Oral Waiver Insufficient to Defeat Contractor’s Liability for Building Code Violation

The Massachusetts Appeals Court, in Downey, et al. v. Chutehall Construction Co., Ltd., 88 Mass. App. Ct. 795 (January 6, 2016), recently held that an oral waiver of compliance with the building code by a homeowner does not preclude the contractor’s liability for the violation, particularly where a violation carries potential public safety concerns.

In this matter, the contractor was hired to replace a roof and roof deck. The parties disputed whether the homeowners (1) represented to the contractor that there was only one layer of roofing at the time of the work; (2) refused to permit the contractor to do test cuts in the roof to determine the number of existing layers; and (3) specifically instructed the contractor to install a new rubber membrane over the existing roof. After installation of the roof was completed, the homeowners discovered four layers of roofing materials and evidence of leaking when installing HVAC equipment. A new contractor was hired to strip the roofing materials, put on a new roof, and reinstall the deck. A jury found that the contractor violated the building code, but awarded no damages, finding that the violation was a result of the homeowners’ directions.

After the case was appealed, the Appeals Court reasoned that permitting a waiver by a homeowner of his or her right to compel a contractor to comply with the contractor’s obligations under the building code would encourage contractors, and perhaps consumers, to waive provisions of the building code on an ad hoc basis, in the hope of saving money in the short-term, but endangering future homeowners, first responders and the public in general. Thus, even if the homeowners orally waived the building code requirement, the Appeals Court held that the contractor was still liable for the violation, entered judgment in favor of the homeowners, and remanded the matter to determine damages.

This decision makes it clear that a home improvement contractor must perform its work in strict accordance with the relevant building code, even if a homeowner requests certain code requirements be ignored in an attempt to save money. Contractors should use this result as an example when confronted with a request from a homeowner to deviate from the building code. This case also highlights the importance of proper documentation of the scope of work in a written contract. While this decision concerned an oral waiver, a different result may have occurred if the contractor documented in a written contract that the existing roof only had one layer of material which the new roof would be applied over. However, a written contract in which the homeowner acknowledges a request for the contractor to deviate from the building code may still leave the contractor liable due to public safety concerns.

Maine Legislature Considers a Bill that Would Limit Indemnification Provisions in Construction Contracts

The Maine legislature is considering a bill that, if passed, would have a significant impact on Maine contractors and subcontractors.  LD-587 would make void and unenforceable any provision in a construction contract requiring the parties or their sureties or insurers to indemnify a promisee against liability arising from the negligence or willful misconduct of the promisee.  The bill has been referred to the Committee on Labor, Commerce, Research and Economic Development.

If passed, neither contractors nor subcontractors could be held liable for the actions of other parties to their contracts.  While there are currently some limits to what passes as an acceptable indemnity agreement in Maine, this law would significantly alter the risks of liability in many construction contracts, since owners frequently contract for broad indemnity agreements with their contractors.

The bill was introduced by Assistant Senate Majority Leader, Senator Andre Cushing (R-Hampden) at the request of the Associated Builders and Contractors of Maine.  While it is somewhat unusual for ABC Maine to support a bill limiting contractors’ rights to contract for indemnity from their subcontractors, ABC Maine states that it supports this bill because it holds parties responsible for their own actions, regardless of their leverage in contract negotiations. 

 A public hearing on the bill was held on March 17, 2015.  In oral testimony and written submissions, representatives of Maine contractors and subcontractors explained that they support this bill because they are frequently compelled to submit to onerous contract requirements given Maine’s competitive construction industry.  Opponents argued that the bill is vague, unnecessary, shifts risk from contractors to owners, and puts undue constraints on the free market.  They further argued that contractors should assume responsibility for workplace injuries since they should have primary control over the worksite and procure insurance for accepting that responsibility.

The bill currently remains pending in committee.  Similar bills have been brought before the Maine legislature several times in the past 20 years and have failed to pass. 

Pay Promptly or Pay Penalties

The Vermont Supreme Court recently issued a ruling that should serve as a reminder to all contractors and owners of the importance of complying with prompt pay requirements.

In Dorr v. LaCoste, an owner refused to pay any part of a contractor’s inflated invoice. The Contractor sued. The court held that the owner was in the wrong for not paying the undisputed portion, and as a result, the court ordered the owner to pay its obligation, plus interest, and a penalty of 1% per month. The interest and penalties added up to nearly half of the original balance.

The takeaway from this case is that owners dealing with contractors (and contractors dealing with subs) should be extremely careful when withholding payment, and should only hold back money that is reasonably in dispute, and even then, it is essential to provide written notice of the basis for the withholding.

Contractor and Designer Tips to Improve Chances of Getting Paid

Engineering News Record (ENR) recently featured an article in its Viewpoint section authored by Preti Flaherty attorney Kenneth E. Rubinstein and Shawmut Design & Construction Chief Legal Officer, Doug Lareau focusing on strategies that contractors and designers can use to improve their chances of getting paid. A copy of this article can be found here.