3/4/2016. Claims for Breach of Contract. Claims for Breach of Contract

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1 Indiana State Bar Association BIG 10 CONSTRUCTION & SURETY LAW CLE CONSTRUCTION CONTRACTING WITHOUT BORDERS March 10, 2016 Illinois Construction Law Overview Daniel S. Brennan Laurie & Brennan LLP Two North Riverside Plaza Suite 1750 Chicago, IL Claims for Breach of Contract Contractor s Claims Substantial Performance Not Full Performance Damages = Contract Price Less Value of Incomplete Work Owner s Claims Failure to Perform Incomplete Work or T4D Damages = Cost to Complete Over Contract Price 2 Claims for Breach of Contract Owner s Claims Defective Work Damages = Cost to Repair or Replace UNLESS Cost to Repair is Disproportionate to Benefit to Owner OR Correction Would Result in Unreasonable Destruction THEN Measure of Damages is Diminution in Value 3 1

2 Negligence and the Economic Loss Rule Limited Availability Due to ELR Strong in Illinois ELR Bars Recovery of Economic Losses in Tort Unless Property Damage Results from Sudden and Calamitous Occurrence Failure or Defect Presents Clear and Present Danger for Personal Injury Started in Product Liability Context But Extended to Contractors and Architects 4 Warranties Express Warranties Implied Warranties Workmanship Habitability Applies only to Residences Started in Purchaser-Builder/Vendor Context Can Be Waived in Writing 5 Warranties Scope of Implied Warranty of Habitability Builder-Vendor and Original Purchaser and More The Minton Exception and the Expansion of the Implied Warranty If original builder vendor is insolvent, homeowner can assert claim against contractor and subcontractors An express waiver does not protect non-parties to sales contract Insolvency is determined at time of latest amended complaint Does Not Apply to Architects! 6 2

3 Indemnity Express Indemnity Permissible But Limited Construction Contract Indemnification for Negligence Act, 740 ILCS 35/0.01, et seq Prohibits Indemnity Against A Party s Own Negligence Implied Indemnity Based on Pre-Tort Relationship Qualitative Distinction in Conduct of Parties Example -Vicarious Liability 7 Insurance for Construction Defects 8 General Rule Must Be Damage to Other Property Besides the Work Contractor Built Damages that Triggered CGL Coverage: Damage to Furniture and Clothing Damage to Cars in Parking Garage Damages that Did NotTrigger CGL Coverage: Sag in Floor Cracked Concrete Collapsed Masonry Wall No Damages for Delay Clauses Enforceable but Judicial Exceptions Include: Bad Faith Fraud Concealment Misrepresentation Circumstances Not Within Parties Contemplation Widely-Used in Public Sector 9 3

4 Statutes of Limitation and Repose 735 ILCS 5/13-214(a) and (b) (a) - Limitations 4 years from date of discovery (b) - Repose 10 years from the alleged act or omission BUT if discovered within 10 year repose period then still 4 years to file 14 YEARS! Actions to Recover Money and Enforce Express Indemnities 10 years for written contracts 10 Pay When Paid and Pay If Paid Clauses Can Be Used But Not a Defense to a Mechanics Lien (on private or public projects) Limited Use in Defending Breach of Contract Claims Will Be Strictly Construed Against Non-Paying Party 11 Prompt Payment Statutes The State Prompt Payment Act, 30 ILCS 540/0.01, et seq. The Local Government Prompt Payment Act, 50 ILCS 505/1, et seq. Contractor Prompt Payment Act, 815 ILCS 603/1, et seq. 12 4

5 Mechanics Liens Who is Protected? No Lien Contract Provisions Are Void Private v. Public Private Lien Attaches to Real Estate and Improvements Public Lien Attaches to Only the Funds Due the Prime Contractor from Public Owner 13 Mechanics Liens Timing Requirements for Notices and Claims for Lien Original Contractors on Private Projects 4 mos./2 yrs. Subcontractors on Private Non-Residential Projects 90 days/4 mos. Subcontractors on SF Owner-Occupied Residences 60 days/90 days/4 mos. Subcontractors on Public Projects Before the $$ is Paid 14 Mechanics Liens Timing Requirements for Filing Suit Private Projects for Contractors and Subcontractors 2 yrs. Public Projects 90 days after Notice Section

6 Mechanics Liens Bonding Over Section 38.1 Effective January 1, 2016 Interested Party Can Petition Court to Substitute Bond for Lien Surety Must Meet Certain Financial and Size Ratings Bond Amount = 175% of Lien Claim Prevailing Party Entitled to Fee Award 16 6