COMPENDIUM OF MICHIGAN CONSTRUCTION LAW

1 Revised 2010 09999/09998-0090 STATE OF MICHIGAN CONSTRUCTION LAW COMPENDIUM Prepared by David M. Hayes Edward J. Hood Matthew R. Rechtien Clark Hill PLC 500 Woodward Avenue Suite 3500 Detroit, MI 48226 (313) 965-8300 2 09999/09998-0090 The following is an overview of MICHIGAN CONSTRUCTION law. Most CONSTRUCTION disputes are governed by contract law, as MICHIGAN follows the economic loss rule. With a few variations, the law applicable to CONSTRUCTION disputes in MICHIGAN is similar to that found in other states. I.

2 BREACH OF CONTRACT A. Possible Recovery Available to Plaintiffs Breach of contract is the cornerstone for most CONSTRUCTION claims. In MICHIGAN , the statute of limitations for breach of contract is six years. MCL (8). An action for breach of an express contract precludes a claim for breach of an implied contract, , unjust enrichment, covering the same subject matter. Barber v SMH (US), Inc, 202 Mich App 366, 375; 509 NW2d 791 (1993); but see Morris Pumps v Centerline Piping, Inc, 273 Mich App 187, 199-200; 729 NW2d 898 (2006) (permitting unjust enrichment claim against one defendant, in limited circumstances, notwithstanding existence of express contract with another defendant, covering same subject).

3 In the absence of an express contract, a plaintiff may freely seek recovery for breach of an implied contract, , unjust enrichment. Cascade Elec Co v Rice, 70 Mich App 420, 428-29; 245 NW2d 774 (1976). Such claims are sometimes subjected to a three-year limitation period. MCL (10). See Huhtala v Travelers Ins Co, 401 Mich 118, 127-28; 257 NW2d 640 (1977). In MICHIGAN , private parties are allowed to contractually shorten the applicable limitations period; unambiguous contractual provisions serving that purpose will be enforced unless the provision[s] would violate law or public policy.

4 Rory v Continental Ins Co, 473 Mich 457, 470; 703 NW2d 23 (2005) (overruling Camelot Excavating Co, Inc v St Paul Fire & Marine Ins Co, 410 Mich 118; 301 NW2d 275 (1981) (permitting courts to refuse enforcement of unreasonable limitation-period shortening provisions)) . B. Abandonment If a contractor fails to employ a sufficient quality and quantity of workmen, he may be deemed to have abandoned the CONSTRUCTION project. Under such a situation, the owner may proceed to complete the project and recover damages from the contractor.

5 If a performance bond has been provided by the contractor, the owner may seek substitute performance by the surety, subject to the limitations (including the penal sum) of the performance bond. It is often unclear whether the contractor s performance, or lack of performance, constitutes abandonment. A contractor s mere failure to comply with a contract specification regarding materials to be used may not constitute abandonment. However, to avoid the potential difficulty of determining whether a contractor s conduct constitutes abandonment, many CONSTRUCTION contracts expressly outline the circumstances under which an owner may declare a contractor to be in default and take over completion of the project.

6 C. Plans and Specifications A contractor is generally entitled to rely on the accuracy of the plans and specifications provided by the owner. Indeed, such documents carry an implied warranty of suitability; if they are defective, the contractor may recover damages for delays proximately related to the breach of the implied warranty. Hersey Gravel Co v State Highway Dept, 305 Mich 333; 9 NW2d 567 (1943). Nevertheless, a contractor cannot recover for defects in plans and specifications that it prepares.

7 Nor can a contractor ignore defects in plans and specifications that it should have reasonably discovered when bidding the project. 3 09999/09998-0090 II. NEGLIGENCE Under MICHIGAN s economic loss rule, to state a tort claim, a plaintiff must allege the breach of a separate and distinct tort duty, , something more than a mere breach of contract. Henry v Dow Chem Co, 473 Mich 63, 71-72; 701 NW2d 684 (2005). Indeed, in MICHIGAN , economic losses, see Neibarger v Universal Cooperatives, 439 Mich 512, 520; 486 NW2d 612 (1991) ( goods contracts), and damages not due to breaches of separate and distinct tort duties, Rinaldo s Const Corp v MICHIGAN Bell Tel Co, 454 Mich 65, 84; 559 NW2d 647 (1997) ( services contracts), cannot be recovered in tort.

8 Accord Corl v Huron Castings, Inc, 450 Mich 620, 628-29; 544 NW2d 278 (1996); Kewin v Massachusetts Mutual Life Ins Co, 409 Mich 401, 418-19; 295 NW2d 50 (1979). The idea here is that commercially anticipated damages, , economic losses or those arising from no more than a breach of contract, must be recovered in contract. See Detroit Bd of Educ v Celotex Corp, 196 Mich App 694; 493 NW2d 513 (1992) (permitting suit in tort where parties not likely to have anticipated and negotiated over relevant risk); see also Kisiel v Holz, 272 Mich App 168, 172-73; 725 NW2d 67 (2006) (barring owner s suit in tort for contractor s deficient CONSTRUCTION ).

9 Generally, actions to recover damages for injuries to persons or property are governed by MCL (10), which provides for a default three-year period of limitations. In McCann v Brody-Built CONSTRUCTION Co, Inc, 197 Mich App 512; 496 NW2d 349 (1992), a subsequent purchaser of a residence sought to recover damages for alleged negligent CONSTRUCTION . The court held that the three-year statute of limitations for negligence actions applied, running from when property damage, a basic element of the cause of action, was discovered, or should have been discovered, by plaintiff owner or the plaintiff s predecessor under MCL The three-year statute of limitations was also applied to a property owner s claim of flooding and damage, as a result of alleged improper maintenance of a lake improvement system.

10 Even though the complaint also alleged breach of contract. Lear v Brighton Township, 184 Mich App 605; 459 NW2d 26 (1990). A claim of professional negligence must establish all the necessary elements of ordinary negligence: duty, breach of duty, proximate cause, and damages. Bacco Constr Co v American Colloid Co, 148 Mich App 397; 384 NW2d 427 (1986). Design professionals are liable for foreseeable injuries to foreseeable victims that proximately result from negligent performance of their professional duties. Like other professionals, an architect owes a duty of care, which, in this instance, extends to any person lawfully on the premises designed by the architect, and constructed according to the architect s plans and specifications; privity of contract is not required.