While the bill had a lot of support in the House and Senate (see voting history here), it never got to the governor’s desk, and largely fizzled out.

The concept is back from the dead, however, being introduced on January 18, 2011, by Representative Van De Wege as 2011 House Bill 1295. Compare this bill’s synopsis with the 2009 summary:

…to eliminate barriers to the voluntary installation of sprinkler systems in private residences. The bill provides financial and regulatory incentives to homeowners, builders, and water purveyors for voluntarily installing the systems. It also exempts a public water system from liability for damages resulting from shutting off water to a residential home with an installed fire sprinkler system.

It’s virtually identical.

The 2011 Bill appears to be moving through the chambers a bit more quickly than its 2009 counterpart, and also has a companion bill in the Senate’s chambers (SB 5206).

Nationwide, residential fire sprinklers are getting more popular, and it’s becoming more and more likely that government regulation over these installations will expand as time goes on. Take, for example, what the U.S. Fire Administration (through FEMA) states as follows on the topic:

It is the official position of the U.S. Fire Administration that all American should be protected against death, injury and property loss resulting from fire in their residences. All homes should be equipped with smoke alarms and automatic fire sprinklers…

We’ll keep you posted on any progress to this legislation.

That opinion - Abraham v. T. Henry Construction, Inc., 230 Or.App. 564 (2009) – has been sent to the Oregon Supreme Court for review, and oral arguments were heard last month. You can read the Oregon Supreme Court’s media release here. The media release does a great job of outlining the issues at stake in the case.

The two issues of particular interest to the state’s application of the economic loss rule are identified in the media release as so:

1. If a property owner alleges that his or her contractor violated the “building code,” whether the property owner has a negligence claim when the contract between the parties expressly required the contractor to follow all building codes.
2. Whether the Oregon Residential Building Code sets forth a standard of care independent from the contract between a property owner and a contractor or subcontractor, and thus permits imposition of negligence liability, when the parties’ contract expressly requires compliance with all building codes.

Stay tuned at the Construction Law Monitor, as we’ll monitor the outcome of this case.

My slides from the Keynote presentation are available on my SlideShare.com account, and are embedded here:

In the next seven days, I’ll be speaking at two engagements. The first is available only to students at Loyola New Orleans College of Law, but the second is available to anyone in the New Orleans area through Lorman Seminars. Here are the details.

Loyola Law Schools Skills Curriculum
I’ll be visiting Loyola to teach a course through the school’s Skills Curriculum. The course – Solo from Scratch – teaches students how to open and run a solo practice right out of law school. I first taught the course in 2009, and I’m happy to be invited back to teach this semester. The course will be on Saturday, January 22, 2011, at 9:00 AM, at the Loyola New Orleans College of Law campus.

Building Codes – Lorman Seminars
This is a seminar organized by Lorman Education Services.  It will take place on January 26, 2011, at the Crown Plaza Hotel New Orleans Airport oat 2829 Williams Blvd, in Kenner, LA. The seminar is all-day, and you can register for the seminar and receive a 20% discount on registration with this information:

Building Codes (seminar information here)
January 26, 2011
Register Online: http://www.lorman.com or by phone (866) 352-9539
Discount Code: F2716129
Priority Code: 15000

In the earlier decision, the Oregon court clarified the statute of limitations in a breach of contract claim for construct defects. Surprisingly, because of some ambiguity in two Oregon statutes, it has not been settled whether these suits were to be brought within 6 years from the date of breach, or ten.

The Court in Waxman v. Waxman & Associates, Inc. appears to have settled the rub, holding the claim must be brought within six years from the date of the breach – regardless of when the breach was or should have been discovered. 224 Or. App. 499, 198 P.3d 455 (Or. Ct. App. 2008).

Which leads us to a case the following year before the Oregon Court of Appeals, Abraham v. T. Henry Construction Inc., 230 Or. App. 564, 217 P.3d 212 (2009).

In this case, the plaintiffs brought suit against their contractors for breach of contract (defects) and negligence….8 years after the breach. As we just learned from the Waxman case, therefore, the breach of contract claims were prescribed, and the Abraham court found as such.

Interesting about this case, however, is that the negligence claims were allowed to proceed. This, despite application of the economic loss doctrine.

Typically, the economic loss doctrine will prohibit a tort claim between contracting parties when the claim arises out of a failure to perform contractual obligations. In other words, since negligence is a duty/care claim, one party must breach a standard of care….not simply a contractual obligation.

The plaintiffs in Abraham argued, however, that the contractors had breached a standard of care because it had violated the Oregon Building Code.  The Oregon Court of Appeals agreed that the Oregon Building Code did create a standard of care, and allowed the claim of negligence to proceed.

In Gentile, the construction contract required the contractor to meet all prevailing building codes. A situation arose with regard to the parish’s drainage requirements, as the original design did not accommodate the code. The drainage study and total completed price for the drainage work was eventually tallied to cost $47k more than estimated.

The contractor wanted the property owner to pay for this, because it was an “unknown condition.” The owner rejected the change orders arguing the contractor was responsible to meet prevailing building codes.

The Gentile court agreed with the property owner. According to the first circuit, the contract unambiguously required the contractor to comply with prevailing building codes. The fact that the designer and the contractor overlooked the drainage requirements and failed to properly provide for the the same in its plans and bid…did not pass the burden of paying for the drainage onto the owner. Instead, the contractor/designer was liable for the mistake.

The court found that the drainage requirements were not a “hidden condition” of the property, but merely, something the contractor and designer overlooked.

What Does It Mean For You?
Nearly every construction contract has a provision similar to the one in Gentile where the contractor (or sub) is required to meet prevailing building codes. When bidding on a project, its critical to bid responsibly. Failing to understand and accommodate the prevailing building codes applicable to the site can end up destroying the project’s bottom line.

The real key is understanding what is and what is not a “change order.” The term gets used so frequently by those working on a construction project, we sometimes forget its true meaning and warp the term to work to a party’s convenience.

A change order is not issued overtime the cost of work or scope of work is greater than anticipated. It’s only issued when the scope of work is changed.

If the owner adds a new complex to the plans, or requires a different quality of materials – this will likely result in a change order. However, if you simply didn’t correctly estimate the amount of work that would be required for a task or misunderstood the prevailing building codes…a change order will not be an available remedy.

Like the situation in Gentile, you will be legally responsible for your own mistake.

Of course, this Gentile case will not likely apply to a scenario where a change is required because of a hidden site condition. If a hidden site condition is found, a change order is appropriate. The court in Gentile just clarified something that may seem a bit obvious: failing to take into account the building codes in the parish was not a hidden condition, regardless of whether it was or was not scoped in the original plans.

This article was originally posted on Wolfe Law Group’s topic-specific Louisiana Construction Law Blog.