“Was Not” versus “Is So”: Court Clarifies Whether Exceeding Monetary License Limit Affects Contractor’s Recovery

After a great extended weekend on the beaches of Florida, we embarked upon the drive back to Nashville with six kids.  Despite the clearly defined travel rules, the antagonizing kid was putting his feet on the emotional kid. The creative kid was writing on the seat with markers, while the perfect kid screamed foul.  The lazy teenagers slept. Mom and dad were triggered for eight hours.

Many Tennessee contractor’s have felt the same way with the changes in the licensing laws over the past few years. The rule relating to the effect of a contractor who exceeds its licensing limit is now clear based upon the decision in Clayton Pickens v. John R. Underwood (Tenn. Ct. App. June 12, 2018).  In that case, the dispute was whether the “old law” or the “new law” applied.  Here’s how it went down:

  • On June 2, 2008, contractor entered into an agreement with owner to construct house for $572,000, but at the time the contract was signed the contractor’s license limit was $350,000.
  • Under the prior version of Tennessee Code Section 62-6-103, an “unlicensed contractor” was limited to recover only the actual documented expenses that could be shown by clear and convincing evidence.
  • The question that often came up was whether a contractor who exceeds its monetary limit was “unlicensed” for purposes of this rule on damages.
  • The Legislature amended Tennessee Code Section 62-6-103(b) effective June 23, 2009, which clarified that: “[a]ny contractor required to be licensed under this part who is in violation of this part or the rules and regulations promulgated by the board shall not be permitted to recover any damages in any court other than actual documented expenses that can be shown by clear and convincing proof.”
  • In Anchor Pipe Company, Inc. v. Sweeney-Bronze Development, LLC (Tenn. Ct. App. Aug. 2, 2012), the court held that a licensed contractor who contracts above his or her monetary limit still is considered “licensed” for application of the rule on damages above.  The Anchor Pipe court was interpreting and applying the prior version of Section 103.

In Clayton Pickens, the evidence showed that the parties signed the contract in 2008, which was one year before the statute changed, but filed the lawsuit one month after the statute was amended.  The court held the old law applied:

We believe the date of the contract to be more significant here than the date of the filing of the complaint. By the time Pickens filed his complaint, all the operative, underlying events of this case had transpired. The amendment to Tenn. Code Ann. § 62-6-103 was substantive in nature. The effect of the amendment was to expand the limitation of actual documented expenses to any contractor required to be licensed under the statute and rules, whereas before this limitation applied only to unlicensed contractors. When Pickens signed the contract and performed the work for the Underwoods, he was not subject to that limitation as he was not unlicensed.  Pickens is not limited retroactively by the provisions of the amended statute.

It appears that all of the loops have been closed.  Currently, the law states that if you exceed your licensing limit or otherwise violate some provision of the licensing laws, you cannot file a lien and your damages will be limited to actual documented expenses proven by clear and convincing evidence.

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“Was Not” versus “Is So”: Court Clarifies Whether Exceeding Monetary License Limit Affects Contractor’s Recovery

“Was Not” versus “Is So”: Court Clarifies Whether Exceeding Monetary License Limit Affects Contractor’s Recovery

After a great extended weekend on the beaches of Florida, we embarked upon the drive back to Nashville with six kids.  Despite the clearly defined travel rules, the antagonizing kid was putting his feet on the emotional kid. The creative kid was writing on the seat with markers, while the perfect kid screamed foul.  The lazy teenagers slept. Mom and dad were triggered for eight hours.

Many Tennessee contractor’s have felt the same way with the changes in the licensing laws over the past few years. The rule relating to the effect of a contractor who exceeds its licensing limit is now clear based upon the decision in Clayton Pickens v. John R. Underwood (Tenn. Ct. App. June 12, 2018).  In that case, the dispute was whether the “old law” or the “new law” applied.  Here’s how it went down:

  • On June 2, 2008, contractor entered into an agreement with owner to construct house for $572,000, but at the time the contract was signed the contractor’s license limit was $350,000.
  • Under the prior version of Tennessee Code Section 62-6-103, an “unlicensed contractor” was limited to recover only the actual documented expenses that could be shown by clear and convincing evidence.
  • The question that often came up was whether a contractor who exceeds its monetary limit was “unlicensed” for purposes of this rule on damages.
  • The Legislature amended Tennessee Code Section 62-6-103(b) effective June 23, 2009, which clarified that: “[a]ny contractor required to be licensed under this part who is in violation of this part or the rules and regulations promulgated by the board shall not be permitted to recover any damages in any court other than actual documented expenses that can be shown by clear and convincing proof.”
  • In Anchor Pipe Company, Inc. v. Sweeney-Bronze Development, LLC (Tenn. Ct. App. Aug. 2, 2012), the court held that a licensed contractor who contracts above his or her monetary limit still is considered “licensed” for application of the rule on damages above.  The Anchor Pipe court was interpreting and applying the prior version of Section 103.

In Clayton Pickens, the evidence showed that the parties signed the contract in 2008, which was one year before the statute changed, but filed the lawsuit one month after the statute was amended.  The court held the old law applied:

We believe the date of the contract to be more significant here than the date of the filing of the complaint. By the time Pickens filed his complaint, all the operative, underlying events of this case had transpired. The amendment to Tenn. Code Ann. § 62-6-103 was substantive in nature. The effect of the amendment was to expand the limitation of actual documented expenses to any contractor required to be licensed under the statute and rules, whereas before this limitation applied only to unlicensed contractors. When Pickens signed the contract and performed the work for the Underwoods, he was not subject to that limitation as he was not unlicensed.  Pickens is not limited retroactively by the provisions of the amended statute.

It appears that all of the loops have been closed.  Currently, the law states that if you exceed your licensing limit or otherwise violate some provision of the licensing laws, you cannot file a lien and your damages will be limited to actual documented expenses proven by clear and convincing evidence.

“Was Not” versus “Is So”: Court Clarifies Whether Exceeding Monetary License Limit Affects Contractor’s Recovery

Talking Crisis Changes on the Job Site at Construction Law in North Carolina

Today Musings takes a trip to Construction Law in North Carolina to discuss those pesky on the fly change orders on the job.

Thanks to Melissa Brumback for the invite and while you’re over there check out the rest of her great content.

As always, I welcome your comments below.  Please subscribe to keep up with this and other Construction Law Musings.

 

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Talking Crisis Changes on the Job Site at Construction Law in North Carolina

Another Reminder that Your Construction Contract Language Matters

construction photoHere at Musings, I have often (some might say too often) discussed the fact that in Virginia (as well as other places), your construction contract language will be strictly enforced.  I have also discussed the need for attorney fees provisions as well as other language in order to mitigate your risk as a contractor.  A recent case from the City of Roanoke Circuit Court discussed both of these principals and their intersection.

In LAM Enterprises, LLC v. Roofing Solutions, Inc., the Roanoke Court looked at a contract between LAM and Roofing Solutions, Inc. that contained two provisions of the construction contract between the parties.  The first provision limited the liability of Roofing Solutions to the contract price.  The second provision is a relatively typical “prevailing party” attorney fees provision in which the winner of any lawsuit would be entitled to collect its attorney fees.  For the specific language of these provisions, I commend the opinion linked above for your reading.

Where this case got interesting was when the total of liability for the breach of contract by Roofing Solutions plus the attorney fees of LAM’s attorneys exceeded the total contract price.  Roofing Systems filed a motion for partial summary judgment to limit the total liability including attorney fees to the capped amount, in this case $44,900.00.  Needless to say, the plaintiff’s attorneys argued that the attorney fees provision was wholly separate from the contractual liability cap.  The Court, in reconciling the two provisions determined that the liability cap imposed a total liability (fees and all) of the $44,900.00.  In doing so, the Court stated:

The parties, with eyes wide open, entered into their contract and specifically agreed to the liability cap provision. Thus, for this court to conclude that Roofing Solutions’ liability could exceed the contract price would ignore the plain meaning of that provision. Should LAM be the prevailing party in a suit or arbitration to resolve a contract dispute, then it would be entitled to recover attorneys’ fees, as long as those fees don’t exceed the liability cap.

In short, the well drafted provision capping liability was key in limiting the total exposure of Roofing Systems for contractual liability of any kind and giving Roofing Systems some certainty of risk.  While this is a trial court opinion and it looks as if the trial has yet to occur, the Court followed the usual course of Virginia courts and gave full effect to all of the contract’s provisions. The case also highlights the need to get the assistance of an experienced construction attorney when either drafting or reviewing any contractual language that you may be asked to sign relating to a construction project.

As always, I recommend that you read the opinion and let me know if you have any thoughts.

As always, I welcome your comments below.  Please subscribe to keep up with this and other Construction Law Musings.

© Construction Law Musings- Richmond, VA is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 license.

Another Reminder that Your Construction Contract Language Matters

Happy Memorial Day from Construction Law Musings

american flag photoWell, the office is closed and I am enjoying the day off with my family and friends and thinking about those that served this country.  I hope that you are doing the same. Here’s wishing all of the readers of this construction law blog a great Memorial Day.

Thanks for your readership and comments and a special thank you to all of our men and women in uniform.  They are the folks (past and present) that this day is all about.  If you are a new visitor to Construction Law Musings, be sure to take some of your time off to peruse the various sections of the blog, including of course the Guest Posts from friends of Musings.

Have a great day and Musings will be back up and charging ahead in the days and weeks to come.

As always, I welcome your comments below.  Please subscribe to keep up with this and other Construction Law Musings.

© Construction Law Musings- Richmond, VA is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 license.

Happy Memorial Day from Construction Law Musings

More Fishing with Construction Clients

Tarpon in Pine Island Sound

I have written before here at Construction Law Musings about the value of personal interactions with clients in the age of internet marketing, Twitter, etc. At times, however, even I forget my own advice and tend to stick to my office and use email and other online tools for marketing and client development. At times it is easier to use the great tools of a “cloud” centered world to communicate and otherwise interact with clients, attorneys, and potential clients.  In many ways, I’ve taken to the cloud and its convenience and power.  My Clio practice management and billing system I use for my construction law practice is cloud based and, of course, Musings is itself a blog.  For these reasons, I occasionally fall into the trap of “staying in the cloud.”

Just a couple of weeks ago, I was reminded of the fun and, yes, marketing advantage of “real world” interaction with clients.  I was out with friends, including one of my construction clients, fishing for tarpon (the photo for this post is one that we caught) and it hit me once again that I work with and for a good group of folks.  Aside from the fun of catching these large fish that jump and fight, the face to face interaction cemented even further a great client relationship and friendship.

In short, whatever your activity, whether shooting sporting clays, participating in your local AGC chapter, or just having lunch or coffee occasionally, don’t forget that the personal touch can and should lead to a better and more solid client relationship.  In a world where the yellow pages are used, if at all, to hold a door open and the internet is where many a potential client seeks its first information on a construction lawyer, in my experience the deal is best closed, and the relationship best grown, through everything from a simple phone call to a trip out on a boat.  Making this effort most often leads to long term clients that I often call friends as well.

Please join the conversation with a comment below.  Also, I encourage you to subscribe to keep up with the latest Construction Law Musings.

© Construction Law Musings- Richmond, VA is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 license.

More Fishing with Construction Clients

Active Interference Wins Skee Ball Points and Precludes Enforcement of A “No Damages for Delay” Clause

Last week during family skate night, my daughter asked me for two quarters to play some Skee-Ball.  I loved playing that game as a kid.  But imagine my surprise when I turned the corner and witnessed her active interference with the rules of the game! (… Truly, you can’t script this stuff…)

In construction contracts, “active interference” is a recognized exception to the enforcement of what is known as a “no damages for delay” clause.  This type of provision seeks to preclude any increased costs associated with delays on the project.  For example, a traditional clause may read as follows:

“No claims for increased costs, charges, expenses or damages of any kind shall be made by the Contractor against the Owner for any delays or hindrances from any cause whatsoever; provided that the Owner, in the Owner’s discretion, may compensate the Contractor for any said delays by extending the time for completion of the Work as specified in the Contract.”

* * * * * *

“Should the Contractor sustain any damage through any act or omission of any other contractor having a contract with the Owner or through any act or omission of any Subcontractor of said other contractor, the Contractor shall have no claim against the Owner for said damage.”

In the a regularly cited case, United States Steel Corp. v. Missouri Pacific Railroad Company, 668 F.2d 435 (8th Cir. 1982), the court recognized that “no damages for delay” clauses are valid, but that there are numerous exception to the rule.  In that case, the Owner issued a notice to proceed to the bridge superstructure contractor with knowledge that substructure work would not be completed on schedule.  As a result, superstructure contractor was delayed for 170 days while waiting for access to work site.  The contract contained a “no damages for delay” clause specifically making reference to delays caused by substructure contractor.

In the end, the court recognized that “no damages for delay” provisions are generally enforceable except as to delays: (1) not contemplated by the parties under the provision; (2) amounting to an abandonment of the contract; (3) caused by the owner’s bad faith; or (4) amounting to active interference.  Since the Owner issued the notice to proceed with knowledge of the substructure delays, the Court concluded that the Owner was guilty of active interference.  Accordingly, the superstructure contractor was entitled to recover on its delay damage claim.

Lesson Learned. The real lesson is to make sure to review your contract for these types of provisions and try to negotiate the terms.  For example, the AIA A201 expressly provides that the owner and contractor may seek damages from each other in the event of a delay caused by the other party.  There will be certain notice and substantiation requirements, but it is common to allow a party to seek damages for delay.  If an owner is unwilling to remove a no-damages-for-delay clause in your contract, then you should try to limit its application to certain delays such as delays caused by others, leaving the owner liable for its own delays.

Active Interference Wins Skee Ball Points and Precludes Enforcement of A “No Damages for Delay” Clause