CONSTRUCTION ACADEMY 2018 MARCH 1, 2018
Are We There Yet? Or Is My 1 Year Warranty Pure Fiction? Joshua Levy Margaret Heitkamp Simpsons Reserved 1
Breachlessly Closing Out Your Project Where to Start Let s see what the AIA A201 says Reserved 2
3.5 Warranty 3.5.1 The Contractor warrants that materials furnished will be of good quality and new. The Contractor further warrants that the Work will conform to the requirements of the Contract Documents and will be free from defects. 3.5 Warranty 3.5.2 All material, equipment, or other special warranties required by the Contract Documents shall be issued in the name of the Owner and shall commence in accordance with Section 9.8.4. Reserved 3
9.8 Substantial Completion 9.8.4 When the Work or designated portion thereof is substantially complete, the Architect will prepare a Certificate of Substantial Completion that shall establish the date of Substantial Completion. 9.8 Substantial Completion Warranties required by the Contract Documents shall commence on the date of Substantial Completion unless otherwise provided in the Certificate of Substantial Completion. Reserved 4
9.9 Partial Occupancy or Use 9.9.1 The Owner may occupy any completed or partially completed portion of the Work provided the Owner and Contractor have agreed in writing concerning the period for commencement of warranties required by the Contract Documents. 12.2.2 After Substantial Completion 12.2.2.1 If within one year after the date of Substantial Completion any of the Work is found to be not in accordance with the Contract Documents, the Contractor shall correct it promptly after receipt of notice from the Owner to do so. Reserved 5
12.2.2 After Substantial Completion The Owner shall give such notice promptly after discovery of the condition. 12.2.2 After Substantial Completion During the one-year period for correction if the Owner fails to notify and give the Contractor an opportunity to make the correction, the Owner waives the rights to require correction by the Contractor and to make a claim for breach of warranty. Reserved 6
12.2.2 After Substantial Completion If the Contractor fails to correct nonconforming Work within a reasonable time during that period after receipt of notice from the Owner or Architect, the Owner may correct it in accordance with Section 2.5. 12.2.2 After Substantial Completion 12.2.2.2 The one-year period shall be extended with respect to Work performed after Substantial Completion by the period of time between Substantial Completion and the actual completion of that Work. Reserved 7
12.2.5 Nothing contained in this Section 12.2 shall be construed to establish a period of limitation with respect to other obligations the Contractor has under the Contract Documents. Establishment of the one-year period for correction of Work as described in Section 12.2.2 relates only to the specific obligation of the Contractor to correct the Work Reserved 8
and has no relationship to the time within which the obligation to comply with the Contract Documents may be sought to be enforced nor to the time within which proceedings may be commenced to establish the Contractor s liability with respect to the Contractor s obligations other than specifically to correct the Work. Reserved 9
13.3 Rights and Remedies 13.3.1 Duties and obligations imposed by the Contract Documents and rights and remedies available thereunder shall be in addition to and not a limitation of duties, obligations, rights, and remedies otherwise imposed or available by law. The A201 Warranty is a Call Back Warranty. You re not there yet Reserved 10
Warranty Claims Owner can call the contractor back during the warranty period If the owner does not call the contractor back, the owner loses the warranty claim But. Not all claims! What s Left After Your Warranty? A typical warranty is not an exclusive remedy for the owner! Remember: 13.3.1 Duties and obligations imposed by the Contract Documents and rights and remedies available thereunder shall be in addition to and not a limitation of duties, obligations, rights, and remedies otherwise imposed or available by law. Reserved 11
What s Left After Your Warranty? Breach of contract claims Exposure: actual and incidental damages Cut off: 6 years after the work is performed Not extended in WI for latent defects Some other states do extend for latent defects Can You Limit Contract Claims? Yes! You can limit contract claims if the contract clearly states the intent of the parties is to limit the available remedies or time frame The contractual limitation on remedies and time frame must be reasonable and not a complete abrogation of the right of action Reserved 12
Contract Claims (continued) To limit contract claims, you cannot include this AIA section: 13.3.1 Duties and obligations imposed by the Contract Documents and rights and remedies available thereunder shall be in addition to and not a limitation of duties, obligations, rights, and remedies otherwise imposed or available by law. Stay tuned for what you can and should include (if you can) What s Left After Your Warranty? Tort Claims (negligence; misrepresentation) Exposure: damages caused by tortious conduct property, personal injury, wrongful death Some limitations on when an owner can bring a tort claim Injured third-parties can bring tort claims Exemplary/punitive damages for willful conduct Reserved 13
Tort Claims (continued) Available for 3 years after the claimant knows or reasonably should know of the injury and the cause of the injury (the discovery rule ) You cannot eliminate or limit tort claims in your contract; you can insure yourself to reduce your risk Cut-off: 13 years after actual completion (maybe) What s Left After Your Warranty? Deceptive Trade Practices Act claims False advertising Exposure: actual pecuniary losses, plus costs and reasonable attorney s fees Cut off: 3 years after the act constituting false advertising Reserved 14
In Sum What Can You Expect? Potential claims against contractors include: Express Warranty warranty period Implied Warranty typically 3 years False Advertising 3 years Breach of Contract 6 years Tort 3 to 13 years The Statute of Repose may get you there. Only New York and Vermont have no repose. Reserved 15
AIA G704-2000 Certificate of Substantial Completion The Work performed under this Contract has been found to be substantially complete. Substantial Completion is when the Work is sufficiently complete so that the Owner can occupy the Work for its intended use. The date of Substantial Completion is also the date of commencement of applicable warranties except as stated below. Reserved 16
AIA G704-2000 Certificate of Substantial Completion A list of items to be completed or corrected is attached hereto. Unless otherwise agreed to in writing, the date of commencement of warranties for items on the attached list will be the date of issuance of the final Certificate of Payment. AIA G704-2000 Certificate of Substantial Completion The responsibilities of the Owner and Contractor for security, maintenance, heat, utilities, damage to the Work and insurance shall be as follows. Reserved 17
Manufacturer s or other express warranties (such as roofers) can extend dates past repose. How Can a Contractor Take Control? By expressly limiting claim deadlines. Reserved 18
Sample Exclusive Remedies Provision The remedies stated in the agreement are Developer s sole and exclusive remedies for any failure by Contractor to comply with obligations to Developer, and Developer hereby irrevocably waives any right to assert a claim against Contractor based on a legal theory that a remedy provided herein fails of its essential purpose. Remedies Cumulative All rights and remedies provided in this Agreement are cumulative and not exclusive of any other rights or remedies that may be available to the parties, whether provided by law, equity, statute, in any other agreement between the parties or otherwise. Reserved 19
Breachless Checklist Identify every warranty Confirm substantial completion Deliver all special warranties Complete warranty walk-through 13 year record return Questions? Joshua Levy Partner Milwaukee, WI 414.978.5554 joshua.levy@huschblackwell.com Margaret Heitkamp Associate Milwaukee, WI 414.978.5373 margaret.heitkamp@huschblackwell.com Reserved 20
MODULAR CONSTRUCTION STRATEGIES AND CONSIDERATIONS Eric Meier Sammie Schacht Speaker Background Eric Meier UW Law School 2002 4 boys, ages 2-8 On 2 nd season of American Idol Sammie Schacht UW Law School 2016 Interned for the AGC of WI Worked for a General Contractor 2 Reserved 1
Modular Construction In the News Broad Sustainable Building erected a 57 story rectangular, glass and steel skyscraper in China in 19 days Assembled three floors a day using a modular method 3 Time Lapsed Video 4 Reserved 2
Modular Construction In the News Junior Living erected a 124 unit studio apartment building in Sweden in 4 months 5 Modular Construction In the News The Stack Apartments, a 56 unit, all modular building in New York City, was erected in 19 days 10% more cost efficient and was constructed 25% faster than traditional construction 6 Reserved 3
What is Modular Construction? Involves planning, designing, fabricating, transporting and assembling building elements at a location other than their final point of assembly onsite. Modular: up to 95% of work done off-site Often shipped to site as 3D units Other kinds of off-site construction: componentized, panelized 7 Re-locatable vs. Permanent Two segments of modular construction Re-locatable modular Meets temporary space needs Ex. job trailers and temporary classrooms Permanent Permanently incorporated into a structure 8 Reserved 4
Emergence of Permanent Modular Construction Began in the early 1900 s with the creation of modular homes Popular in Europe for over a decade Over 90% of construction projects in in the UK use PMC But use in large commercial projects is new in the United States 5 years ago, PMC constituted only 25% of the U.S. market share in the modular industry. Today it represents over 50%. 9 Benefits of Modular Construction Quality Control Schedule reduction Labor productivity Cost Reduced material waste Safety Reduced disruption 10 Reserved 5
Challenges of Modular Construction Coordination/cooperation Design Design freeze Shop size Transportation Handling of modules onsite 11 What Kinds of Projects Are Well Suited to Modular Construction? Project with tight schedules Repetitious projects Ex. classrooms, multi-family apartment units, bathrooms pods, healthcare facilities and hotels Design-build projects Projects with site limitations 12 Reserved 6
Legal Considerations Subcontractor or Supplier? Building Codes OSHA Contract Drafting Lien and Prompt Pay Law Insurance 13 Subcontractor or Supplier? Are modular contractors subcontractors or suppliers? Not settled law If subcontractor: Deemed a contract for services If supplier: Uniform Commercial Code Implied warranties Products liability Statute of Limitation Statue of Repose 14 Reserved 7
Subcontractor or Supplier? UCC applies in absence of contract terms to the contrary Use subcontract form instead of purchase order form Clearly identify that module must be built to the applicable plans and specifications 15 Building Codes International Building Code IBC assumes traditional construction Some states have amended building code to include modular considerations Arizona, Florida, Georgia, Illinois, Indiana, Kentucky, Minnesota, Rhode Island, New Jersey, Maryland, Nevada, New York, Oregon, Pennsylvania and Vermont 16 Reserved 8
Building Codes Module needs to comply with the code applicable where the project is located Inspection Often occurs prior to arrival onsite and again onsite Some states permit certification labels for modules 17 Certification Companies specialize in inspecting modules Example: PFS-TECO Based in Cottage Grove but has offices across the country Approved by all states with modular building program and the IBC PFS-TECO inspects module If compliant with applicable building code, label is affixed to module Tells local builder inspector that the module complies is code compliant 18 Reserved 9
Building Codes Wisconsin has not passed its own laws for commercial/industrial modular construction But Wisconsin has an agreement with Minnesota that allows modular buildings manufactured in Minnesota to be sited in Wisconsin provided that they bear a certification label 19 OSHA Different space are subject to different OSHA requirements Site concerns: overhead and height Shop concerns: confined spaces, entrapment and escape Site safety concerns: increased and more frequent crane picks 20 Reserved 10
Lien and Prompt Pay Law Incorporation of modular contractor in project can negatively impact lower tiers Lien law and prompt pay laws can apply differently to lower tier subcontractors/suppliers 21 Wisconsin - Wis. Stat. 779.01(3) Any person who performs, furnishes, or procures any work, labor, service, materials, plans, or specifications, used or consumed for the improvement of land, and who complies with s. 779.02, shall have a lien therefor on all interests in the land belonging to its owners. 22 Reserved 11
Pennsylvania - 49 P.S. 1201(5) Subcontractor means The term does not include an architect or engineer who contracts with a contractor or subcontractor, or a person who contracts with a materialman or a person who contracts with a subcontractor not in direct privity of a contract with a contractor. 23 TYPICAL PROJECT Owner MODULAR PROJECT Owner Prime Contractor Prime Contractor Plumbing Subcontractor Modular Subcontractor Plumbing Supplier Plumbing Subcontractor Plumbing Supplier 24 Reserved 12
Insurance Controlled insurance programs (OCIP/CCIP) Typically requires a certain threshold amount of labor costs onsite Might be hard to meet this threshold on a modular project Builders Risk Property insurance Often extends to material stored on site or in transit Modules might be too big to be stored onsite Standard builder s risk policy doesn t cover offsite storage 25 Contract Drafting Standard form contracts won t work Considerations: Design freeze Ownership of modules Responsibility for modules Inspection Insurance Termination 26 Reserved 13
Modular construction can provide many benefits to projects of varying types and sizes But it requires: Good relationship among project participants Early coordination and implementation Advance consideration of legal implications 27 Questions? Eric Meier Partner Milwaukee, WI 414.978.5413 eric.meier@huschblackwell.com Sam Schacht Attorney Madison, WI 608.234.6120 samantha.schacht@huschblackwell.com 28 Reserved 14
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Constructing A Drone Use Plan To Add Value & Reduce Risk Jonathan Schmalfeld Jake Remington Construction and infrastructure sectors are the largest industries for commercial drone use according to PwC Reserved 1
Common Construction Drone Usages Land Surveying Reduce Labor/Improve Accuracy Arial Photography Provide real time progress updates for superintendents and investors Analyze Data Digital Service Models 3D Modeling Inspections Bridges, towers, and other hard to access areas Safety Records Reserved 2
http://knowbeforeyoufly.org/ Know Before You Fly UAS (including payload) must weigh less than 55 lbs UAS Operator must have A Remote Pilot Aircraft Certificate (RPAC), or Be under direct supervision of an RPAC pilot Cannot operate over persons not directly participating in flight Class G airspace operations allowed without ATC permission; Class B, C, D, and E airspace flights allowed w/ ATC approval Maximum altitude of 400 AGL or within 400 of a structure Daylight operations only Must Remain in the Visual Line of Sight at all times RPAC pilot can only command 1 UAS at a time Reserved 3
Remote Pilot Airman Certificate Qualifications: Demonstrate aeronautical knowledge by either: Passing an initial aeronautical knowledge test Hold a part 61 pilot certificate (other than a student pilot), complete a flight review within the previous 24 month, and complete a suas training course Be vetted by the TSA Be at least 16 years old Certificate of Waiver UAS operators who want to fly outside the requirements of the Small UAS Rule (Part 107) may request a waiver and/or airspace authorization Most commonly authorized waiver: night operations FAA publishes all approved waivers on its website https://www.faa.gov/uas/request_waiver/waivers_gran ted FAA publishes interactive maps to show what airspace can be utilized for UAS operations https://faa.maps.arcgis.com/apps/webappviewer/inde x.html?id=9c2e4406710048e19806ebf6a06754ad Reserved 4
How to Apply for Waiver For simple waiver, apply online at https://www.faa.gov/uas/request_waiver/ Review the below list of regulations subject to waiver before applying Section 333 Exemption Some UAS Rules are not subject to Waiver: Flying UAS weighing more than 55 lb s Carrying property for compensation If you cannot get a waiver to do what you need to for your business, you can apply for Section 333 Exemption This is a longer process, and has more requirements Must have a airman certificate under Section 44711 Likely will need a certificate of airworthiness TSA Screening Required Reserved 5
Civil Liability For Accident Potential negligent acts include: Operating a UAS in violation of the FAA guidelines (Negligence per se) Failing to maintain UAS, which lead to a malfunction Permitting somebody without proper training to operate your UAS There are intentional torts which could apply: Trespass, Nuisance, Assault, Battery, Invasion of Privacy, and Fraud. Products liability actions are available against drone manufacturers Civil Liability Continued Reserved 6
Criminal Liability It Is Possible!! Beyond the Flight Considerations What other legal issues exist? Cybersecurity Data is the new oil Protecting Intellectual Property Use of data policies Radio frequency management Leasing or service providers Employment Policies and Agreements Insurance Coverage Planning for Malfunctions: Prevent harm, stabilize the aircraft, recover the aircraft Reserved 7
Privacy Concerns Not FAA Enforced FAA s mission is aviation safety, not privacy Part 107 does not specifically deal with privacy issues for drones No UAS regulations on data collection on people or property FAA is promoting a privacy education campaign Provide users with recommended privacy guidelines FAA s B4UFly mobile app Educate commercial pilots on privacy during certification process Issued guidance to local and state governments on privacy issues Effort builds on National Telecommunications and Information Administration s privacy best practices FAA encourages UAS pilots to check local and state laws Examples: remote sensor technology or photography How to Handle UAS Operations Handle the job in house? Increased Complexity Increased liability Regulatory Compliance Risk of Civil Penalties (anywhere between $400 and $200,000) Liability in the event of an incident/accident Contract with a 3 rd party for UAS services? Delegates compliance but Contract terms with UAS service provider are critical Reserved 8
Contractual Considerations Operator s Duty to Comply with the law and regulations FAA Part 107 regulations CONTRACTOR Common law liability HISTORY Insurance Coverage Sufficient for incident/ accident? Does coverage list customer as an additional insured? Indemnification for actions of UAS operator Protecting Intellectual Property Who owns the data collected by the UAS operations? Who has a license to use the data? What if You Have a UAS Accident? Does this involve your worksite and employees? Are you under MSHA or OSHA Jurisdiction? Do you have a reporting requirement? Was the UAS operated by a contractor? You may have adverse legal interests. Control information and access by default. Take control of your site Preserve the scene Don t let anyone move anything unless for safety Document. Take photos (not privileged!). Get counsel involved ASAP. Reserved 9
Your Contractor Has an Accident Is the contractor friend or foe? You may be more experienced Discuss investigation protocols and plans to interact with agencies Determine contractor participation and access Does the agency require an accident report? Root cause analysis reports? Consider joint defense agreement Re-evaluate contractor safety Continue the relationship? Areas for Legal Assistance Compliance checks regarding FAA regulations Obtain insurance with correct coverage protections Ranging from standard policies to policies purchased for individual flights Prepare Safety Management System ( SMS ) Programs Defined in Fed. Aviation Regs. Part 5 Recommended by the FAA Can provide liability protection in event of an accident Contract with third-party UAS operators Obtain Part 107 waivers (BVLOS, night) On Site Accident Investigation to Preserve Privilege and Defenses Reserved 10
Stay Updated! Subscribe to Safety Law Matters for safety law updates, strategies and tips: www.safetylawmatters.com/subscribe Questions? Jonathan Schmalfeld Associate St. Louis, MO 314.345.6276 jonathan.schmalfeld@huschblackwell.com Jake Remington Attorney Milwaukee, WI 414.978.5527 jake.remington@huschblackwell.com Reserved 11