Articles Posted in Construction Law

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Under New Jersey construction law, the New Jersey Consumer Fraud Act applies to most residential and commercial construction projects.  It is applicable to contractors, subcontractors and suppliers.  However, a New Jersey Appeals Court held in a recent decision that architects are not subject to the Consumer Fraud Act because of the “learned professional” exemption.

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Background

The Borough of Caldwell contracted with Cozzarelli Cirminiello Architects, LLC for architectural services including design, construction and rehabilitation of Borough-owned facilities.  CCA’s invoices were approved by municipal officials before being submitted to and approved by the Council before they were paid.  After a new Council was elected, the Borough terminated its contracts with CCA.  Caldwell then sued CCA in the Law Division of the Superior Court of New Jersey in Essex County for breach of contract, unjust enrichment and violation of the New Jersey Consumer Fraud Act. Caldwell claimed that CCA failed to perform its services, failed to produce “products,” failed to support the Borough on construction bids, failed to produce construction documents, double billed the Borough, and billed it above the agreed upon rate.

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New Jersey construction law incorporates the damages provisions of the Consumer Fraud Act in residential home improvement construction projects.  A New Jersey appeals court recently analyzed the recovery of triple damages and attorneys fees in construction projects under the Consumer Fraud Act, and personal liability for contractors, in two construction law decisions.

Background

Philip Dattolo hired EMC Squared, LLC to construct a new single-family home in Boonton, New Jersey.  They signed a written contract.  Toward the end of the project, Dattolo selected severalhouse-225x300 additional items to be included.  A written change order to the original signed contract was drafted, but the change order was never signed.  In January 2020 the home passed final inspections, and EMC’s owner, Edward Morgan, advised Dattolo that he could not continue working on the project.  Dattolo refused to pay “one additional cent,” and complained that there were numerous construction defects which would cost him thousands of dollars to remediate.

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At McLaughlin & Nardi, LLC, our New Jersey construction lawyers represent contractors, subcontractors, suppliers, project managers, owners, architects and engineers in all areas of construction law. Here are some frequently asked questions about New Jersey constructionus-1978465__340-300x200 law.

  • What is construction law?

    Construction law refers to the laws, regulations and case law that guide the construction industry. It encompasses a wide range of issues including contract law, construction liens, construction defects, breach of construction contracts, litigation, arbitration, mediation, appeals, bonds and bonding, collection, guarantees and sureties, construction claims, and related consultancy contracts.

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The New Jersey Consumer Fraud Act and home improvement practices regulations presented a dilemma – they provide valuable tools protecting homeowners from unscrupulous home improvement contractors by awarding them triple damages and attorneys fees when successful, but risk imposing drastic penalties on legitimate contractors who miss some of their more technical requirements.  However, as the Appellate Division recently explained in the case of Philip Dattolo v. EMC Squared LLC and Edward T. Morgan, the requirement that a homeowner must provehouse-225x300 ascertainable damages which result from the consumer fraud violations goes a long way toward resolving this conflict.

Background

The facts of the case are these.  Dattolo contracted with EMC Squared LLC to construct a single-family home in Boonton, New Jersey in October 2018.  EMC was solely owned by Edward Morgan.  In March 2019, EMC offered a list of extras, and Dattolo accepted some.  EMC created a written change order but it was never signed.  In January 2020, Mogan told Dattolo that EMC was unable to continue.  He told Dattolo that the project received final inspections.  He gave Dattolo a final bill with credit for the unfinished work.  Dattolo refused to pay, asserting many construction defects existed which would cause him considerable expense to correct.

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New Jersey construction contractors and suppliers often have difficulty collecting money due them for their work or supplies.  One of the tools available to help ensure payment is including a personal guarantee in their construction contracts.  However, personal guarantees have certain requirements.  The Appellate Division of the Superior Court of New Jersey addressed this issue inhouse-225x300 the case of Extech Building Services, Inc. vs. E&N Construction, Inc., Shawn Roney and Joaquim Ferreira, et al.

Background

Extech Building Services, Inc., was the supplier of building materials on a construction project for the general contractor, E&N Construction, Inc.  There was a written six paragraph agreement in which Extech extended credit for the project to E&N.  The last paragraph of the agreement also had a provision for personal guarantees; however, the identity of the guarantors was not provided.  There were three signature lines.  Two had the names of Shawn Roney and Joaquim Ferreira, who were executives at E&N, which were signed; a third line was blank and unsigned.

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A recent New Jersey construction law development will greatly affect contractors.

The New Jersey Legislature passed a new law regulating home improvement and home elevation contractors, which Governor Murphy signed into law on January 8, 2024.  Thebuilding-home-construction-contractor-blueprint-architecture-300x200 regulations governing home improvement contracts and home elevation contractors were already draconian, but the new law is a sea change, greatly expanding the regulatory requirements for New Jersey contractors, including a new requirement that they be licensed.

Applicability: Every Job Over $500

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New Jersey construction litigation often involves claims against contractors for improper construction or delay.  Contractors, in turn, often argue as a defense, counterclaim or cross-claim that any delay or improper construction was the fault of the licensed professional on6-300x225 the project, such as the engineer or the architect.  Owners may also make these claims against architects and engineers directly.  A trial judge in the Superior Court of New Jersey in Morris County recently addressed what is required to maintain such a claim in the case of Township of Parsippany-Troy Hills vs. Thomas Controls, Inc.

Background: The Lawsuit

The Township of Parsippany-Troy Hills sued Thomas Controls, Inc. over its work on construction improvements to the Township’s wastewater management treatment plan project.  The Township had separately contracted with Keystone Engineering Group to act as engineers on the project.  Thomas filed counterclaims against the Township and filed a third-party complaint against Keystone, suing it for alleged negligence, delay and professional malpractice.  Keystone filed a motion to dismiss Thomas’s third-party complaint, arguing that the New Jersey Affidavit of Merit Statute requires that an affidavit of merit must be filed within 120 days of a defendant filing an answer when the defendant is a licensed professional and the claims are for negligence or professional malpractice.  As a licensed engineer, Keystone argued that this law protected it because Keystone did not file an affidavit of merit within the required time frame.

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An appellate court recently examined the covenant of good faith and fair dealing in New Jersey construction contracts in the case of Konopka vs. Brown’s Heating, Cooling, Plumbing.

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Background

Konopka hired Brown’s as a contractor to install a Carrier gas furnace in his home.  Brown was to supply labor and materials in exchange for the homeowner paying $19,800. The contract provided that change orders had to be in writing.  One-third of the contract price was payable on signing, one-third when work started, and one-third upon completion.  The homeowner paid the first installment.  The job started on August 26, 2015.  The homeowner had not yet paid the second installment, but the contractor wanted to work with him.  However, on September 9, 2023, Brown’s sent an email which terminated the contract.  The Court explained that:

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One of the most difficult problems in New Jersey construction law for contractors and subcontractors is getting paid.  Fortunately, a powerful remedy exists in the New Jersey Prompt Payment Act.  A recent appellate court decision examined frameup-225x300the New Jersey Prompt Payment Act in the case of Jo-Med Contracting Corp. vs. City of Linden.

Background

The City of Linden contacted Jo-Med to submit a bid for emergency repair work on approximately 20 feet of sewer repair, together with approximately 30 feet of related curb replacement.  Jo-Med submitted a bid for $25,000 based on the job description provided by the City engineer; the bid stated that the cost would be higher if Jo-Med ran into unforeseen problems not apparent in the City’s description, in which case it would bill the City on a time and materials basis.  Jo-Med was awarded the contract.  The City’s engineer told Jo-Med’s owner that he would “work with him for additional charges to finish the work.”

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Independent Contractors versus Employees Under New Jersey Employment Law

Under New Jersey employment law, the classification of a worker as an employee or independent contractor has significant ramifications for both the employer and employee, including the ability of the employer to shift the cost of insurance, payroll taxes and benefits to the employee, and relieving it from having to pay time and a half for overtime.  The New Jersey Supreme Court explained in the seminal case ofbuilding-home-construction-contractor-blueprint-architecture-300x200 Hargrove vs. Speepy’s LLC, that there are different, fact sensitive tests for this determination depending on the context, such as for wage issues, workers compensation and unemployment.  More recently, the Supreme Court addressed this issue in the context of whether an employer must make contributions for disability and unemployment in the case of East Bay Drywall, LLC vs. New Jersey Department of Labor and Workforce Development.

Background: East Bay’s Business Model

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