontractors in complex public and private construction projects involving commercial buildings, schools, hospitals, hotels, theaters, wind-energy facilities, high-end homes, transportation centers, pipelines, and waste-water treatment plants.

JOHN EPPERSON, update author of chap 4, is a partner of Cooper, White & Cooper LLP in San Francisco. He received his B.S. in Environmental Health from Purdue University and his J.D. degree from Lewis and Clark College. He has a broad environmental, health, and safety law practice, advising clients on a wide range of regulatory compliance counseling, transactional, and permitting/entitlement issues. He represents clients in administrative enforcement actions and advises clients in their efforts to investigate and remediate contaminated properties, including associated cost recovery efforts and regulatory agency oversight. He also provides transactional due diligence regarding environmental issues in property transactions. Mr. Epperson has spoken on a variety of environmental topics to industry groups and environmental attorneys and is an adjunct professor teaching a class at Golden Gate University on “Toxics and Brownfield Law.” He is a former member of the Executive Committee of the California State Bar Environmental Law Section. Prior to practicing law, Mr. Epperson had over 10 years’ experience in radiation safety and emergency planning in the nuclear power industry.

BARBARA R. GADBOIS is the update author of chap 2. See biography in the About the Authors section of this book.

MICHAEL B. GEIBEL is the update author of chap 10. See biography in the About the Authors section of this book.

WILLIAM S. HALE, update coauthor of chap 11, is an associate at Pillsbury Winthrop Shaw Pittman LLP in San Francisco, where he represents owners and contractors in connection with construction contracts and disputes. He received his B.S. in Mechanical Engineering from the University of California, Berkeley, in 1992, and his J.D. from the University of California, Los Angeles, School of Law in 2008. Mr. Hale is also a California licensed civil engineer, and before attending law school he worked as a rigging engineer in the construction industry. He has over 10 years of field experience on domestic and international projects in the fossil power, petrochemical, mining, and nuclear industries.

SARA H. KORNBLATT is the update author of chap 1. See biography in the About the Authors section of this book.

VICTOR F. LUKE, update author of chap 7, is a partner at Gibbs Giden Locher Turner Senet & Wittbrodt LLP. He concentrates his practice on construction, real estate, insurance, and business transactions. In 2014, Mr. Luke was named as a top attorney in California by Los Angeles Magazine. He received his B.A. in English and his J.D. from the University of California, Los Angeles. Mr. Luke is admitted to practice in California and Nevada.

DWAYNE McKENZIE, update author of chap 6, is an attorney in the Labor and Employee Benefits Group of Cox, Castle & Nicholson LLP. He received his undergraduate degree from the University of California, Los Angeles, in 1991 and his J.D. from the University of California, Los Angeles, School of Law in 1994. He has been involved extensively in prevailing wage law legislation, interpretation, and litigation for over 10 years and routinely counsels clients on public works construction and contracting. He also regularly represents developer, contractor, and property owner trade associations and individual developers and contractors in general employment law, labor relations, ERISA, and other employee benefits matters.

CHRISTOPHER NG, update author of chap 13, is an equity partner at Gibbs Giden Locher Turner Senet & Wittbrodt LLP, where he represents private and publicly held companies in a wide range of business, commercial, and construction transactions and disputes. Mr. Ng received his B.A. in Business Administration from California State University, Northridge, and his J.D. from Pepperdine University. Mr. Ng is admitted to practice before the Central, Southern, Eastern, and Northern Districts of California, U.S. District Courts, all California courts, and in the District of Columbia.

KRISTEN THALL PETERS, update author of chap 4, is a partner of Cooper, White & Cooper LLP. She is chair of the firm’s Green Practice Group and practices real estate, land use, and environmental law. Ms. Peters advises and counsels commercial developers, property owners, and industrial interests in connection with real estate acquisition and sales, development projects, green building, renewable energy, easements and rights of way, and regulatory and land use approvals, including compliance with CEQA, NEPA, and the Endangered Species Act, and frequently writes and lectures on these issues. Ms. Peters holds a B.A. in Environmental Sciences from the University of California, Berkeley, and a J.D. from Santa Clara University School of Law. Before practicing law, Ms. Peters was an environmental protection specialist with the U.S. Army Corps of Engineers.

JOHN RALLS, update coauthor of chap 11, is a partner at Ralls Gruber & Niece LLP in San Mateo. He received his undergraduate degree from the University of California, Berkeley, and his J.D. from the University of California, Berkeley, School of Law. His practice covers the entire range of construction law and government contracts, including contract drafting and advice, bid protests, strategic counseling during troubled projects, claim preparation and defense, insurance recovery, mediation, arbitration, litigation, and appeals.

EDWARD L. SEIDEL, update author of chap 15, is a senior counsel at Cooper, White & Cooper LLP. His practice includes general and commercial litigation, contract disputes, real estate and construction matters, and environmental law. Mr. Seidel holds a B.A. in Psychology and a B.A. in Political Science from Miami University and a J.D. from Tulane Law School. Mr. Seidel has served as faculty at his alma mater of Tulane Law School in the area of civil litigation.

THEODORE L. SENET is the update author of chap 8. See biography in the About the Authors section of this book.

CYNTHIA SHAMBAUGH, update author of chap 14, is a member of the Law Offices of Thomas J. Burns in San Francisco. She received her undergraduate degree from Bryn Mawr College in 1975, her master’s degree from the University of Chicago in 1977, and her J.D. degree from the University of California, Hastings College of the Law, in 1985. She specializes in the defense of subcontractors in construction defect litigation as staff counsel for Zurich Insurance Company (and formerly as staff counsel for American States Insurance Company and Safeco Insurance Company). Ms. Shambaugh has presented a PowerPoint seminar on “The Flow of a Construction Defect Lawsuit: Roadmaps to Resolution” at meetings in New Orleans, Salt Lake City, and Las Vegas and at the West Coast Casualty Seminar in Anaheim. Ms. Shambaugh also contributed to prior editions of chap 14.

TIMOTHY R. SULLIVAN, update author of chap 12, is a partner in McLaughlin Sullivan LLP in Fresno. Mr. Sullivan represents both plaintiffs and defendants in litigated real estate matters. He also represents both insurers and insureds in a variety of insurance-related matters, including bad faith and declaratory relief actions. He also defends insurance brokers and agents in malpractice cases and provides advice to business clients regarding their exposures and insurance coverages. Mr. Sullivan has spoken frequently on subjects pertaining to insurance and is a guest lecturer at the San Joaquin College of Law. He is the coauthor of chaps 11, 12, and 14 of California Title Insurance Practice (2d ed Cal CEB) and its 1999, 2002, and 2007 updates. He received his B.A. degree in 1983 from the University of Missouri at Columbia and his J.D. degree in 1986.

RICHARD J. WITTBRODT is the update author of chap 5. See biography in the About the Authors section of this book. Mr. Wittbrodt would like to recognize and thank Ashley Tullius, an associate attorney at his firm, for her help with this update.

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