However, instances arise where a condominium board of managers and/or individual unit owners ("board") file claims against a sponsor for construction and design defects in the condominium building after the statute of limitations runs against the contractor or architect due to the fact that the contractual sale dates of the condominium units start the six (6) year statute of limitations applicable to claims by the board for design and construction defects in the condominium.
In those cases, the law of indemnification protects the sponsor. Although the sponsor may not have a direct claim against the contractor or architect due to the running of the statute of limitations, the sponsor may assert an indemnification claim against the contractor or architect to the extent the sponsor has to pay damages to the board for design and construction defects in the building, i.e., the sponsor can recover any monies it has to pay to the board for the defects from the responsible contractor or architect because the statute of limitations for the indemnification claim does not start to run until payment to the board is made.
Our attorneys are available to assist clients in drafting appropriate contract language.
]]>Read more about lien waivers.
]]>"(1) delays caused by the contractee's bad faith or its willful, malicious, or grossly negligent conduct, (2) uncontemplated delays, (3) delays so unreasonable that they constitute an intentional abandonment of the contract by the contractee, and (4) delays resulting from the contractee's breach of a fundamental obligation of the contract."
[id., at 309]
Justice Marcy Friedman of the New York Supreme Court recently determined that no Corinno Civetta exceptions applied in dismissing an action for delay damages arising out of a 22 month project delay. Advanced Automatic Sprinkler Co. Inc. v. Seaboard Surety Co., 650321/2011, NYLJ1202678994141, at 1 (Sup., NY, Decided December 3, 2014). In Advanced, supra, Advanced Automatic Sprinkler Co. ("Advanced"), a subcontractor of Dart Mechanical Corporation ("Dart"), a non-party brought suit against defendant Seaboard Surety Company ("Seaboard") for delay damages under a payment bond issued by Seaboard on behalf of Dart. The parties agreed that the liability of Seaboard would be measured by the liability of its principal. Seaboard, in moving to dismiss based up on the no-damage-for-delay clause in the Advanced-Dart contract, acknowledged that the entire project had been repeatedly delayed. Rather, it argued that the following causes did not fall within the exceptions enunciated in Corinno Civetta:"(1) The original property owner did not vacate the site in a timely fashion; (2) contaminated soil was encountered at the Project; (3) the prime electrical contractor failed to perform its work; and (4) DSNY's engineers made design errors, including the design of the sprinkler system that Advanced was to install."
[id., at 4]
Justice Friedman agreed with Seaboard's position. In dismissing Advanced's delay claims, with prejudice, the Court wrote:"The categories of delay alleged in the complaint-denial of access to the Project site, flawed design, failure to adhere to or properly coordinate the progress schedule, delays due to the work of another (the electrical) prime contractor-are all delays within the scope of the contractual provisions."
[id., at 4]
These decisions illustrate the importance of insuring that the contractual provisions be carefully drafted. A contractor seeking to avoid a potential or future delay claim on the part of its subcontractor should seek the advice of counsel so as to insure that the no-damage-for-delay clause contains the broadest possible language. At a minimum, the clause should insure that the subcontractor's sole remedy as a result of project delays will be an extension of time, and that the subcontractor waives any claim for damages on account of any delay, obstruction or hindrance for any cause whatsoever, whether or not anticipated. As illustrated in the Advanced case, a carefully worded no-damage-for-delay clause should result in substantial savings to the contractor if delay issues arise in the performance of the subcontractor's work. Our attorneys are available to assist clients in drafting appropriate contract language.]]>An example of such language is as follows:
"In no event shall the indemnification obligation extend beyond when the institution of legal or equitable proceedings for negligence would be barred by an applicable statute of repose of limitations."
Whether you are the party seeking to enforce, or invalidate, the above contractual language, there are pitfalls under New York law of which you should be aware.
· The statute of limitations for a claim of indemnification does not start to run until the party seeking indemnification has made a payment to the injured party, which may be after the statute of limitations on the underlying negligence claim has run. The settlement of the underlying claim and/or the statute of limitations applicable to the underlying claim itself do not bar the indemnity claim.
· An indemnity claim has a six year statute of limitations, as per CPLR §213(2), which commences upon payment. You do not have to wait however, until payment to the injured party is made to bring an indemnification claim, as held by the courts and codified by CPLR §1007. The language above, depending on when the contract is signed, might bar this indemnity claim if it was not made within the statute of limitations applicable to the underlying negligence claim.
· The ability to bring a claim after the statute of limitations for the underlying cause of action has run is limited to indemnification only, where the entire loss is shifted to another.
· The party trying to enforce the limiting language may not be able to do so because the General Obligations Law §17-103 states that an agreement to waive, extend or not plead the Statute of Limitations in contract actions is valid if in wiring and signed after the accrual of the cause of action, thereby rendering any waiver of a claim at the contract drafting stage unenforceable. It is not uncommon that some contracts get signed after a design professional or contractor is already at work on a project and there may even be an existing claim at that time. Signing an agreement with the above language, if after the accrual of a certain cause of action, could act as a waiver.
The important take away is that indemnification language in a construction contract is only as good as its ability to be enforced. The waiver of claim, or the belief you have required another waive claims, can easily be thwarted or overlooked if handled improperly. Our attorneys are available to assist you with your contracts to ensure that the indemnity clauses are enforceable.
]]>Documents prepared by the architect, including drawings and specifications, generally remain the property of the architect, unless dealt with differently in the agreement. If ownership is to remain with the architect, the owner should negotiate a perpetual license to use and reproduce the architect's instruments of service in connection with the project, even after the architect is no longer engaged; therefore, the owner will be able to proceed with the construction of its project. This can become complicated depending on when the architect is terminated and what level of drawings it has designed as of that time. An architect may insist that its name be removed from drawings and/or that its name not be used in marketing of the project. These issues should be addressed in the agreement.
The owner should confirm the architect's agreement provides that the owner's obligation to make payment is for services properly rendered pursuant to the agreement up to the time of termination. Otherwise, the architect may seek to prevent the owner from using its instruments of service until the architect is paid for all sums due under the agreement regardless of whether those services were performed at all or performed properly.
The owner also should be sure to include language in the agreement that the architect will cooperate in the transition to a new architect, including the withdrawal as the architect of record for project filings with the Department of Buildings.
We are available to work with our clients in negotiating architect's agreements and settlement agreements with architects consistent with the foregoing.
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