Pay When/If Paid Clauses

Under North Carolina law, pay when paid clauses are unenforceable. Simple enough, in theory. To be more specific, "payment by the owner to a contractor is not a condition precedent…

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Top Ten Construction Contract Terms: Indemnification

Our Top 10 Construction Terms series identifies and discusses the key construction contract provisions that affect risk allocation among the project participants. This post, Indemnification Part 1, describes the various sources…

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How Long Is Your Warranty?

North Carolina General Statute § 1-50(a)(5) provides that “[n]o action to recover damages based upon or arising out of the defective or unsafe condition of an improvement to real property shall be brought more than six years from the later of the specific last act or omission of the defendant giving rise to the cause of action or substantial completion of the improvement.” “Unlike an ordinary statute of limitations which begins running upon accrual of the claim, the period contained in the statute of repose begins when a specific event occurs, regardless of whether a cause of action has accrued or whether any injury has resulted.” Roemer v. Preferred Roofing, Inc., 190 N.C.App. 813, 816, 660 S.E.2d 920, 923 (N.C.App.,2008). As the court stated, if the action is not brought within 6 years, the plaintiff “literally has no cause of action.”

In Roemer, the plaintiff received a lifetime warranty on a roof that failed after seven years. The Plaintiff brought an action for damages for the breach of warranty. The Court of Appeals affirmed the dismissal. This decision was recently affirmed in Christie v. Hartley Construction, 745 S.E. 2d 60 (N.C. App. 2013). Where does this leave a building owner who is relying on a warranty longer than six years? You bargained for the longer protection and may have even chosen amongst competitors based upon how long the warranty lasted.

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A Right To Cure?

The most commonly used general conditions (AIA A201 – 2007) provides that an owner may terminate a construction contract for cause upon seven days written notice. The AIA contract does not provide the contractor with an express right to cure. Of course, there must be cause and the AIA contract requires a certification of cause by the initial decision maker but none of this alters the lack of any express right to cure. The question then is whether there exists some implied right to cure in the absence of any contractual provision.

There is no North Carolina case law that holds that there is an implied right to cure in the absence of an express contractual provision.

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