Contract Law in the Construction Industry Context

Carl J. Circo

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781000708004
• Edition: 1
• Topic: Law
• Subtopic: Construction Law
• Index: Law

This book chronicles how contract cases from the construction industry have influenced, solidified, refined and particularized U.S. contract law. The book's central claim is that the construction industry experience has helped to contextualize U.S. contract law and, therefore, has encouraged the common law to be more receptive to flexible legal standards and practices and less constrained by the relatively rigid rules that often characterize contract law. Other scholarly books analyze the themes, values, standards, and principles of contemporary contract law, but none captures how construction industry relationships and practices have influenced the common law of contracts.

After providing an overview of construction law as a specialty of the practicing bar and as a field for scholarly inquiry, this book examines the construction industry cases that have most directly influenced contract law. It reviews how industry dispute patterns have caused courts to refine contract law principles or to adapt and modify other principles. Separate chapters explain the special roles that cases in the U.S. Supreme Court and in the lower federal courts have played in defining and distinguishing contract law in the construction industry. The final chapters assess implications the construction industry cases hold for contract theory writ large, and for the future of contract law.

This book is essential reading for legal scholars, construction law and contract law specialists, and those interested in how the construction industry has helped shape the U.S. legal system.

Part 1

Contract law and the construction industry

1 The practice and study of construction law

Construction Law evokes contrasting connotations. Practitioners know construction law as a legal specialty for those representing project owners and investors, design professionals, and the construction industry trades. In that sense, construction law stands as an established and recognized field, encompassing the broad legal knowledge and skills required to advise industry clients. The bar embraces construction law as a practical amalgamation drawn from a legal spectrum that includes tort, contract, insurance and risk management, intellectual property, labor law, administrative law, surety law, complex litigation and alternative dispute resolution, secured financing, statutory liens, design professional rights and obligations, and related topics. Legal theory, policy, and organizing principles hold, at best, a secondary place in applied construction law. For academics in the United States, however, construction law’s very legitimacy as the subject of scholarly inquiry remains tentative. Many law professors, if they have any developed conception of construction law at all, think of it only as a practice specialty involving a disparate array of legal principles, statutes, and regulations affecting design and construction activities. Only a few U.S. legal academics research and write in the area. A small minority of law schools regularly offer a course in construction law, and most of them hire practicing lawyers to teach the subject on a part-time basis.

Is there, in fact, a coherent body of construction law meriting scholarly inquiry? What might justify conferring such status on legal aspects of the construction industry? Beginning in the second half of the twentieth century, Justin Sweet, now Professor of Law Emeritus at the University of California, Berkley, pioneered the scholarly study of U.S. construction law. Throughout his distinguished career, Professor Sweet has called on legal educators to pay greater attention to the field.¹ Others concur. In an influential 1998 law review article, Professor Thomas Stipanowich, now the Academic Director of Pepperdine Law’s Straus Institute for Dispute Resolution, convincingly argued the case for more scholarly attention to construction law.² Two years later, Professor Jay Feinman, Distinguished Professor at Rutgers School of Law, Camden, disappointedly concluded that, except for the work at that time of Professors Sweet and Stipanowich, “there has been no sustained scholarly attention” involving construction contracting in particular.³

1 See, e.g., JUSTIN SWEET, SWEET ON CONSTRUCTION LAW 37 (1997).

2 Thomas J. Stipanowich, Reconstructing Construction Law, WIS. L. REV. 463, 493-98 (1998).

3 Jay M. Feinman, Relational Contract Theory in Context, 94 NW. U.L. REV. 737, 747 (2000).

Bruner and O’Connor’s excellent treatise on construction law, published by Thomson Reuters, does much to rectify the situation, especially because it offers many valuable scholarly insights along with its comprehensive practical guidance. Steven G. M. Stein’s treatise on construction law, published by Matthew Bender, also thoroughly covers the topic, especially for practitioners. The Stein treatise dates back to 1983, while Bruner and O’Connor introduced theirs as recently as 2002. Thankfully, we have these two multi-volume works to help fuel the academic venture, but they cannot furnish the complete solution. Indeed, the Bruner and O’Connor treatise dedicates an entire section to the legal academy’s relationship with construction law, which it characterizes as “Academia’s benign neglect of the study of construction law.”⁴ An economic case study of a complex construction project similarly notes that “Legal and economic scholars have devoted little attention to an industry—construction—that seems to offer valuable lessons about the organization of economic activity.”⁵ As recently as 2011, Professor Sweet would again lament the “serious paucity of research on construction law.”⁶

This book responds to the call for more scholarly attention to construction law. It concentrates on the close relationship between the construction industry experience and the common law of contracts. As a first step, however, this introductory chapter offers an overview of construction law, first from a practitioner’s perspective, and then from a scholar’s. Finally, it reframes the case for expanding legal research into construction law.

Construction law as a practice specialty

In 1981, one of the most dramatic aspects of construction law thrust me into the specialty. I was then a junior member of a team addressing liability issues stemming from the notorious collapse of suspended lobby “skywalks” at the Kansas City Hyatt Hotel. That disaster claimed 114 lives. The incident brought about renewed attention to life and safety issues that building design and construction inherently involve.⁷ My immersion in extensive legal research and tedious discovery processes stemming from that horrific tragedy led to my lifelong professional ties to the construction industry. Over the next two decades, I learned the enormity of the construction industry in both human and economic terms. I came to appreciate its legal, financial, and technical complexity through representing public and private project owners, construction lenders, design professionals, general and trade contractors, and other participants in a wide range of projects. The work convinced me that the legal aspects of building design and construction require expertise both practically and intellectually.

4 1 PHILIP L. BRUNER & PATRICK J. O’CONNOR, JR., BRUNER AND O’CONNOR ON CONSTRUCTION LAW § 1:4 (Westlaw 2018).

5 William A. Klein & Mitu Gulati, Economic Organization in the Construction Industry: A Case Study of Collaborative Production Under High Uncertainty, 1 BERKELEY BUS. L. J. 137, 138 (2004).

6 Justin Sweet, Standard Construction Contracts: Academic Orphan, CONSTRUCTION. LAW., Winter 2011, at 38, 39.

7 See Duncan v. Mo. Bd. for Architects, Prof’l Eng’rs & Land Surveyors, 744 S.W.2d 524 (Mo. Ct. App. 1988); see also Carl J. Circo, When Specialty Designs Cause Building Disasters: Responsibility for Shared Architectural and Engineering Services, 84 NEB. L. REV. 162, 203-07 (2005).

Drawing on similar experience, courts and commentators have noted that construction industry disputes often merit a distinctive application of legal principles. For example, in one case, a trial judge declared that “construction contracts are a separate breed of animal.”⁸ Another highlighted the extraordinary risk management challenges the industry presents, saying, “except in the middle of a battlefield, nowhere must men coordinate the movement of other men and all materials in the midst of such chaos and with such limited certainty of present facts and future occurrences as in a huge construction project.”⁹ The Colorado Supreme Court explained that, in resolving liability issues arising from construction projects, judges must often deal with complex “networks of interrelated contracts.”¹⁰ Bruner and O’Connor offer this characterization of the legal system’s adaptation to the construction industry context: “Like other highly complex fields of human endeavor, the construction process has spawned its own unique customs, practices, and technical vocabulary, which in turn led courts and legislatures to develop legal principles consistent with industry realities.” Professors Goetz and Scott, in addressing aspects of interpretation problems in contract law in general, concluded that “unusual economic conditions” affecting certain construction project delivery systems resulted in “new contractual regimes.”¹¹ Observations such as these attest to construction law’s unique characteristics for courts, arbitrators, and legal counsel.

A specialized construction bar existed at least for several years before my personal introduction to it. The Bruner and O’Connor treatise provides an excellent, concise account of the professional foresight of the lawyers who first helped to define the practice specialty, beginning around the middle of the twentieth century.¹² In 1976, the American Bar Association established its Forum on Construction Law (then called the Forum on the Construction Industry), a step that marked a coming of age for the construction bar. The Forum now has several thousand members, and Bruner and O’Connor estimate that the U.S. bar includes more than 35,000 lawyers who concentrate their practices on the construction industry. Today, those practitioners have extensive resources to inform their specialty. Both the Forum and the more recently organized American College of Construction Lawyers publish high quality legal journals, and they, along with a few other local and national organizations, regularly sponsor continuing legal education programs for construction lawyers. Additionally, several publishers offer practice manuals covering every aspect of the construction law practice. Without the professional demand of these practitioners, however, there would be but a scant body of published resources on construction law.

8 Paul Hardeman, Inc. v. Ark. Power & Light Co., 380 F. Supp. 298, 317 (E.D. Ark. 1974).

9 Blake Constr. Co. v. C. J. Coakley Co., 431 A.2d 569, 575 (D.C. 1981).

10 BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66, 72 (Colo. 2004).

11 Charles J. Goetz & Robert E. Scott, The Limits of Expanded Choice: An Analysis of the Interactions Between Express and Implied Contract Terms, 73 CAL. L. REV. 261, 296 (1985).

12 BRUNER & O’CONNOR, supra note 4, at § 1:5.

A scholarly perspective on construction law

As noted above, a few academics and commentators have promoted legal scholarship into building design and construction. This book owes much to their work. Construction law, however, has not yet achieved the status of a recognized field of study within the legal academy. This neglect does not reflect a judgment that construction industry cases have no use in legal education. Several observers have noted that industry cases traditionally accounted for up to 20 percent of the primary opinions included in leading contract casebooks.¹³ My own casual review of current texts suggests a similar count. Nor does the academy’s disinterest result from any lack of specialization among legal educators and scholars, or from any apparent concern among law professors that the balkanization of legal fields could weaken legal education or legal studies. The Association of American Law Schools has over 80 sections covering most legal specialties, from administrative law to trusts and estates. In between, the AALS includes sections on many important industries and economic sectors, such as agriculture and food law, financial institutions and consumer financial services, insurance, internet and computer law, medicine and health care, and sports law. Sections also draw from many highly specialized areas of interdisciplinary studies, including law and anthropology, law and mental disability, law and religion, and law and South Asian studies, to name a few. In addition, the AALS list extends to an impressive number of human endeavors and interest groups, each representing a narrowly targeted but significant societal interest. These cover aging and the law, art law, animal law, disability law, election law, mass communication law, poverty law, and much more. Although I have been teaching, researching, and writing about construction law as a full-time law professor for over 15 years, I am not aware of any substantial group of similarly engaged law professors who might affiliate into an AALS section on construction law. The Forum on Construction Law and the American College of Construction Lawyers include committees or groups for construction law professors, but their membership comes almost entirely from part-time professors. Indeed, all the other law school professors whom I currently know to be teaching construction law courses regularly do so on a part-time basis, and they identify primarily as practitioners. Their published works, while exceedingly useful to scholars, speak most directly to the construction law bar.

13 See id. at § 1:4 n.9; Stipanowich, supra note 2, at 494; Sweet, supra note 1, at 37.

How can the legal academy give but meager attention to such an important segment of the economy and society? The construction industry generates many complex and varied problems for litigation and for alternative dispute resolution; it presents...