Chapter 24 - § 24.1 • INTRODUCTION

• Jurisdiction: Colorado

§ 24.1 • INTRODUCTION

Procedural law governing construction disputes can vary from standard commercial litigation matters, and quite often, construction disputes bring additional procedural requirements. Claims asserted by parties in construction disputes can be subject to certification requirements, mandatory notice provisions, and mandatory alternative dispute resolution (ADR) procedures. It is critical that practitioners in Colorado be familiar both with the general rules that govern civil litigation in Colorado and the special requirements that may apply to construction disputes. This chapter covers just some of the many rules and requirements and does not exhaustively describe every procedural requirement that may apply to a construction matter.

§ 24.1.1-Types of Claims and Actions

Claims by Owners

See generally § 7.5, "Potential Claims of the Owner"; Chapter 8, "Architect/Engineer Liability"; Chapter 10, "The Contractor"; Chapter 12, "Construction Sureties"; § 13.7, "Allocation of Risk: Adjusting Contractual Relationships to Allocate Environmental Liabilities"; Chapter 15, "Defective Construction Performance"; Chapter 16, "Express and Implied Warranties in Construction Law"; Chapter 17, "Disputes Over Contract Clauses"; Chapter 18, "Construction Disputes"; and Chapter 27, "Delay in Construction Contracts."

The most common claims asserted by owners of construction projects are directed at design professionals, contractors, construction managers (CMs), and other entities hired directly by the owner. Owners generally are barred from bringing claims directly against subconsultants, subcontractors, and material suppliers hired by others under Colorado's economic loss rule.¹

Owners' claims against design professionals typically sound in professional negligence and/or breach of contract.² Owners' claims against contractors and CMs typically sound in breach of contract, contractual indemnification, violation of Colorado's trust fund statute, and/or or some variation of fraud.

Professional Negligence

A professional negligence claim, like all negligence claims, requires a duty, breach of the duty, injury to plaintiff, and "sufficient causal relationship between the defendant's breach and the plaintiff's injuries."³ Often, the agreement between the owner and design professional will set forth the required standard of care. In the absence of such a contractual standard of care, the default standard of care in Colorado for design professionals is to use "reasonable care in a manner consistent with the knowledge and ability possessed by members of the profession in good standing" in the same state.⁴

If the design professional has an express or implied duty of care set forth in a contract, the owner's negligence claims are barred by the economic loss rule.⁵ See § 24.10.2, "Economic Loss Rule."

Breach of Contract

An owner may have several breach of contract claims against a design professional, construction manager, or general contractor, including breach of specific provisions of the contract, breach of express warranties included in the contract, and breach of the implied duty of good faith and fair dealing.⁶ In order to recover on a breach of contract claim, the plaintiff must show "(1) the existence of a contract; (2) performance by the plaintiff or some justification for nonperformance; (3) failure to perform the contract by the defendant; and (4) resulting damages."⁷ Owner-architect agreements typically contain express warranties that the architect will design in compliance with legal requirements and industry standards, with the care and skill ordinarily used by members in the local industry community at that time. Additionally, contract claims against architects may also be predicated on the architect's breach of contract by failure to meet applicable local building codes.⁸

As discussed in § 24.5, claims "based in negligence" - i.e., "require[ing] proof of negligence as a predicate to recovery"⁹ - against an architect, engineer, or any licensed professional require filing of a certificate of review within 60 days stating that the claim has been reviewed by an expert and determined to be meritorious.¹⁰ See § 24.5, "Certificate of Review."

For a discussion of an owner's potential rights under insurance policies related to a project, see Chapter 6, "Insurance for the Construction Project." For a discussion of claims for defective construction performance that may be brought by an owner, see Chapter 15, "Defective Construction Performance." For a discussion of claims for breach of express and implied warranty that may be brought by an owner, see Chapter 16, "Express and Implied Warranties in Construction Law."

Claims Against Owners Generally

See generally § 4.15, "Bid Protests"; § 3.4, "Implied Rights and Obligations"; § 7.4, "Potential Liability of the Owner"; Chapter 10, "The Contractor"; § 13.7, "Allocation of Risk: Adjusting Contractual Relationships to Allocate Environmental Liabilities"; Chapter 17, "Disputes over Contract Clauses"; Chapter 18, "Construction Disputes"; Chapter 19, "Mechanics' Liens"; Chapter 27, "Delay in Construction Contracts"; and Chapter 29, "Federal Government Construction Contracts."

Claims against the owner may begin with the owner's refusal to pay for extra work directives; design changes requested by the owner or required due to architect error or omission; and/or delays caused by the owner, a local government agency, or unforeseen circumstances.¹¹ Architects, general contractors, and others in direct contractual privity with the owner can assert claims against the owner for breach of contract.

Additionally, the owner is subject to an implied warranty to the general contractor that the plans and specifications have been adequately prepared.¹² This implied warranty, set out by the Spearin doctrine, provides contractors a right to claim payment for additional work resulting from the defective plans.¹³ Because subcontractors do not usually have privity of contract with owners, direct contract claims by subcontractors against the owner may not be viable.¹⁴ Subcontractors seeking payment for work performed on and materials delivered to a project can file a mechanics' lien against the property, but must be sure to follow the procedural requirements of the mechanics' lien statute as the acts necessary to perfect a lien are strictly construed.¹⁵ A subcontractor will not likely be able to assert an unjust enrichment claim against the owner unless the subcontractor can show "improper, deceitful, or misleading" conduct by the owner.¹⁶

Claims Against Subcontractors by Contractors and Construction Managers at Risk

See generally Chapter 10, "The Contractor"; Chapter 17, "Disputes over Contract Clauses"; Chapter 18, "Construction Disputes"; Chapter 19, "Mechanics' Liens"; and Chapter 27, "Delay in Construction Contracts."

Contractors and construction managers at risk (CMARs) generally enter into one or more subcontracts for work by specialized trades to carry out a project. Claims by contractors against subcontractors may include those for breach of contract, breach of express and/or implied warranty, indemnification, violation of trust fund statute, breach of the implied covenant of good faith and fair dealing,¹⁷ and recovery on payment and/or performance bonds.

Claims Against Contractors and Construction Managers at Risk by Subcontractors

See generally Chapter 10, "The Contractor."

Claims by subcontractors commonly include breach of contract for non-payment or other breach of a contractual obligation and may also include recovery pursuant to a mechanics' lien, substitution bond, or verified statement of claim (for public projects). Subcontractors may also assert claims against contractors' sureties pursuant to payment bonds. Subcontractors additionally make claims for violation of Colorado's trust fund statute and unjust enrichment and/or quantum meruit.

If a subcontractor seeks foreclosure on property pursuant to a mechanics' lien and/or raises a claim for unjust enrichment directly against the owner, the...