Tag: North Carolina

1
Contractual Limitation of Liability in Engineer / Survey Contract Upheld
2
Economic Loss Rule Does Not Bar Owner’s Negligence Claim Against Subcontractor
3
Owner Who Pays Contractor After Receiving Subcontractor’s Lien Notice Becomes Personally Liable to Subcontractor, Even Though Owner Retains More than Lien Amount
4
Court Finds Contractor Has No Claim for Implied Indemnity or for Contribution Against Subcontractors
5
Court Recognizes Implied Warranty of Habitability / Workmanlike Construction in Certain Residential Construction

Contractual Limitation of Liability in Engineer / Survey Contract Upheld

Blaylock Grading Co., LLP v. Smith, 658 S.E.2d 680 (N.C. Ct. App. 2008)

In this case, a grading contractor sued a surveyor (who was also an engineer) for breach of contract and negligence regarding mistakes in surveying work which resulted in the contractor having to incur costs to import fill to raise the elevation of the site.  The contract between the contractor and surveyor contained a provision limiting the surveyor’s liability to $50,000.  The surveyor unsuccessfully moved for partial summary judgment based on the limit of liability.  Following a jury verdict against the surveyor for $574,714, the surveyor moved for judgment notwithstanding the verdict, which the trial court denied, ruling that the limit of liability was void as against public policy.  The North Carolina Court of Appeals reversed the trial court, holding that the limitation of liability was valid and enforceable.

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Economic Loss Rule Does Not Bar Owner’s Negligence Claim Against Subcontractor

Lord v. Customized Consulting Specialty, Inc., 182 N.C. App. 635, 643 S.E.2d 28 (Ct. App. 2007)

In this case, homeowners sued their contractor regarding defective trusses installed in their home, and also brought a negligence claim directly against the subcontractor which supplied the trusses.  A jury awarded no damages against the contractor, but did award damages against the subcontractor.  The subcontractor argued on appeal that the economic loss rule barred the homeowners’ claim.  The North Carolina Court of Appeals affirmed the jury verdict against the subcontractor, holding that the economic loss rule does not bar a negligence claim in the absence of a contract.

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Owner Who Pays Contractor After Receiving Subcontractor’s Lien Notice Becomes Personally Liable to Subcontractor, Even Though Owner Retains More than Lien Amount

O & M Indus. v. Smith Eng’g Co., 360 N.C. 263, 624 S.E.2d 345 (2006)

In this case, the subcontractor served a notice of claim of lien on funds owed to it by the contractor.  The owner paid the contractor after the subcontractor served notice, but also retained funds in excess of the subcontractor’s lien.  The subcontractor sued when neither the contractor nor the owner paid it.  The subcontractor moved for summary judgment, alleging that the owner was personally liable because it paid the contractor after the subcontractor served notice.  The owner also moved for summary judgment.  The trial court granted the subcontractor’s motion for summary judgment and denied the owner’s.  The Court of Appeals reversed, but the North Carolina Supreme Court reversed the Court of Appeals, holding, among other things, that the Court of Appeals failed to properly apply the applicable lien statutes, and that the owner’s retention of funds exceeding the lien did not relieve the owner of personal liability.

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Court Finds Contractor Has No Claim for Implied Indemnity or for Contribution Against Subcontractors

Kaleel Builders, Inc. v. Ashby, 161 N.C. App. 34, 587 S.E.2d 470 (2003)

In this case, homeowners hired an architect to design their residence, and also hired Kaleel Builders, Inc., as contractor to construct the residence.  Kaleel in turn hired several subcontractors. In the fall of 1996, the homeowners halted construction, and filed an arbitration demand against Kaleel alleging defective construction, including the work by the subcontractors and the design/supervision of the architect.  While the arbitration was pending, Kaleel filed a complaint seeking indemnification and/or contribution against the subcontractors and architect in July of 2001.  The trial court dismissed the claims against the subcontractors.  The claims for breach of warranty and breach of contract were dismissed on statute of limitations grounds, and the claims for negligence, indemnity, and contribution were dismissed for failure to state a claim.  The trial court also granted summary judgment for the architect.  The North Carolina Court of Appeals affirmed the trial court’s decision on all claims.

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Court Recognizes Implied Warranty of Habitability / Workmanlike Construction in Certain Residential Construction

Hartley v. Ballou, 286 N.C. 51, 209 S.E.2d 776 (1974)

The plaintiff purchased a house from the defendants which one of the defendants had built.  Shortly after the purchase, the plaintiff experienced flooding in the basement of the house.  The plaintiff sued the defendants for breach of express and implied warranties.  Following trial, the trial court entered a judgment in favor of the plaintiff against the builder defendant.  On appeal, the North Carolina Supreme Court recognized an implied warranty of habitability and workmanlike construction by the builder-vendor of a residence to the initial vendee.  The Supreme Court ultimately reduced the damages awarded since it found that they exceeded the builder’s liability under the implied warranty.

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