The number and complexity of construction cases has grown dramatically over the past couple of decades, particularly in the area of multifamily residential construction. On February 24, 2012, Ken Robinson, Esq., and John Tweedy, Esq., of Robinson Tweedy, PC, presented a Continuing Legal Education program through the Boulder County Bar Association focused on the legal and factual contexts of construction defects in relationship to the larger practice of construction litigation. Attendees received a handout addressing the following topics: 1) litigation context for construction defect disputes; 2) statutory regulation of construction defects; 3) navigating CDARA claims; 4) aspects of CDARA that ought to be clear (but aren’t); and 5) other complex or unresolved CDARA issues.
I. Litigation Context for Construction Defect Disputes
There are many aspects of construction defect litigation that are elusive, complex and not always readily apparent. For example, as discussed below, whether an aspect of a project constitutes a construction defect may be in dispute. A lawsuit may not even start out as a construction defect case catching the unpaid contractor unawares. It is all too common for a simple complaint for non-payment to be met by a counterclaim for defective work. Beyond that, the general level of complexity on larger projects will implicate a plethora of rights and obligations arising out of interconnected contractual relationships overlain by various statutory, code and common law doctrines that can turn what appeared to have been a straight-forward construction defect claim into something much more complicated. Thus it is helpful to explore some of the sources of those rights and obligations and the relationships that give rise to them.
In its simplest form, a construction project involves an owner of property and a contractor hired by the owner to construct improvements to that property. Initially, the relationship is established by contract whereby the contractor agrees to perform a specific scope of work and the owner agrees to pay the contractor a specified compensation for that work. While such a contract may be oral, typically it is reduced to writing. Whatever its form, the contract is the original source of the parties’ rights and obligations.
In its best form, a construction contract will include six aspects of the construction project relationship: (1) housekeeping matters such as party and property identification; (2) definition of the scope of work to be performed, including, if necessary, reference to plans and specifications; (3) a description of the method and quantum of compensation, for example fixed-price or cost-plus; (4) a schedule for the performance and completion of the work; (5) allocation of risk clauses such as differing site conditions or the cost of dispute resolution; and (6) administrative and logistical considerations such as payment documentation and procedures, implementation and documentation of changes to the scope of work or schedule, etc.
Other pertinent sources of rights and obligations include: (1) statutes such as the Colorado Construction Defect Action Reform Act, the Colorado Consumer Protection Act, the Colorado Mechanic’s Lien Statute, and the Colorado Public Works Statute; (2) insurance policies; (3) payment and/or performance bonds; (4) common law doctrines such as the law of negligence; and (5) municipal ordinances such as building codes. At least a few of these laws will come into play in any construction defect dispute; at times all of them will be implicated.
While simple construction defect disputes might involve only an owner and a contractor, more complicated projects could include a geotechnical engineer, an architect, a design engineer, a general contract, subcontractors and suppliers. Other players may include insurers and sureties. Multiple parties with their operative contracts, along with applicable laws, create a complex maze of relationships with the attendant rights and obligations in a construction project.