Trent Cotney, PA, Construction Law Group
Commercial roofing contracts are replete with legal landmines. A roofer that can identify and focus on key provisions may be able to reduce liability. This article focuses on some of the key contract provisions that affect roofers.
There are two types of contractual indemnification: standard indemnity and super indemnity. Standard indemnification is what most roofers encounter in construction contracts.
For example, a roofer tears off a portion of the roof and tarps it at the end of the work day. Overnight, a thunderstorm blows the tarp off causing significant interior damage. The owner asserts a claim against the prime contractor. In turn, the prime contractor turns to the roofer, points to the standard indemnification provision in the subcontract and demands that the roofer indemnify the prime contractor because of the failure to dry-in or properly tarp the portion of the roof.
Super indemnification is where the roofer agrees to not only indemnify its customer for the roofer’s bad acts or omissions but also the customer’s bad acts or omissions. Using the previous example, let’s assume the roofer properly blue roofed the house but after the tarp was placed, the owner got on the roof and removed a portion of it because it was interfering with his satellite signal. In this
scenario, the owner would be either partially or wholly at fault for the damage. A super indemnification provision would allow him to make a claim against the roofer for the interior water damage caused by the misapplied tarp.
Most states have limits on indemnification and many states ban super indemnification altogether especially on public projects.
One of the justifications often used by a prime contractor to avoid paying a roofing subcontractor is a contingent payment or “pay if/when paid” clause contained in the subcontract. This clause usually states that the prime contractor has no obligation or duty to pay the subcontractor until payment is received by the prime contractor from the owner. Not all states allow contingent payment clauses and many out of state contractors insert contingent payment clauses in contract without knowing whether they are valid in the state where work is performed.
In construction, owners and prime contractors withhold a predetermined percentage of each progress payment, called retainage, until final completion. It is also not uncommon for subcontractors to withhold retainage from sub-subcontractors. Retainage is either governed by state or federal statutes or by contract. Generally speaking, retainage is used by owners as an incentive for contractors to complete the project and to protect the owner in the event of back charges for uncompleted punch list items. Many states limit retainage especially on public projects.
Owners frequently insert no damages for delay provisions in construction contracts to prevent a contractor (and any subcontractors) from obtaining additional compensation for delays that have been experienced on a project. Under the typical no damages for delay clause, the contractor or subcontractor is entitled to additional time, but not compensation for extra costs, incurred as a result of delays. Such clauses can be effective whether the delay is caused by the Owner, or by an act of God, such as a hurricane. No damages for delay clauses are generally upheld in court although there are a variety of defenses to enforcement including active interference by a roofer’s customer.
Generally speaking, the Uniform Commercial Code (UCC) (as adopted by most states) governs all transactions involving the sale of goods. The UCC recognizes several different warranties. Express warranties involve explicit representations made by the seller to the buyer regarding the goods to be sold or services performed – for example a one-year workmanship warranty or 30-year NDL material warranty. The implied warranty of merchantability provides the buyer of goods with the assurance that the goods are fit for the ordinary purposes for which the goods are used – shingles are generally designed to perform as a roof covering. The implied warranty of fitness for particular purpose arises when the seller knows that the goods are to be used for a special function – roofing materials that have specific design criteria or wind uplift specifications.
To effectively disclaim UCC warranties, the disclaimer must be part of the agreement between the parties. Specific language must be used in the contract signifying that the parties agree to exclude or modify warranties. The disclaimer must be set off from the rest of the contract by a technique which would provide the reader with notice of the provision, such as bold-facing or capitalization of the terms. Failure to make the disclaimer conspicuous may result in a court determining that the disclaimer is ineffective. Here is an example of a warranty disclaimer:
THERE ARE NO EXPRESS OR IMPLIED WARRANTIES WHATSOEVER INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
FRM
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