Womble Carlyle Construction Industry Blog

Following the construction industry and related legal topics in the United States.

Sunday, March 19, 2006

Lack of Damages Does Not Bar Recovery

The March 6, 2006 issue of ENR has an interesting legal note about a case in which a Connecticut court allowed the plaintiff to sustain a lawsuit for defective design where no damages were alleged. Instead, the plaintiffs were suing to recover costs incurred in "self-help" actions to replace what the plaintiffs considered to be a product that had been defectively designed ---- before there was any actual damage.

Relying on the Connecticut Product Liability Act, the court said that the law does not "require a victim to choose between allowing such damage to occur and then suing, or paying to prevent the damage at its own expense and waiving its right to sue."

It would seem that proving defective design would be very difficult without also showing that such design proximately resulted in damages.

Thursday, March 9, 2006

Personal Liability for Owners under NC Mechanic's Lien Laws

In a surprising decision by the North Carolina Supreme Court, an owner of a construction project may incur personal liability to a subcontractor if it makes any payment to the general contractor after receiving a Notice of Claim of Lien on Funds from the subcontractor ---- even if the owner is retaining more than enough money to cover the amount claimed by the subcontractor in the Notice.

Let's say a subcontractor serves on the owner a Notice of Claim of Lien on Funds in the amount of $100,000. The owner is holding a Contract balance in excess of $250,000, so it goes ahead with a payment to the general contractor of $75,000, which leaves the owner with more than enough on hand to cover the $100,000 claim of lien on funds. No matter --- the owner, because it made a payment in any amount to the general contractor after receiving the Notice of Claim of Lien on Funds, is now personally liable to the subcontractor to the tune of $100,000.

The case is O&M Industries v. Smith Engineering Company, 624 S.E. 2d 345 (Supreme Court of North Carolina, January 27, 2006).