Disputes can arise over any number of issues during the many phases of a construction project. Bid protests, bond claims, payment disputes, lien claims, design defects, to name a few, can lead to disputes, and in some cases, when the parties cannot resolve their disputes out of court, litigation is unavoidable. Facing litigation in the middle of a construction project can be overwhelming, as it comes with the very real risks of disruption, harm to reputation, and damage to the relationships among the parties. Understanding some of the legal issues typically involved in construction litigation will go a long way to giving contractors and developers peace of mind should they encounter a dispute and to helping them build to a strong defense in the event they are sued.
What are Possible Claims in a Construction Litigation?
Breach of contract is a common claim in construction cases. Washington law provides that breach of contract is actionable if the contract imposes a duty, the duty is breached, and the breach causes damage. Breach of contract disputes can arise in the context of change orders, as well as over compensation for “extra work” or “additional work.” Under Washington law, a contractor may be entitled to further compensation, including reasonable profit, for extra work (work that is done in addition to or in excess of the contract’s requirements), but not for additional work (work that is necessarily required in the performance of the contract).
A claim for negligence can arise where an individual suffers personal or physical injuries resulting from the manner in which a building was constructed. That said, Washington generally does not recognize a cause of action for negligent construction on behalf of individual homeowners.
Breach of warranty is another claim that arises frequently in construction cases. The warranty may be express (contained in construction contracts, sales materials, or advertising/marketing materials) or implied. There is a limited implied warranty of habitability in Washington, which applies if the following requirements are met:
- Builder-vendor must be a commercial builder;
- The warranty applies only to the sale of new residential dwellings;
- The warranty protects only the first occupants of residential property; and
- The warranty covers only fundamental defects in the structure of a home (i.e., one that renders the home unfit for its intended purpose).
Claims for misrepresentation and fraud may be available in the construction context. The conduct at issue may be intentional or negligent.
“There are a number of different limitations periods in construction law cases.”
What Are The Categories of Recoverable Damages?
Typically, there are several categories of damages that may be recovered in a construction case. Washington courts apply an “independent duty doctrine,” meaning that a plaintiff may be able to recover damages beyond what is provided for in the contract — such as damages for negligence or other wrongful conduct — if it can identify a duty owed independently of the contract.
The main categories of recoverable damages are:
- Direct damages (those that accrue naturally from the breach, including any incidental or consequential losses)
- Stigma damages (permanent loss or harm for diminution in value)
- Delay damages (construction contracts often include a liquidated damages clause providing for a fixed measure of delay damages)
Which Statue of Limitations Will Apply?
There are a number of different limitations periods in construction law cases. If the action involves a written contract, a six-year statute of limitations will apply. Cases involving oral contracts have a three-year statute of limitation. A claim based on negligence also has a three-year statute of limitations. Fraud claims, and other cases involving intentional torts, have a two-year statute of limitations.
Generally speaking, the statute of limitations starts to run when the plaintiff’s cause of action accrues. In most cases, this occurs when the plaintiff suffers some form of injury or damage.
Sometimes there is a delay between the injury and the plaintiff’s discovery of it. When this happens, the court may apply what is known as the “discovery rule,” which pauses the statute of limitations until such time as the plaintiff knew or should have known (through the exercise of due diligence) all the facts necessary to establish a legal claim. The court will not apply the discovery rule if the delay was caused by the plaintiff sitting on his or her rights.
Where the nature of plaintiff’s injury makes it extremely difficult, if not impossible, for the plaintiff to learn the factual elements of the cause of action within the specified limitation period, the court will apply the discovery rule. The discovery rule often applies in actions for breach of construction contracts where latent construction defects are alleged. That said, a plaintiff cannot ignore notice of possible defects. In other words, when a plaintiff is put on notice of some harm, committed by another, he or she must make reasonably diligent inquiries to determine the scope of the actual harm. As the Washington Supreme Court has said, a person with knowledge sufficient to put him or her upon inquiry notice is deemed to have notice of all facts that reasonable inquiry would disclose.
What Is Washington’s Statute of Repose?
Washington has a statute of repose that is applicable in the construction context. The statute terminates a right of action after a specified time, even if the injury has not yet occurred. A six-year statute of repose applies to actions arising out of the construction of a building. Importantly, the repose statute caps the discovery rule with a six-year overall bar.
How I Can Help
I represent contractors, property developers, and municipalities in all aspects of Construction Litigation, including bid protests, bond claims, contractor disputes, design contracts, design defects, government contracts, lien claims, payment disputes, and subcontractor disputes. If you need assistance with a construction matter, I welcome you to contact me at (509) 662-2452.