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NORTH CAROLINA CONSTRUCTION LAW DESKBOOKSeventh Edition (2016)

CHAPTER IALTERNATIVE DISPUTE RESOLUTION

I. INTRODUCTION..............................................................................................................5II. ARBITRATION..................................................................................................................5 A. AAA Construction Industry Arbitration Rules........................................................6 B. The North Carolina Revised Uniform Arbitration Act...........................................7

1. Arbitration Agreements are Valid & Enforceable......................................7 2. Compelling or Staying Arbitration..............................................................9 3. Waiver of Arbitration.................................................................................11

a. How Courts Determine Whether There has Been a Waiver............12 b. Demonstration Requirements for Resisting Arbitration................13 (1) Actions that Do Not Amount to a Waiver...........................14 (2) Actions that Do Amount to a Waiver.................................16 4. Procedural Provisions................................................................................18

5. Appeal of Arbitration Orders.....................................................................20 6. Confi rming, Vacating or Modifying Arbitration Awards............................21

a. North Carolina...............................................................................21b. Federal Arbitration Act & Arbitration in Other States...................29 (1) Corruption, Fraud or Undue Means....................................30

(2) Evident Partiality...............................................................31(3) Arbitrator Misconduct.......................................................34

(a) Failure to Postpone Hearing..................................35 (b) Refusal to Hear Evidence.......................................35 (c) Misconduct Catch-All Provision...........................36

(4) Arbitrator Exceeded Power................................................36 (a) Greathouse – A Prime Example in which Arbitrators Exceeded their Powers........................38 (b) Perini – A Prime Example in which Arbitrators Did Not Exceed their Powers................................39

7. Alternative Decisionmakers......................................................................41 C. Other Relevant North Carolina Statutes................................................................42 1. Contracts to Improve Real Property..........................................................42

2. Contract Provisions Waiving Jury Trials Unenforceable...........................42 3. Contracts with Forum Selection Provisions.............................................43 D. The Federal Arbitration Act..................................................................................44 E. Court-Ordered Arbitration....................................................................................47III. HOW TO ARBITRATE A CONSTRUCTION DISPUTE................................................48 A. Contractual Arbitration Provisions........................................................................48 B. Subsequent Agreement..........................................................................................48 C. Service Providers...................................................................................................48

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1. American Arbitration Association.............................................................49 2. The International Chamber of Commerce.................................................49 3. Other Service Providers.............................................................................49

IV. MEDIATION................................................................................................................49 A. AAA Construction Industry Mediation Rules......................................................50 B. Mediation in North Carolina..................................................................................50

1. General Courts of Justice...........................................................................50 2. North Carolina Federal District Courts.....................................................53

V. CONCLUSION.................................................................................................................53VI. FORMS & APPENDIX.....................................................................................................53FORM 1: Motion to Dismiss, Motion to Stay Proceeding and to Compel Arbitration, and Motion to Cancel Lien.....................................................................................55FORM 2: Order on Motions to Dismiss, Stay Proceeding and Compel Arbitration, and Cancel Lien.....................................................................................................59FORM 3: Motion to Stay Pending Arbitration Answer and Counterclaim............................61FORM 4: Order on Motion to Stay Pending Arbitration.......................................................63FORM 5: Motion to Dismiss..................................................................................................65FORM 6: Petition to Confi rm Arbitration Award..................................................................69FORM 7: Order to Confi rm Arbitration Award.....................................................................73FORM 8: Motion to Confi rm Arbitration Award..................................................................75FORM 9: Sample Arbitration Provisions...............................................................................77FORM 10: Agreement to Arbitrate, Version 1..........................................................................79FORM 11: Agreement to Arbitrate, Version 2..........................................................................83FORM 12: Post-Dispute Agreement to Arbitrate.....................................................................87APPENDIX: Arbitration Procedures...........................................................................................89

CHAPTER IICASE LAW SUMMARY

I. ACCORD & SATISFACTION........................................................................................111II. ARBITRATION...........................................................................................................112 A. Arbitrability.......................................................................................................112 B. Compelling Arbitration........................................................................................114 C. Waiver.................................................................................................................116 D. Award of Attorney’s Fees.....................................................................................117 E. Confi rming Award................................................................................................118 F. Vacating Award....................................................................................................119III. ARCHITECTS & ENGINEERS......................................................................................120 A. Licensing...........................................................................................................120 B. Scope of Duties/Obligations................................................................................121 C. Liability to Client.................................................................................................122 D. Liability to Third Parties......................................................................................123IV. ATTORNEY’S FEES......................................................................................................125

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V. CHANGES & CHANGED CONDITIONS....................................................................126 A. Entitlement to Compensation..............................................................................126 B. Waiver of Written Notice.....................................................................................128VI. CIVIL PROCEDURE.....................................................................................................129 A. Jurisdiction & Venue............................................................................................129 B. Standing..............................................................................................................132 C. Res Judicata........................................................................................................133 D. Pleadings.............................................................................................................133 E. Statutes of Limitation & Repose..........................................................................136 F. Discovery............................................................................................................145 G. Evidence........................................................................................................146 H. Sanctions.......................................................................................................147 I. Notice of Appeal..................................................................................................149VII. CONTRACTS...............................................................................................................150 A. Consideration....................................................................................................150 B. Award & Bidding.................................................................................................150 C. Formation.................................................................................................151 D. Enforcement......................................................................................................152 E. Implied......................................................................................................152 F. Interpretation................................................................................................154 G. Breach...............................................................................................................156 H. Substantial Performance......................................................................................161 I. Anticipatory Repudiation....................................................................................161 J. Termination.........................................................................................................162VIII. DAMAGES....................................................................................................................162 A. General................................................................................................................162 B. Interest................................................................................................................166 C. Delay...................................................................................................................167 D. Liquidated Damages...........................................................................................168IX. ENVIRONMENTAL......................................................................................................168X. FEES..............................................................................................................................170XI. FINANCING & LENDING.............................................................................................170XII. INDEMNIFICATION & CONTRIBUTION...................................................................171XIII. INSURANCE..............................................................................................................173 A. What Policy Applies............................................................................................173 B. Scope of Coverage..............................................................................................175 C. Exclusions to Coverage.......................................................................................175 D. Other Conditions to Coverage.............................................................................177 E. Miscellaneous.....................................................................................................178XIV. LICENSING.................................................................................................................178 A. Requirement of Licensure...................................................................................178 B. Expiration of License..........................................................................................182 C. Disciplinary Power & Revocation........................................................................182

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D. Effect of Lack of Licensure..................................................................................183XV. MECHANIC’S LIENS....................................................................................................184 A. Claimants............................................................................................................184 B. Entitlement..........................................................................................................187 C. Amount...............................................................................................................189 D. Procedure...........................................................................................................190 E. Timeliness..........................................................................................................192 F. Priority................................................................................................................193 G. Waivers/Releases................................................................................................195XVI. OSHA & PROJECT SAFETY..........................................................................................196XVII. PUBLIC CONTRACTS..................................................................................................200 A. Bidding...............................................................................................................200 B. Qualifi cations......................................................................................................202 C. Sovereign Immunity............................................................................................202 D. Claims.........................................................................................................203XVIII. REMEDIES FOR DEFECTIVE WORK.........................................................................207XIX. SURETYSHIP................................................................................................................214 A. Claimants..........................................................................................................214 B. Notice..................................................................................................................215 C. Venue.................................................................................................................216 D. Limitation of Actions..........................................................................................216 E. Extent of Liability................................................................................................217 F. Discharge of Surety.............................................................................................219 G. Rights of Surety...................................................................................................220XX. TORTS............................................................................................................................220 A. Personal Injury to Workers...................................................................................220 B. Personal Injury to Third Parties............................................................................225 C. Negligence..........................................................................................................226 D. Misrepresentation...............................................................................................231 E. Fraud............................................................................................................232 F. Conversion..........................................................................................................234 G. Interference with Contract...................................................................................234 H. Nuisance..............................................................................................................235XXI. UNFAIR TRADE PRACTICES......................................................................................235XXII. WARRANTY..................................................................................................................240 A. Express................................................................................................................240 B. Implied Warranty of Plans & Specifi cations........................................................242 C. Implied Warranty of Workmanlike Construction................................................243 D. Implied Warranty of Habitability.........................................................................244 E. Implied Warranty of Merchantability..................................................................246XXIII. WORKERS’ COMPENSATION.....................................................................................246 A. Choice of Law......................................................................................................247 B. Statutory Employer..............................................................................................247 C. Exceptions to Employer’s Immunity...................................................................250

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CHAPTER IIICONSTRUCTION CLAIMS

I. INTRODUCTION..........................................................................................................259 A. Changes, Change Orders & Extra Work...............................................................259 1. The “Changes” Clause.............................................................................259 a. Was the Original Scope of the Work Changed?..........................260 b. Was the Person Who Changed the Scope of the Work Authorized to Order Changes?.......................................................................261 (1) Authority........................................................................261 (a) Express (Actual) Authority..................................261 (b) Implied (Actual) Authority..................................261 (c) Apparent Authority..............................................262 (2) Ratifi cation by the Owner................................................262 (3) Practice Point..................................................................263 c. Was a Written Change Order Required?......................................264 (1) Practice Point...................................................................264 d. Was a Written Notice of a Claim for Additional Compensation Required?...................................................................................265 2. Drafting Claims for Additional Compensation........................................267 B. Constructive Change...........................................................................................268 1. Owner’s Erroneous Interpretation of Contract Documents......................268 2. Changed Conditions................................................................................268 a. Type I...........................................................................................269 b. Type II.........................................................................................270 c. Practice Points.............................................................................271 3. Owner’s Dictation of Method of Performance........................................272 4. Impossibility or Impracticability of Performance...................................272 5. Delays & Interference..............................................................................273 6. Acceleration...........................................................................................274 7. Cardinal Changes....................................................................................275 8. Improper Inspection................................................................................275 C. Warranties........................................................................................................276 1. Express Warranties..................................................................................276 2. Implied Warranties..................................................................................277 a. Warranty of Plans & Specifi cations...........................................277 (1) Practice Points.................................................................277 b. Warranty to Not Delay or Hinder................................................278 c. Warranty of Workmanship...........................................................278 d. Warranty of Habitability..............................................................278 D. Contract Performance or Breach.........................................................................279 1. Substantial vs. Complete Performance....................................................279 2. Material vs. Immaterial Breach................................................................280

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a. Material Breaches........................................................................281 (1) Failure to Pay....................................................................281 (2) Timeliness of Performance..............................................281 (3) Improper Performance of Work (Defective Work)..........281 (4) Delay, Disruption & Interference.....................................282 (5) Defective Plans or Specifi cations....................................282 E. Delay, Disruption & Acceleration........................................................................282 1. Introduction...........................................................................................283 2. Determining Fault....................................................................................283 a. Excusable/Noncompensable Delays............................................283 (1) Weather..........................................................................284 (2) Labor Problems................................................................284 (3) Notice.............................................................................284 b. Unexcusable/Compensable Delays..............................................284 c. Concurrent Delay.........................................................................285 (1) No Recovery by Either Party............................................285 (2) Apportionment of Delay Damages...................................285 d. Early Completion.........................................................................285 3. “No Damages for Delay” Clauses............................................................286 4. Acceleration............................................................................................288 F. Inspection & Acceptance......................................................................................288 1. Inspection...............................................................................................288 2. Acceptance.............................................................................................289 G. Contracts Implied at Law.....................................................................................289 H. Unfair & Deceptive Trade Practices.....................................................................290 I. Damages............................................................................................................291 1. The Contractor’s Damages......................................................................291 a. Actual Damages..........................................................................292 (1) Direct..............................................................................292 (2) Indirect.........................................................................293 2. The Owner’s Damages............................................................................293 3. Exemplary Damages................................................................................294 a. Punitive Damages........................................................................294 b. Treble Damages...........................................................................295 4. Attorneys’ Fees........................................................................................295 a. N.C. Gen. Stat. § 6-21.2...............................................................295 b. N.C. Gen. Stat. § 75-16.1.............................................................296 c. N.C. Gen. Stat. § 44A-35.............................................................296 d. N.C. Gen. Stat. § 1D-45...............................................................296 5. Duty to Mitigate/Minimize......................................................................297 6. Liquidated Damages Clauses...................................................................297 J. Prompt Pay Acts...................................................................................................298 1. Public Projects.........................................................................................298

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a. Federal Law.................................................................................298 b. North Carolina Law.....................................................................299 2. Private Projects........................................................................................300 K. Pay-When-Paid Clauses......................................................................................301 L. Negligence.........................................................................................................301 M. Willful & Wanton Negligence..............................................................................304 N. Duty to Subcontractors........................................................................................305 O. Negligent Misrepresentation...............................................................................305 P. Fraud...................................................................................................................306 Q. Strict Liability......................................................................................................306 R. Intentional Interference with Contract/Prospective Economic Advantage...........307 S. Conversion..........................................................................................................308 T. Trespass...............................................................................................................309 U. North Carolina False Claims Act (NC FCA)........................................................309 1. Introduction............................................................................................309 2. Purpose...................................................................................................309 3. Actions Constituting a False Claim.........................................................309 4. Liability under NC FCA..........................................................................310 5. Key Terms...............................................................................................310 6. Application of Terms...............................................................................311 7. Sample False Claims................................................................................311 8. Statute of Limitation................................................................................311 9. Black Letter Law – Federal False Claims Act/Relevant Case Law.........312 a. Basic Elements............................................................................312 b. Legitimate Claims vs. Infl ated Claims........................................312 c. Burden of Proof...........................................................................312 d. General Contractor Passing-Through Claims.............................312

CHAPTER IVCONSTRUCTION INDUSTRY STANDARD FORM CONTRACTS

I. INTRODUCTION....................................................................................................319II. WHY INDUSTRY STANDARD FORM CONTRACTS?..............................................320III. TYPES OF CONSTRUCTION INDUSTRY STANDARD FORM CONTRACTS......322 A. AIA Standard Form Contract Documents.............................................................322 1. Integrated Project Delivery (IPD)............................................................323 a. AIA Document A295–2008: General Conditions of the Contract for Integrated Project Delivery......................................323 b. AIA Document C195–2008: Standard Form of Single Purpose Entity Agreement for Integrated Project Delivery.........324 c. Four AIA Digital Practice Documents..........................................326 (1) AIA Document C106–2013: Digital Data Licensing Agreement.......................................................................326

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(2) AIA Document E201–2007: Digital Data Protocol Exhibit.............................................................................326 (3) AIA Document E202–2008: Building Information Modeling (BIM) Protocol Exhibit...................................327 (4) AIA Document E203–2013: Building Information Modeling (BIM) & Digital Data Exhibit..........................327 2. New Master Services & Project Management Agreements......................328 a. Master Services Agreements.......................................................328 (1) Contractor........................................................................328 (2) Architect..........................................................................328 (3) Consultant........................................................................328 b. Program Management Agreements.............................................329 (1) Program Manager for Single Project................................329 (2) Program Manager for Multiple Projects...........................329 3. Availability of AIA Standard Form Contract Documents........................330 B. ConsensusDocs Standard Form Contract Documents.........................................338 1. ConsensusDocs 300: Standard Form of Tri-Party Agreement for Collaborative Project Delivery.................................................................340 2. ConsensusDocs 301: Building Information Modeling (BIM) Addendum...............................................................................................342 3. Availability of ConsensusDocs Standard Form Documents...................343 C. Design-Build Institute of America (DBIA) Standard Form Contract Documents.........................................................................................................347 1. Availability of DBIA Standard Form Documents....................................347 D. EJCDC Standard Form Contract Documents......................................................350 1. EJCDC C–700: Standard General Conditions of the Construction Contract...................................................................................................350 2. Availability of EJCDC Standard Form Documents.................................350 E. Fédération Internationale Des Ingénieurs-Conseils (FIDIC) Standard Form Contract Documents............................................................................................353 1. Availability of FIDIC Standard Form Documents...................................354IV. CONCLUSION...............................................................................................................354APPENDIX...........................................................................................................................355 APPENDIX A-1: Residential Construction Contract...............................................357 APPENDIX A-2: Cost-Plus Addendum to Residential Construction Contract........363 APPENDIX A-3: Residential Construction and Land Sales Contract.....................367 APPENDIX A-4: Cost-Plus Addendum to Residential Construction and Land Sales Contract..............................................................................375

CHAPTER VCONSTRUCTION LIENS

INTRODUCTION......................................................................................................................383PART 1: ADVISING THE PERSON WHO SEEKS TO COLLECT MONEY OR SECURE PAYMENT UNDER THE LIEN STATUTE..........................................................385

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I. THE CONTRACTOR’S LIEN AGAINST THE OWNER’S REAL PROPERTY..........385 A. Can a Lien Be Asserted on the Client’s Behalf? – Legal Requirements...............385 B. The Elements of the Contractor’s Lien Against the Owner’s Real Property.......386 1. The Furnishing of Labor, Materials & Services.......................................387 2. Contracts to Improve Real Property Can Be Express or Implied...........387 3. Identifying the “Owner” of the Property.................................................388 4. The Contract Must Be for the Making of an Improvement to Real Property...........................................................................................389 5. New Lien Agent & Pre-Notice Requirements..........................................389 a. Owner Obligation to Designate a Lien Agent & Lien Agent Obligations..................................................................................390 b. Contractor & Subcontractor Obligations to Provide Notice of the Lien Agent “Downstream”................................................390 c. Notice to Lien Agent...................................................................391 6. All Debts Owing......................................................................................393 C. Practical Considerations Regarding Whether the Contractor Should File a Lien Against the Owner’s Real Property...........................................................394 D. Pre-Notice Requirements, Perfection & Enforcement of the Contractor’s Lien on Real Property..........................................................................................395 1. Preparing the Claim of Lien on Real Property..........................................395 a. The Caption.................................................................................397 b. Prefatory Language.....................................................................397 c. Name & Address of the Person Claiming the Lien.......................397 d. Name & Address of the Record Owner, Name of Contractor......397 e. Description of the Real Property.................................................398 f. Name & Address of the Person with Whom Claimant Contracted...398 g. Date Upon Which Labor or Materials Were First Furnished by the Lien Claimant...................................................................398 h. Date Upon Which Labor or Materials Were Last Furnished by the Lien Claimant....................................................................399 i. General Description of the Labor Performed or Materials Furnished & the Amount Claimed...............................................400 j. Signing the Claim of Lien on Real Property...............................400 2. Amending the Claim of Lien on Real Property.......................................401 3. The Lawsuit to Enforce the Lien..............................................................401 a. Necessary Parties.........................................................................401 b. Venue...........................................................................................403 c. Essential Elements.......................................................................403 d. Preparing the Judgment................................................................403 e. Voluntary Dismissal.....................................................................404 f. Amendments to Assert Lien Claims............................................404 g. Special Considerations in Cases in Which Owner Files Bankruptcy..........................................................................404 E. Discharging the Lien............................................................................................404 1. Discharging the Lien After Settlement.....................................................405

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2. Replacing the Lien With a Cash or Surety Bond.....................................405II. ELEMENTS OF THE SUBCONTRACTOR’S LIEN UPON FUNDS............................407 A. Furnishing Labor or Materials at the Site of the Improvement...........................408 B. The Money to Which the Lien Attaches.............................................................409 1. Identifying the Obligor.............................................................................409 2. Principles of Subrogation.........................................................................409 3. Priority of the Subcontractor’s Lien on Funds – The Bankruptcy “Fix”........................................................................................................410 C. Using & Enforcing the Subcontractor’s Lien Upon Funds.................................411 1. Establishing the Lien on Funds................................................................411 a. Use the Statutory Form................................................................411 b. Improve the Form Through Use of Prefatory Language.............412 c. Fill out the Form Correctly...........................................................412 d. Properly Serve the Notice of Claim of Lien Upon Funds...........413 2. The Obligor’s Duties Upon Receipt of a Notice of Claim of Lien Upon Funds.....................................................................................414 a. The Obligor Must Withhold Funds to Satisfy the Lien from the Next Payment at the Peril of Becoming Directly Liable to the Lien Claimant.....................................................................414 b. If the Obligor Makes a Payment, the Lien Continues on the Funds in the Hands of the Person Paid..................................416 c. Obligors Making Wrongful Payments are Entitled to Reimbursement & Indemnifi cation..............................................416 D. Enforcing the Lien on Funds...............................................................................417 1. The Obligor’s Remedy: Declaratory Judgment & Interpleader................417 a. Proper Parties...............................................................................418 b. Venue...........................................................................................418 c. Relief Requested..........................................................................418 d. Distribution of the Funds.............................................................419 2. The Lien Claimant’s Remedy – Foreclosure...........................................419 a. Proper Parties...............................................................................419 b. Venue...........................................................................................419 c. Elements in Foreclosing a Lien on Funds....................................419 E. Discharging the Lien on Funds – Use of Lien Waivers......................................420III. LIENS ON REAL PROPERTY AVAILABLE TO SUBCONTRACTORS....................421 A. The Subcontractor’s Lien on Real Property Arising from the Owner’s Wrongful Payment...............................................................................................421 1. The Rights of Lower-Tier Subcontractors to Assert the Direct- Liability Lien via Subrogation..................................................................422 2. Procedure for Perfecting the Direct-Liability Lien on Real Property Under Section 44A-20(d).........................................................422 a. Time Limits for Establishing the Direct-Liability Lien................423 b. Priority of the Direct-Liability Lien............................................423 c. Proving Service by Affi davit.......................................................423 d. Stating the Grounds for Believing the Owner is Directly Liable.............................................................................425

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B. The Nature of the Subcontractor’s Lien on Real Property Through Subrogation.........................................................................................................426 1. Filing the Subrogation Lien....................................................................426 2. Time Limits.............................................................................................426 3. Defenses to the Lien Asserted Through Subrogation..............................427 4. The “Electric Supply” or “Swain” Problem............................................427 a. The 1992 Electric Supply “Fix”..................................................428IV. ATTORNEY’S FEES ARE AVAILABLE TO THE PREVAILING PARTY....................429V. FILING OF A HYBRID CLAIM OF LIEN/NOTICE OF CLAIM OF LIEN UPON FUNDS................................................................................................................430PART 2: ADVISING THE PERSON WHO SEEKS TO DEFEND AGAINST OR DEFEAT A LIEN CLAIM.................................................................................................431I. DEFENDING AGAINST CLAIMS OF LIEN ON REAL PROPERTY.........................431 A. Look for Errors in the Claim of Lien on Real Property........................................431 1. Identifying the Owner.............................................................................431 2. Confi rm that Time Limits Have Been Met...............................................432 3. Review the Description of the Real Property Involved...........................432 4. Review the Description of the Work Performed by the Contractor................................................................................................433 5. Review the Amount of Money Claimed by the Contractor in the Claim of Lien.................................................................................433 6. Check the County in Which the Claim of Lien is Filed..........................433 B. If the Claim of Lien on Real Property Appears Procedurally Proper, Check the Accuracy of Its Factual Contentions......................................433 1. Review the Contracts Involved...............................................................433 2. Confi rm the Facts Relating to the Date of First Furnishing and Last Furnishing of Labor & Materials.....................................................434 3. Analyze Carefully the Amounts Claimed by a Contractor.......................435 C. Challenging the Validity of Lien Waivers.............................................................435II. DEFENDING CLAIMS OF LIENS UPON FUNDS.....................................................436 A. Defending the Claim of Lien Upon Funds from the Obligor’s Perspective..........................................................................................................436 B. Defending the Claim of Lien Upon Funds from the Contractor’s or Subcontractor’s Perspective............................................................................437III. DEFENDING SUBCONTRACTOR LIENS AGAINST THE OWNER’S REAL PROPERTY..........................................................................................................437 A. Defending the Subrogation Lien.........................................................................437 B. Defending the Direct-Liability Lien....................................................................438PART 3: ADVISING THE CONTRACTING PARTIES IN ADVANCE OF CONSTRUCTION....................................................................................................................440I. ADVISE THE PARTIES TO COMPLY WITH NEW LIEN AGENT & PRE-NOTICE REQUIREMENTS AND TO KEEP CAREFUL RECORDS.................440II. ADVANCE LIEN WAIVERS ARE VOID AS AGAINST PUBLIC POLICY.............440III. USING THE LIEN ON FUNDS PROSPECTIVELY.....................................................441

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CHAPTER VIEFFECTS OF BANKRUPTCY

I. THE BASICS...................................................................................................................450 A. Chapter 7, 11 or 13?.............................................................................................450II. PROCEEDINGS UNDER CHAPTER 11.......................................................................451 A. Creditors..............................................................................................................452 1. First-Day Orders......................................................................................452 2. Meeting of Creditors................................................................................452 3. Proofs of Claim........................................................................................453 4. Creditors’ Committees.............................................................................454 5. Appointment of Chapter 11 Trustee or Examiner....................................455 B. What Constitutes Property of the Estate..............................................................456 1. Property of the Estate Generally..............................................................456 2. Surety Bonds............................................................................................456 3. Progress Payments...................................................................................457 4. Joint Checks.............................................................................................458 5. Letters of Credit.......................................................................................458 6. Right of Setoff..........................................................................................459 7. Perfection of Liens...................................................................................460 C. Debtor’s Obligations............................................................................................462 1. Monthly Reports......................................................................................463 D. Motions Filed Prior to Confi rmation of Plan of Reorganization..........................463 1. Motions for Relief from Stay...................................................................463 a. Enforcement of Mechanic’s & Materialmen’s Liens While the Automatic Stay is In Place...........................................................465 2. Motions to Allow Financing.....................................................................468 3. Assumption & Rejection of Executory Contracts....................................469 4. Motion for Valuation of Collateral...........................................................472 E. Adversary Proceedings........................................................................................472 F. Chapter 11 Disclosure Statement & Plan of Reorganization................................473 1. Disclosure Statement...............................................................................473 2. Plan of Reorganization.............................................................................474III. PROCEEDINGS UNDER CHAPTER 13.......................................................................475 A. The Chapter 13 Trustee........................................................................................476 B. Creditors..............................................................................................................476 1. Meeting of Creditors................................................................................476 2. Automatic Stay.........................................................................................477 a. Termination for Individual Debtors..............................................477 b. No Automatic Stay.......................................................................478 c. Termination for Individual Cases................................................478 d. Secured Creditors – Grounds for Relief from Automatic Stay.......479 3. Violations of the Automatic Stay.............................................................479

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4. Proofs of Claim.......................................................................................480 5. Secured Claims.......................................................................................481 6. Unsecured Claims...................................................................................483 C. The Debtor...........................................................................................................484 1. Chapter 13 Plan........................................................................................484 a. Good Faith Requirement.............................................................484 b. Contents of Plan..........................................................................485 c. Modifi cation of Plan....................................................................486 d. Completion of Plan......................................................................486 e. Additional Requirements for Discharge Entry.............................487 2. Retention of Property of the Debtor & Motivations for Filing a Chapter 13 Plan........................................................................................488 a. Retention of Property...................................................................488 b. Protection of Co-Debtor (or Co-Obligor)....................................488 c. Chapter 13 Superdischarge..........................................................489 D. Post-Confi rmation of the Chapter 13 Plan...........................................................489 E. Chapter 13 Motions & Objections........................................................................490 1. Motions for Relief from Stay..................................................................490 2. Motion for Valuation of Collateral..........................................................490 3. Exemptions............................................................................................492 a. North Carolina Exemptions & Applicability...............................493 b. Exemptions Available Under North Carolina Law......................493 c. Other Exemptions Available........................................................495 d. Notice Required of Additional Exemptions................................496IV. PROCEEDINGS UNDER CHAPTER 7.........................................................................496 A. Creditors.............................................................................................................496 1. Meeting of Creditors...............................................................................496 2. The Automatic Stay.................................................................................497 3. Proofs of Claim.......................................................................................498 4. Final Distribution....................................................................................499 B. The Debtor...........................................................................................................499 1. Debtor’s Responsibilities After Filing.....................................................499 2. Duties of the Individual Debtor...............................................................499 a. Statement of Intention.................................................................499 b. Exemptions & Objections to Exemptions....................................500 c. Lien Avoidance............................................................................500 d. Reaffi rmation..............................................................................503 C. The Trustee..........................................................................................................504 1. Identifi cation & Gathering of Assets.......................................................504 2. Executory Contracts or Unexpired Leases...............................................504 3. Preferences..............................................................................................506 a. Exception: Contemporaneous Exchange for New Value.............507 b. Exception: Ordinary Course of Business....................................511 c. Exception: New Value.................................................................511

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d. Exception: Fixing of Statutory Lien.............................................511 e. Exception: Value Limits...............................................................511 4. Avoiding Powers......................................................................................512 5. Fraudulent Conveyances & Transfers......................................................513 6. Sale of Assets...........................................................................................514 7. Abandonment of Property........................................................................515 8. Final Account of Trustee..........................................................................515 9. Order Closing the Case.............................................................................515 D. Discharge..........................................................................................................516 1. Objections to Discharge of Specifi c or Certain Debts.............................516 2. Complaint Objecting to Entire Discharge................................................517 3. Discharge of Debtor.................................................................................518

CHAPTER VIIENVIRONMENTAL ISSUES IN CONSTRUCTION LAW

I. OVERVIEW....................................................................................................................525 A. Key Federal & State Environmental Laws and Regulations...............................525 1. The Federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) (42 U.S.C. §§ 9601–9675)..........................526 2. North Carolina Inactive Hazardous Sites Act (N.C. Gen. Stat. §§ 130A-310 to -310.77 (2015))....................................................................526 3. Federal Resource Conservation and Recovery Act (RCRA) (42 U.S.C. §§ 6901–6991(i))......................................................................................527 4. North Carolina Solid Waste Management Act (N.C. Gen. Stat. §§ 130A-290 to -310.77 (2015))...............................................................527 5. North Carolina Oil Pollution and Hazardous Substances Control Act (OPHSCA) (N.C. Gen. Stat. §§ 143-215.75 to -215-104AA (2015))........527 6. Federal & North Carolina Underground Storage Tank (UST) Regulations (40 C.F.R. Part 280; 15A N.C. Admin. Code, Subchapter 2N)..........................................................................................................528 7. North Carolina & Federal Petroleum Underground Storage Tank Trust Funds (N.C. Gen. Stat. §§ 143-215.94A to .94Q (2015); 42 U.S.C., Subtitle 1)....................................................................................528 8. Federal Clean Air Act (CAA) (42 U.S.C. §§ 7401–7671).........................528 9. Federal Clean Water Act (CWA) (33 U.S.C. §§ 1251–1387)....................529 10. North Carolina Water and Air Resources Act (N.C. Gen. Stat. §§ 143-211 to -215.10 (2015))....................................................................................530 11. Federal Toxic Substances Control Act (TSCA) (15 U.S.C. §§ 2601– 2629).......................................................................................................530 12. Federal Emergency Planning and Community Right-to-Know Act (EPCRA) (42 U.S.C. §§ 11001–11050).....................................................530 13. North Carolina Hazardous Chemicals Right-to-Know Act (N.C. Gen. Stat. §§ 95-173 to -221 (2015)).................................................................531

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14. National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. §§ 4321–4370h)...........................................................................................531 15. North Carolina Environmental Policy Act of 1971 (SEPA) (N.C. Gen. Stat. §§ 113A-1 to -20 (2015))..................................................................531 16. North Carolina Sedimentation Pollution Control Act (SPCA) (N.C. Gen. Stat. §§ 113A-50 to -69 (2015))........................................................532 17. North Carolina Coastal Area Management Act (CAMA) (N.C. Gen. Stat. §§ 113A-100 to -134.9 (2015)).........................................................532 18. North Carolina Mining Act of 1971 (N.C. Gen. Stat. §§ 74-46 to -74 (2015).....................................................................................................532 B. The North Carolina Agencies Responsible for Implementing Environmental Laws....................................................................................................................534 1. Division of Coastal Management (DCM)...............................................534 2. Division of Water Resources (DWR)......................................................534 3. Division of Air Quality (DAQ)...............................................................534 4. Division of Energy, Mineral and Land Resources (DEMLR)...............535 5. Division of Waste Management (DWM).................................................535II. ENVIRONMENTAL STANDARDS IMPACTING CONSTRUCTION ACTIVITIES.................................................................................................................535 A. Water Quality Protections....................................................................................535 1. Sedimentation Pollution Control Act (SPCA).........................................535 a. Mandatory Standards...................................................................536 (1) General Buffer Requirement Around Watercourses........536 (2) Graded Slope Requirement..............................................536 (3) Uncovered Land Requirement.........................................537 (4) Erosion & Sedimentation Control Plans.........................537 b. Local Ordinances & State Jurisdiction........................................538 c. Penalties & Enforcement.............................................................538 d. Case Law.....................................................................................540 2. Spill Notifi cation Requirements..............................................................541 a. Hazardous Substance Under CERCLA.......................................541 b. Oil & Other Substances under OPHSCA....................................543 c. Extremely Hazardous Substances................................................543 d. Polychlorinated Biphenyls (PCB)...............................................545 e. Hazardous Waste.........................................................................546 f. Discharges to Surface Water.........................................................547 g. Underground Storage Tanks (USTs)............................................547 h. Transportation-Related Spills......................................................547 3. Wetlands................................................................................................548 a. Dredge & Fill (Section 404) Permits...........................................548 (1) Does the Project Occur in “Wetlands”?..........................548 (2) Does the Project Involve a Regulated Activity?...............551 (3) Does an Exemption Apply for the Project?.....................552

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(4) If a Section 404 Permit is Required, is a Nationwide or an Individual Permit Needed?.........................................553 b. 401 Certifi cation & State Wetlands Rules....................................553 4. Riparian Buffer Rules..............................................................................554 5. Stormwater Requirements.......................................................................555 a. National Pollution Discharge Elimination System (NPDES) Stormwater Permits.....................................................................555 b. State Stormwater Management Program Permits.......................556 c. Nutrient Management Requirements...........................................557 d. Coastal Area Management Act (CAMA) Permits.......................558 (1) Major Permits..................................................................558 (2) General Permits...............................................................559 (3) Minor Permits..................................................................559 B. Air Quality Protections........................................................................................559 1. Hazardous Materials Protections.............................................................559 a. Asbestos.....................................................................................559 b. Lead Paint....................................................................................560 2. Permits for Transportation Sources..........................................................561 3. Open Burning Rules................................................................................562III. SITE CONTAMINATION & REMEDIATION..............................................................563 A. General Remediation Statutes..............................................................................563 1. CERCLA.................................................................................................563 a. The Cleanup Program..................................................................563 b. Potentially-Responsible Parties...................................................564 (1) Liability in General..........................................................564 (2) Liability for Construction Activities................................564 (3) Lender Liability...............................................................567 c. Defenses......................................................................................567 2. The Federal Resource Conservation and Recovery Act (RCRA)...........569 3. Inactive Sites............................................................................................569 4. Land Use Restrictions..............................................................................571 B. Petroleum Underground Storage Tanks (USTs)...................................................572 C. Dry Cleaners........................................................................................................573 D. Brownfi elds.....................................................................................................574IV. ACRONYM GLOSSARY...............................................................................................576

CHAPTER VIIIFEDERAL PUBLIC CONSTRUCTION

I. INTRODUCTION...........................................................................................................583 II. SOURCES OF FEDERAL PUBLIC CONSTRUCTION LAW.......................................583 A. The FAR..............................................................................................................583 B. The Prime Contract..............................................................................................584

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C. Statutes................................................................................................................584 D. Case Law.............................................................................................................585III. PROCUREMENT...........................................................................................................585 A. Federal Business Opportunities in North Carolina..............................................585 B. The Bidding Process............................................................................................585 1. Sealed Bidding (Formal Advertising).....................................................585 2. Competitive Negotiation (Best Value Bidding).......................................586 3. Bid Protests.............................................................................................587 C. Socioeconomic Programs....................................................................................587 D. Ethics, FAPIIS & Debarment..............................................................................588IV. CLAIMS & DISPUTES...................................................................................................588 A. The Contracting Offi cer......................................................................................588 B. The Written Claim...............................................................................................589 C. The Contract Disputes Act...................................................................................589V. THE MILLER ACT.........................................................................................................590 A. Types of Bonds....................................................................................................591 1. Bid Bond.................................................................................................591 2. Performance Bond...................................................................................592 3. Payment Bond.........................................................................................592 B. Nonexclusivity of Remedy..................................................................................593 C. Contracts Covered...............................................................................................594 D. Absence of Bond.................................................................................................594 E. Parties Covered...................................................................................................595 1. First-Tier Subcontractor/Supplier............................................................596 2. Second-Tier Subcontractor/Supplier.......................................................596 3. Third-Tier Subcontractors/Suppliers.......................................................598 F. Notice Requirements...........................................................................................599 G. Suits to Enforce Rights Under the Act..................................................................600 1. State Law vs. Federal Law/Federal Preemption.......................................601 2. Administrative Issues..............................................................................601 3. Contractor/Subcontractor Litigation.......................................................601VI. WEBSITES.....................................................................................................................602VII. ADDITIONAL RESOURCES........................................................................................603FORM 1: Sample Notice Letter...........................................................................................605APPENDIX: Procedure in Procurement Protest Cases Pursuant to 28 U.S.C. § 1491(b).........607

CHAPTER IXGREEN/SUSTAINABLE CONSTRUCTION

I. INTRODUCTION..........................................................................................................617 A. What is Sustainable or Green Construction?.......................................................617 B. Why is Building Green Important?.....................................................................618II. THE MAJOR RATING SYSTEMS – AN OVERVIEW................................................619

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A. U.S. Green Building Council (LEED Certifi cation)............................................619 B. Green Globes.......................................................................................................620III. LEED BD+C NEW CONSTRUCTION & MAJOR RENOVATION CERTIFICATION...........................................................................................................621 A. Certifi cation Process............................................................................................621 B. BD+C Certifi cation Requirements.......................................................................621 1. Integrated Process....................................................................................623 2. Location & Transportation (LT)...............................................................623 3. Sustainable Sites (SS)..............................................................................623 4. Water Effi ciency (WE)............................................................................624 5. Energy & Atmosphere (EA).....................................................................624 6. Materials & Resources (MR)...................................................................624 7. Indoor Environmental Quality (EQ).......................................................625 8. Innovation (IN)........................................................................................625 9. Regional Priority......................................................................................625IV. INTERNATIONAL GREEN CONSTRUCTION CODE...............................................625 A. Site Development & Land Use............................................................................626 B. Material Resource Conservation & Effi ciency....................................................626 C. Energy Conservation, Effi ciency & CO2 Emission Reduction...........................627 D. Water Resource Conservation, Quality & Effi ciency..........................................627 E. Indoor Environmental Quality & Control............................................................627 F. Commissioning, Operation & Maintenance.........................................................628 G. Existing Buildings & Existing Building Site Development................................628V. STATUTORY REQUIREMENTS...................................................................................628 A. State Facilities......................................................................................................628 B. State or Local Mandates for Green Construction................................................629VI. GREEN RISK ALLOCATION/CLAIM PREVENTION...............................................630 A. Risk of Non-Certifi cation....................................................................................632 B. Risk of Failure to Meet Performance Requirements............................................634 C. Higher Designer Standard of Care & Possible Unintended Warranties.............635 D. Use of New, Unproven & Potentially-Unavailable Products..............................635 E. The Need to Redefi ne Substantial Completion...................................................636VII. GREEN RESOURCES ON THE WEB...........................................................................637

CHAPTER XINSURANCE ISSUES IN CONSTRUCTION LAW

I. INTRODUCTION..........................................................................................................643II. COMMON POLICIES & COVERAGES........................................................................645 A. Builder’s Risk Insurance......................................................................................645 1. Introduction.............................................................................................645 2. Property Covered.....................................................................................645 3. Scope of Coverage & Policy Exclusions..................................................646

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4. Builder’s Risk Endorsements..................................................................648 5. When the Policy Terminates....................................................................648 6. Deductibles.............................................................................................649 7. Waiver of Subrogation.............................................................................649 B. Contractor’s Commercial General Liability (CGL) Policy.................................650 1. Introduction........................................................................................650 2. Declarations Page....................................................................................650 3. Who is Insured?.......................................................................................650 4. Duty to Defend........................................................................................653 5. What is the Extent of Coverage (i.e., Limits of Liability)?.......................653 6. Occurrence/Claims-Made....................................................................653 7. Types of Coverage Available...................................................................655 8. Claims for Faulty Workmanship..............................................................656 a. Not “Property Damage” Caused by an “Occurrence”..................656 b. “Business Risk” Exclusions........................................................658 9. Other Policy Exclusions..........................................................................660 a. “Expected or Intended Injury”....................................................660 b. Employer’s Liability....................................................................660 c. Contractual Liability Exclusion..................................................660 d. Pollution Exclusion.....................................................................661 10. Notice of Claims......................................................................................661III. OTHER TYPES OF INSURANCE.................................................................................662 A. Owner’s & Contractor’s Protective Liability Policies.........................................662 B. Project Management Professional Liability Insurance........................................663 C. Owner-Controlled Insurance Programs (“Wrap-Up” Policies)...........................663 D. Pollution Liability Policies..................................................................................664 1. Contractor’s Pollution Liability (CPL)....................................................664 2. Pollution Legal Liability (PLL)...............................................................665 3. Non-Owned Disposal Site Coverage (NODSC).....................................665 4. Storage Tank Liability..............................................................................665 5. Environmental Property Transfer.............................................................665 E. Umbrella or Excess Liability Insurance..............................................................666 F. Workers’ Compensation Insurance.....................................................................666 G. Force Majeure Insurance.....................................................................................667 H. Owners’ & Contractors’ System Performance Coverages or Effi cacy Coverage...........................................................................................................667 I. Inherent Defects Insurance (IDI).........................................................................667 J. Cyber Liability Insurance....................................................................................667IV. LIABILITY INSURANCE AVAILABLE TO DESIGN PROFESSIONALS................668 A. Professional Liability (Malpractice) Insurance...................................................668 B. Project Insurance Covering Design Professionals..............................................669 C. Design-Build Insurance......................................................................................669V. OTHER RESOURCES...................................................................................................670VI. CONCLUSION...............................................................................................................671

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CHAPTER XIEMPLOYMENT, IMMIGRATION & LABOR ISSUES

FACING THE CONSTRUCTION INDUSTRY

I. INDEPENDENT CONTRACTORS & EMPLOYEES...................................................679 A. Distinguishing an Independent Contractor from an Employee...........................679 B. The Tests..............................................................................................................681 1. The Department of Labor “Economic Realities” Test............................681 2. Internal Revenue Service Test..................................................................682 a. Factors to Determine Status of the Relationship.........................683

(1) Instructions.....................................................................683 (2) Training..........................................................................683 (3) Integration...............................................................683 (4) Services Rendered Personally.........................................683 (5) Hiring, Supervising & Paying Assistants......................683 (6) Continuing Relationship..................................................683 (7) Set Hours of Work............................................................684 (8) Full Time Required...........................................................684 (9) Doing Work on Employer’s Premises...............................684 (10) Order or Sequence Set......................................................684 (11) Oral or Written Reports.....................................................684 (12) Payment by Hour, Week, Month......................................685 (13) Payment of Business and/or Traveling Expenses..............685 (14) Furnishing of Tools & Materials.......................................685 (15) Signifi cant Investment.....................................................685 (16) Realization of Profi t or Loss.............................................685 (17) Working For More Than One Firm at a Time..................686 (18) Making Service Available to General Public....................686 (19) Right to Discharge............................................................686 (20) Right to Terminate............................................................686b. Categories to Assess Degree of Control & Independence........686 (1) Behavioral Control..........................................................686 (2) Financial Control.............................................................687 (3) Type of Relationship........................................................687

3. The Common Law Test............................................................................688 a. Federal Courts..............................................................................688 4. North Carolina Courts..............................................................................690II. IMMIGRATION............................................................................................................691 A. Federal Immigration Reform...............................................................................691 1. Executive Order – Expansion of the Deferred Action for Childhood Arrivals...................................................................................692 B. State Immigration Reform...................................................................................693 C. The Immigration Reform and Control Act of 1986 (IRCA)...............................694 1. Compliance with IRCA: I-9 Form............................................................694

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a. Document Presentation & Review..............................................694 b. Completing the I-9 Form.............................................................695 (1) Section 1..........................................................................695 (2) Section 2..........................................................................696 (3) Section 3..........................................................................696 c. Rehires.....................................................................................696 d. Expiration of Eligibility...............................................................696 e. Unique Circumstances.................................................................697 (1) Referrals from State Employment Service Agencies......697 (2) Third-Party Verifi cation...................................................697 (3) Replacement Receipts.....................................................697 f. Retention of I-9 Forms................................................................698 2. Penalties for Noncompliance...................................................................698 a. Knowing Violations.....................................................................698 (1) Actual Knowledge...........................................................698 (2) Constructive Knowledge.................................................699 b. Technical Violations....................................................................700 3. Audits......................................................................................................701 a. Self-Audits..................................................................................701 b. ICE Audits...................................................................................702 D. The E-Verify Program..........................................................................................703 1. Using E-Verify.........................................................................................703 2. E-Verify Requirements for Federal Contracts..........................................705 3. E-Verify in North Carolina.......................................................................706 a. Public Employers........................................................................706 b. Private Employers.......................................................................707 c. E-Verify Requirements for State Contracts.................................707 d. Violations....................................................................................708 E. Discrimination.....................................................................................................708 1. Types of Prohibited Discrimination.........................................................708 2. Protected Parties......................................................................................709 3. Filing Discrimination Charges................................................................709 4. Remedies & Penalties..............................................................................710III. COVENANTS NOT TO COMPETE..............................................................................710 A. Non-Compete Agreements in North Carolina.....................................................710 B. Judicial Review of Covenants Not to Compete...................................................711 1. The Writing Requirement........................................................................712 2. Consideration..........................................................................................713 3. Reasonableness with Regard to Time & Territory....................................714 4. Not Against Public Policy.......................................................................715 C. Avoiding Litigation.............................................................................................716 1. New Employees.......................................................................................716 a. Avoiding Unfair Competition Claims.........................................716 b. Protecting an Employer’s Own Interest......................................717

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(1) Confi dentiality Agreements.............................................718 (2) Non-Solicitation Agreements..........................................718 (3) Assignment of Invention Agreements.............................718 2. Departing Employees..............................................................................719 D. Investigation, Evidence Preparation & the Injunction..........................................720 1. Strategy....................................................................................................720

2. Procedure...............................................................................................721 a. Temporary Restraining Orders.....................................................721 b. Preliminary Injunctions...............................................................722 c. Appeal.........................................................................................722IV. ORGANIZED LABOR & THE UNION-FREE EMPLOYER........................................722 A. North Carolina’s Right-to-Work Status.................................................................723 B. The National Labor Relations Act........................................................................723 1. Unfair Labor Practices.............................................................................724 2. Union Elections.......................................................................................725 a. Voluntary Recognition.................................................................725 b. Board-Certifi ed Election..............................................................726 C. Protected Concerted Activity...............................................................................727 D. Employer Free Speech & Issue-Free Message.....................................................728 1. Employer Free Speech.............................................................................729 2. An Employer’s Statement on Remaining Union-Free..............................730 3. Captive Audience Meetings.....................................................................733 4. Employment Policies...............................................................................733 a. Rules Regarding Union Insignia..................................................734 b. Rules Regarding Solicitation/Distribution..................................734 c. Rules Regarding Off-Duty Access...............................................735 d. Rules Regarding On-Duty Conduct............................................736 e. Rules Regarding Posting of Union Literature.............................736 E. Board Remedies for Unlawful Policies................................................................736 F. The Foundation of an Issue-Free Employer.........................................................737 1. The Preventive Audit...............................................................................737 2. Management Credibility & Training.....................................................738 3. Effective Communications with Employees & Problem-Solving Mechanisms.............................................................................................739 4. Appreciation of Employees.....................................................................739V. QUICK REFERENCE GUIDE FOR ADDITIONAL EMPLOYMENT LAW TOPICS..........................................................................................................................740 A. Employment at Will.............................................................................................740 B. Labor Statutes......................................................................................................740 C. Wage & Hour Laws..............................................................................................741 D. Family & Medical Leave Act (FMLA) Equivalent..............................................741 E. Special Leave Statutes.........................................................................................742 F. Military Service & Employee Leave....................................................................742 G. Trade Secrets........................................................................................................742

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H. Unfair & Deceptive Trade Practices Act.............................................................743 I. PersonnelorEmployeeConfidentiality...............................................................743 J. Protection of Social Security Numbers...............................................................743 K. Discrimination.....................................................................................................744 1. North Carolina’s Equal Employment Practices Act (NCEEPA)..............744 2. North Carolina Persons with Disabilities Protection Act (NCPDPA)......744 L. Whistle-Blower Statutes & Retaliatory Discharge..............................................744 M. WorkerAdjustment&RetrainingNotification(WARN)Act.............................745 N. WorkplaceViolence.............................................................................................745VI. FORMS...........................................................................................................................745FORM 1: Exit Acknowledgment.........................................................................................747FORM2: UnemploymentEligibilityVerification(FormI-9).............................................749FORM 3: Social Security Administration Notice to Employee of Tentative Nonconfirmation.............................................................................................759FORM 4: U.S. Department of Homeland Security Notice to Employee of Tentative Nonconfirmation............................................................................................763FORM5: VerificationofWorkAuthorizationComplaintForm&Instructions...................767

CHAPTER XIILICENSING OF CONSTRUCTION PROFESSIONALS

I. THE NORTH CAROLINA LICENSING BOARD FOR GENERAL CONTRACTORS..........................................................................................................779 A. Introduction.................................................................................................779 B. Examinations......................................................................................................779 C. LicenseClassifications........................................................................................779 D. Limitation of License..........................................................................................780 E. Entities Licensed.................................................................................................781 F. Reciprocity..........................................................................................................782 G. Homeowners Recovery Fund..............................................................................782 H. Statutes&CasesDefiningGeneralContracting..................................................783 1. StatutoryDefinition.................................................................................783 2. UnauthorizedPractice.............................................................................784 3. Civil Consequences of Unlawful General Contracting............................784 4. TheStrictCompliancePolicy.................................................................785 5. Whoisa“GeneralContractor?”..............................................................786 a. TheControlTest..........................................................................786 b. Subcontractors............................................................................787 c. Parallel Prime Contracting..........................................................788 6. CostoftheUndertaking...........................................................................789 7. ConstructionManagement......................................................................789 a. StatutoryDefinition.....................................................................789 b. LicensingRequirements..............................................................790 c. Cases..........................................................................................791

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8. Clearing & Grading.................................................................................792II. THE NORTH CAROLINA BOARD OF ARCHITECTURE.........................................792 A. Introduction.........................................................................................................792 B. Application & Renewal of License......................................................................793 1. Application..............................................................................................793 2. Renewal.................................................................................................793 a. Individual License Renewal........................................................793 b. Corporate Registration Renewal..................................................793 c. Reinstatement..............................................................................794 C. License Classifi cations, Limitations of License & Entities Licensed................794 1. Individual License...................................................................................794 2. Corporate License....................................................................................794 3. Partnerships............................................................................................794 D. Reciprocity.........................................................................................................795 1. Individuals..............................................................................................795 2. Foreign Corporations...............................................................................795 E. Statutes and Rules & Regulations........................................................................795 1. Practice of Architecture............................................................................795 2. Unauthorized Practice..............................................................................796 3. Exemptions.............................................................................................796 4. Qualifi ed Immunity..................................................................................797 5. Disciplinary Actions & Procedures.........................................................797 6. Adoption of New Rules & Declaratory Rulings......................................797III. THE NORTH CAROLINA BOARD OF EXAMINERS FOR ENGINEERS & SURVEYORS.................................................................................................................797 A. Introduction........................................................................................................797 B. Application & Renewal of License......................................................................798 1. Application............................................................................................798 a. Engineering License....................................................................798 b. Land Surveyor License................................................................799 2. Renewal.................................................................................................799 3. Temporary Permits...................................................................................800 C. License Classifi cations & Limitations.................................................................800 1. Engineer.................................................................................................800 2. Land Surveyor..........................................................................................800 D. Entities Licensed..................................................................................................800 E. Reciprocity..........................................................................................................800 F. Statutes and Rules & Regulations........................................................................801 1. Practice of Engineering............................................................................801 2. Practice of Land Surveying......................................................................801 3. Unauthorized Practice.............................................................................802 4. Exemptions..............................................................................................802IV. THE NORTH CAROLINA BOARD OF EXAMINERS OF ELECTRICAL CONTRACTORS............................................................................................................803

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A. Introduction.......................................................................................................803 B. Application & Renewal of License......................................................................803 1. Application for Registration, Certifi cation & License.............................803 2. Renewal.................................................................................................804 3. Restatement.............................................................................................804 C. License Classifi cations, Limitations of License & Entities Licensed.................804 1. Limited, Intermediate & Unlimited License Classifi cation....................805 2. Residential Dwelling License..................................................................805 3. Special Restricted License Classifi cations..............................................805 D. Reciprocity..........................................................................................................805 E. Statutes and Rules & Regulations........................................................................805 1. Practice of Electrical Contracting............................................................805 2. Unauthorized Practice.............................................................................806 3. Exemptions.............................................................................................806 4. Disciplinary Actions & Procedures..........................................................806 5. Adoption of New Rules & Declaratory Rulings......................................807V. BOARD OF PLUMBING, HEATING & FIRE SPRINKLER CONTRACTORS..........807 A. Introduction......................................................................................................807 B. Application & Renewal of Registration...............................................................807 1. Application..............................................................................................807 2. Renewal...................................................................................................808 3. Reinstatement..........................................................................................808 C. License Classifi cations........................................................................................808 D. License Limitations, Duties & Responsibilities..................................................809 1. Permits...................................................................................................809 2. On-Site Presence.....................................................................................809 E. Entities Licensed.................................................................................................810 1. Corporation.............................................................................................810 2. Partnership..............................................................................................810 3. Business with a Trade Name....................................................................810 F. Reciprocity......................................................................................................810 G. Statutes and Rules & Regulations........................................................................810 1. Practice of Plumbing, Heating & Fire Sprinkler Contracting.................810 2. Unauthorized Practice.............................................................................811 3. Exemptions............................................................................................811 4. Disciplinary Actions & Procedures..........................................................811 5. Adoption of New Rules & Declaratory Rulings......................................812VI. THE NORTH CAROLINA APPRAISAL BOARD........................................................812 A. Introduction........................................................................................................812 B. Real Estate Appraisers.........................................................................................812 1. Application & Renewal of License..........................................................812 a. Application for Registration, Certifi cation & License.................812 b. Renewal.......................................................................................813 2. License Classifi cations............................................................................813

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a. Trainee.......................................................................................813 b. Licensed Residential Real Estate Appraiser................................814 c. Certifi ed Residential Real Estate Appraiser.................................814 d. Certifi ed General Real Estate Appraiser......................................814 3. Entities Licensed......................................................................................815 4. Reciprocity...............................................................................................815 5. Statutes and Rules & Regulations............................................................815 a. Practice of Real Estate Appraisal.................................................815 b. Standards for Appraisals..............................................................815 c. Unauthorized Practice.................................................................815 d. Disciplinary Actions & Procedures..............................................816 B. Real Estate Appraisal Management Companies..................................................816 1. Application & Renewal of License..........................................................816 a. Application for Registration.........................................................816 b. Renewal.....................................................................................817 c. Inactive or Lapse of Registration.................................................817 2. Registration Classifi cations, Limitations & Entities Registered...............817 3. Statutes and Rules & Regulations.............................................................818 a. Practice of Real Estate Appraisal Management...........................818 b. Unauthorized Practice..................................................................819 c. Exemptions...............................................................................819 d. Records.......................................................................................819 e. Disciplinary Actions & Procedures..............................................819VII. THE NORTH CAROLINA HOME INSPECTORS LICENSING BOARD..................820 A. Introduction........................................................................................................820 B. Application & Renewal of License......................................................................820 1. Application.............................................................................................821 2. Renewal...................................................................................................821 3. Inactive or Lapse of License....................................................................821 C. License Classifi cations, Limitations & Entities Licensed....................................822 D. Reciprocity..........................................................................................................822 E. Statutes and Rules & Regulations.........................................................................823 1. Practice of Home Inspecting....................................................................823 2. Unauthorized Practice.............................................................................823 3. Exemptions............................................................................................823 4. Disciplinary Actions & Procedures..........................................................823VIII. THE NORTH CAROLINA BOARD OF LANDSCAPE ARCHITECTS......................824 A. Introduction.........................................................................................................824 B. Application & Renewal of License.......................................................................824 1. Application.............................................................................................824 2. Renewal...............................................................................................824 3. Reinstatement..........................................................................................825 C. License Classifi cations, Limitations & Entities Licensed....................................825 D. Reciprocity..........................................................................................................825

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E. Statutes and Rules & Regulations........................................................................825 1. Practice of Landscape Architecture.........................................................825 2. Unauthorized Practice.............................................................................826 3. Exemptions.............................................................................................826 4. Disciplinary Actions & Procedures..........................................................826IX. THE NORTH CAROLINA LANDSCAPE CONTRACTORS REGISTRATION BOARD..........................................................................................................................826 A. Introduction........................................................................................................826 B. Application & Renewal of Registration...............................................................827 1. Application..............................................................................................827 2. Renewal..................................................................................................827 3. Reinstatement..........................................................................................827 C. Classifi cations, Limitations & Entities Certifi ed.................................................828 D. Reciprocity..........................................................................................................828 E. Statutes and Rules & Regulations........................................................................828 1. Practice of Landscape Contracting..........................................................828 2. Unauthorized Practice.............................................................................828 3. Disciplinary Actions & Procedures..........................................................829X. BOARD OF LICENSING OF SOIL SCIENTISTS.........................................................829 A. Introduction.........................................................................................................829 B. Application & Renewal of Registration...............................................................829 1. Application..............................................................................................829 2. Renewal............................................................................................830 3. Reinstatement.........................................................................................830 C. License Classifi cations, Limitations & Entities Licensed....................................830 D. Reciprocity..........................................................................................................831 E. Statutes and Rules & Regulations........................................................................831 1. Practice of Soil Science...........................................................................831 2. Unauthorized Practice.............................................................................831 3. Exemptions.............................................................................................831 4. Disciplinary Actions & Procedures..........................................................832

CHAPTER XIIISURETY LAW & THE CONSTRUCTION INDUSTRY: A NORTH CAROLINA PRIMER

I. INTRODUCTION..........................................................................................................839II. SURETYSHIP DEFINED & DISTINGUISHED...........................................................839 A. Insurance Distinguished from Suretyship............................................................840 B. Indemnity Distinguished from Suretyship...........................................................840III. PERFORMANCE & PAYMENT BONDS......................................................................841 A. Performance Bonds.............................................................................................842 1. Surety’s Options upon Principal’s Default..............................................842 a. Provide Financial Assistance to Defaulting Principal.................842 b. Allow Obligee to Remove & Replace Defaulting Contractor.......842

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c. Obtain Bids for Completing Contractor........................................843 d. Tell Obligee to Complete Projects with Remaining Contract Funds...........................................................................................843 e. Perform Good Faith Investigation................................................843 2. “Takeover” Agreements...........................................................................843 B. Payment Bonds....................................................................................................844 1. The Federal Miller Act.............................................................................844 a. Covered Claimants.......................................................................844 b. When Pre-Suit Notice Is Required...............................................845 c. The One-Year Statute of Repose..................................................845 d. Venue for Action...........................................................................846 e. Delivery of Materials to Site Not a Condition Precedent to Recovery...................................................................................846 2. North Carolina’s “Little Miller Act”........................................................846 a. Payment Bond Claims by First-Tier Subcontractors...................846 b. Payment Bond Claims by Remote Subcontractors – Notice Required.......................................................................................847 c. The One-Year Statute of Repose..................................................847 d. Venue for Action..........................................................................847 e. Delivery of Materials to Site Not a Condition Precedent to Recovery...................................................................................848 f. 2012 Legislation – “Double Payment” Protection for Contractors...................................................................................848 C. Obtaining Copies of Payment Bonds for Public Projects.....................................849IV. NATURE & EXTENT OF SURETY’S LIABILITY........................................................849 A. General Principles................................................................................................849 B. What the Obligee Can Recover from the Surety in the Event of the Principal’s Default.................................................................................................................850 C. Who Can Recover from the Surety in the Event of the Principal’s Default...........851 D. Penal Amount of the Bond....................................................................................852 E. Disputes Concerning Default...............................................................................853 F. Surety’s Liability for Principal’s Negligence.......................................................853 G. Surety’s Liability for Interest...............................................................................854 H. Surety’s Liability for Defects After Substantial Completion................................855 I. Surety’s Defenses.................................................................................................855 1. Failure to Declare Unequivocal Default...................................................856 2. Cardinal Changes.....................................................................................856 3. Prepayments & Overpayments.................................................................856 4. Invalidity of the Bond...............................................................................857V. SURETY’S REMEDIES.................................................................................................857 A. Remedies Against the Bonded Principal & Its Indemnitors.................................857 1. Reimbursement.......................................................................................857 2. Exoneration.............................................................................................857 3. Quia Timet................................................................................................858

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4. Subrogation.............................................................................................858 5. Specifi c Performance...............................................................................858 B. Remedies Against the Owner/Obligee.................................................................859 C. Remedies Against Co-Sureties.............................................................................860 D. Remedies Against Engineers & Architects........................................................860 E. Remedies Against Principal’s Accountant...........................................................860VI. ANALYSIS OF AIA PERFORMANCE & PAYMENT BONDS AND THE DAWN OF THE CONSENSUSDOCS BOND FORMS................................................861 A. Analysis of the AIA Document A312-2010 Performance Bond..........................861 1. Section 1 – Obligations of the Surety.....................................................861 2. Section 3 – Owner’s Obligation to Give Notice to Surety......................862 3. Section 4 – Failure to Comply with Notice Requirement.......................863 4. Section 5 – Options of the Surety...........................................................863 5. Section 6 – Default by Surety..................................................................864 6. Section 7 – Amount of Surety’s Liability.................................................864 7. Section 10 – Waiver of Notice of Change...............................................865 8. Section 11 – Limitations Period..............................................................865 B. Analysis of the AIA Document A312-2010 Payment Bond...............................866 1. Section 1 – Obligations of Surety...........................................................866 2. Section 5 – Contractual Privity...............................................................866 3. Section 7 – Actions Required by Surety..................................................867 4. Section 8 – Amount of Surety’s Liability................................................868 5. Section 11 – Waiver of Notice................................................................868 6. Section 12 – Limitations Period..............................................................868 7. Section 16.2 – Claimants.........................................................................869 C. ConsensusDocs Bond Forms...............................................................................869 1. Key Differences Between the AIA A312 Performance Bond & ConsensusDocs 260.................................................................................869 a. No Meeting Required as Precondition to Action........................869 b. No Owner Consent Required.......................................................870 c. No Recitation of Damage Liabilities...........................................870 2. Key Differences Between the AIA A312 Payment Bond & ConsensusDocs 261.................................................................................870 a. Surety Not Required to Pay Claimant........................................870 b. No 60-Day Deadline for Surety Response...................................870VII. OTHER CONSTRUCTION INDUSTRY BONDS.........................................................870 A. Lien Discharge Bonds.........................................................................................871 B. Bid Bonds............................................................................................................871VIII. ARBITRATION.............................................................................................................872 A. Surety’s Obligation to Arbitrate Disputes Arising Solely Out of the Performance Bond’s Terms and/or from Principles of Suretyship Remains Unsettled..............872 B. Surety Bound by Arbitration Between Obligee & Principal...............................874 C. Surety May Not Be Entitled to Notice................................................................874

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D. Surety Seeking to Arbitrate Must Appeal Denial of Stay Motion or Risk Waiving Arbitral Rights...............................................................................875IX. STATUTE OF LIMITATIONS FOR SURETIES...........................................................875 A. Actions Against the Surety...................................................................................875 1. General Principles....................................................................................875 2. Contractual Limitations Provision of the A312 Performance Bond.........876 3. Miller Act & Little Miller Act..................................................................877 4. Private Payment Bonds............................................................................877 5. Performance Bond Actions by the State or Political Subdivision...........877 B. Actions by the Surety Against the Principal.........................................................878X. RECOVERY OF ATTORNEYS’ FEES...........................................................................878 A. Right of the Surety to Recover from Principal.....................................................878 B. Recovery of Attorney’s Fees from Surety.............................................................879 1. Recovery by Performance Bond Obligees...............................................879 2. Recovery by Miller Act Claimants...........................................................880 3. Recovery by Little Miller Act Claimants................................................880XI. BAD FAITH CLAIMS AGAINST SURETIES..............................................................880XII. INDEMNITY AGREEMENTS......................................................................................881XIII. LEGAL ISSUES ARISING FROM THE UNDERWRITING PROCESS......................884 A. The Underwriting Process Generally..................................................................884 B. Surety’s Legal Obligations During the Underwriting Process.............................884 C. Legal Issues Arising from the Involvement of Bond Brokers.............................885 1. The Extent to which Brokers can Bind Sureties......................................885 2. Bond Broker Liability..............................................................................886XIV. BANKRUPTCY CONSIDERATIONS...........................................................................887 A. The Fight for Contract Proceeds..........................................................................887 B. Preference Battles................................................................................................888 C. Automatic Stay Does Not Shield Surety from Claims.......................................888 D. Limiting the Principal’s Discharge......................................................................888XV. FORMS..........................................................................................................................889FORM 1: Takeover Agreement............................................................................................891FORM 2: Performance Bond & Payment Bond with Instruction Sheet (AIA Document A312).........................................................................................895FORM 3: Performance Bond (ConsensusDocs 260)..........................................................905FORM 4: Payment Bond (ConsensusDocs 261).................................................................909FORM 5: Model General Agreement of Indemnity.............................................................913

CHAPTER XIVOCCUPATIONAL SAFETY & HEALTH ACT OF NORTH CAROLINA

I. OVERVIEW.....................................................................................................................927II. PROCEDURAL PROVISIONS OF OSHANC................................................................928 A. Organizational Structure for Administering OSHANC.......................................928 B. OSHANC Inspections..........................................................................................928

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1. Validity of OSHANC Inspections/Warrants............................................928 2. What a Contractor Should Do During an OSHANC Inspection..............929 3. Citation & Response Procedures..............................................................930 C. Appeals Process...................................................................................................930III. SUBSTANTIVE PROVISIONS OF OSHANC..............................................................932 A. Statutory Duties of Employers.............................................................................932 B. Types & Classifi cations of Violations..................................................................933 1. De Minimus Violations............................................................................934 2. Non-Serious Violations...........................................................................934 3. Serious Violations...................................................................................934 4. Repeated Violations................................................................................934 5. Willful Violations....................................................................................935IV. DEFENSES & NON-DEFENSES TO OSHANC VIOLATIONS...................................935 A. Defenses..............................................................................................................935 1. Impossibility of Compliance...................................................................936 2. Standards................................................................................................936 3. Isolated Employee Misconduct...............................................................936 4. A Greater Hazard.....................................................................................936 5. Multi-Employer Work Site......................................................................936 6. Economic Infeasibility............................................................................937 7. No Hazard...............................................................................................937 8. No Exposure............................................................................................937 9. Repeated Violation Defenses..................................................................937 10. Willful Violation Defenses......................................................................938 11. Timeliness............................................................................................938 B. Non-Defenses..............................................................................................938V. MULTI-EMPLOYER WORKSITE CITATIONS...........................................................938VI. WOODSON v. ROWLAND: CONTRACTOR LIABILITY IN TORT...............................942 A. Liability of Employer...........................................................................................943 B. Liability of the Owner/General Contractor..........................................................947

CHAPTER XVPROJECT DELIVERY SYSTEMS

I. INTRODUCTION...................................................................................................953II. ALTERNATIVE DELIVERY SYSTEMS......................................................................954 A. The Traditional Design-Bid-Build Method.........................................................954 1. Single-Prime Approach...........................................................................954 2. Multi-Prime Approach............................................................................956 B. Design-Build..................................................................................................957 1. Overview................................................................................................957 2. Special Licensing Considerations in North Carolina for Design-Build....961 C. Construction Management Options....................................................................963 1. “Agency” Construction Managers...........................................................964

xlviii North Carolina Bar Association Foundation Continuing Legal Education

2. “At-Risk” Construction Managers...........................................................965 D. Project & Program Managers...............................................................................966 E. Integrated Project Delivery..................................................................................967 1. Project Cost Risk......................................................................................968 2. Project Schedule (& Damages from Late Completion Risk)....................968 3. Design & Construction Defects................................................................969 4. Third-Party Claims & Insurance...............................................................969 5. Dispute Resolution...................................................................................969 F. Public-Private Partnerships..................................................................................970III. PRICING OPTIONS........................................................................................................970 A. Fixed-Price or Lump-Sum Contracts....................................................................970 B. Cost-Plus Contracts..............................................................................................971 C. Guarantee Maximum Price (GMP) Contracts.......................................................971IV. CONCLUSION...............................................................................................................972

CHAPTER XVISTATE & LOCAL GOVERNMENT CONTRACTING PROCEDURES

I. INTRODUCTION..........................................................................................................985II. SOVEREIGN IMMUNITY..............................................................................................986III. DEPARTMENT OF ADMINISTRATION.......................................................................987 A. State Buildings.....................................................................................................987 1. Designer Selection...................................................................................987 2. Advertising/Bidding................................................................................988 3. Construction Methods or Delivery Systems.............................................989 a. Separate- or Multi-Prime Contracting..........................................989 b. Single-Prime Contracting.............................................................990 c. Dual Bidding................................................................................990 d. Construction Management...........................................................990 e. Design-Build...............................................................................991 f. Design-Build Bridging.................................................................992 g. Public-Private Partnership...........................................................992 h. Alternative Contracting Methods.................................................992 i. University Exception....................................................................993 4. Award....................................................................................................993 5. Withdrawal of Bid....................................................................................994 6. Execution of Contract Documents...........................................................995 7. Minority Participation & Goals................................................................995 8. Project Expediter......................................................................................996 9. Construction Administration....................................................................996 10. Contractor Review Process......................................................................999 11. Claims....................................................................................................999 12. Claim Procedures...................................................................................1000

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a. N.C. Gen. Stat. § 143-128(f)(1) Disputes Resolution..................1000 b. Administrative Remedies..........................................................1001 (1) During Construction......................................................1001 (2) Post-Construction..........................................................1001 c. De Novo Review........................................................................1002 (1) Judicial Review..............................................................1002 (2) OAH Review.................................................................1003 B. State Purchase Contracts....................................................................................1003IV. DEPARTMENT OF TRANSPORTATION....................................................................1004 A. NCDOT Contracts.............................................................................................1004 1. Competitive Bidding.............................................................................1004 2. Submission of Bid/Bid Security............................................................1005 3. Withdrawal of Bid.................................................................................1005 4. MBE/DBE Requirements......................................................................1005 5. Construction Administration.................................................................1006 6. Claims Procedure..................................................................................1006 a. Administrative Remedies..........................................................1006 (1) During Construction......................................................1006 (2) Post-Construction..........................................................1007 b. De Novo Review........................................................................1008 (1) Judicial Review.............................................................1008 (2) OAH Review.................................................................1008VI. CONCLUSION............................................................................................................1009VII. FORMS & APPENDIX.................................................................................................1009FORM 1: State Standard Form of Agreement Between Owner/Designer (SAMPLE).....1011FORM 2: State Standard Form Construction Contract......................................................1025FORM 3: State Standard Form Change Order...................................................................1033FORM 4: State Standard Form CM@R Pre-Construction Services Contract....................1037FORM 5: State Standard Form CM@R Preliminary GMP Contract.................................1039FORM 6: State Standard Form CM@R Fixed GMP Contract..........................................1043FORM 7: State Performance Bond Form..........................................................................1047FORM 8: State Payment Bond Form.................................................................................1049APPENDIX: State Standard Form General Conditions..........................................................1051

CHAPTER XVIITHE NORTH CAROLINA STATE BUILDING CODE

I. OVERVIEW..................................................................................................................1101II. HISTORY......................................................................................................................1101III. NEW LAWS / PROPOSED LEGISLATION: SESSION LAW 2015-145, HOUSE BILL 255.......................................................................................................................1103 A. Purpose of the Bill..............................................................................................1103 B. Resulting Changes to Existing Statutes..............................................................1103

l North Carolina Bar Association Foundation Continuing Legal Education

1. Imposition of Additional Limits on Inspections......................................1103 2. Simplifi cation of Application Process.....................................................1103 3. Clarifi cation of “Misconduct”................................................................1104 4. Threshold Requirement Raised..............................................................1104 5. Creation of Residential Code Committee...............................................1104IV. AUTHORITY & STRUCTURE OF THE STATE BUILDING CODE.........................1105 A. Statutory Authorization......................................................................................1105 B. The Building Code Council................................................................................1106 C. The State Building Code as an Administrative Rule..........................................1107 D. Interpretation.....................................................................................................1108V. SECTIONS OF THE CURRENT STATE BUILDING CODE.......................................1108 A. North Carolina Administrative Code & Policies.................................................1110 B. 2012 NC Building Code.....................................................................................1110 C. 2012 NC Accessibility Code – Chapter 11 of the 2012 NC Building Code........1111 D. 2012 NC Electrical Code....................................................................................1112 E. 2012 NC Energy Conservation Code..................................................................1112 F. 2012 NC Fire Code.............................................................................................1113 G. 2012 NC Fuel-Gas Code.....................................................................................1114 H. 2012 NC Mechanical Code.................................................................................1115 I. 2012 NC Plumbing Code...................................................................................1116 J. 2012 NC Residential Code.................................................................................1116 K. 2015 NC Existing Building Code & 2006 North Carolina Rehabilitation Code..1117 L. 2004 Edition of NC Regulations for Manufactured Homes................................1119VI. ENFORCEMENT..........................................................................................................1119 A. Jurisdiction of Building Inspectors.....................................................................1120 1. County...................................................................................................1120 2. City.........................................................................................................1122 3. State.......................................................................................................1123 B. Certifi cates of Compliance & Occupancy..........................................................1125 C. Department of Insurance Review of Plans..........................................................1126 D. Application of Current or Pre-Existing Requirements for Building Repairs.....1126 E. Appeals..............................................................................................................1126 1. Local Ordinances...................................................................................1126 2. Direct Appeal to NCDOI........................................................................1127 3. Appeal from NCDOI to BCC.................................................................1127 4. Appeal from Building Code Council to the Superior Court...................1128VII. LIABILITY....................................................................................................................1128 A. Negligence Per Se..............................................................................................1128 1. Member of Protected Class....................................................................1128 2. Proximate Cause....................................................................................1129 B. Defense of Sovereign Immunity.........................................................................1130 1. Government Function............................................................................1130 2. Insurance Coverage...............................................................................1131 C. Negligent Inspection..........................................................................................1132

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1. OfficialCapacity....................................................................................1132 2. Individual Capacity...............................................................................1133

INDEX......................................................................................................................................1135