USA - NEW YORK Law and Practice Contributed by: Adam S. Walters, Erin C. Borek, Timothy P. Moriarty and Kelly E. Marks, Phillips Lytle LLP
upon the price of individual units of work, for which the contractor provides a specific price. The owner must compensate the contractor for every unit the contractor completes. 7.2 Assigning Responsibility for the Design and Construction of a Project In New York, the design of a project must be completed by licensed design professionals, which includes Professional Engineers (PE) and Registered Architects (RA). Traditionally, construction projects consist of a designer for the design phase and a contrac - tor for the construction phase, a process called design-bid-build. Typically, an architect leads the design phase of a project, employing additional professionals as subcontractors. The contractor manages the construction phase of the project. However, design-build delivery systems are becoming more popular. In this type of project delivery system, the design and construction services are constructed by a single entity using one contract. This arrangement reduces costs in both design and construction, provides a single point of responsibility, and can greatly shorten the delivery schedule by overlapping the design phase and the construction phase. In December 2019, the New York State Legislature passed a law allowing certain New York City departments to use design-build for public projects. The third type of project delivery system is called a construction manager at risk (CMAR) method, which is a derivative of the design-bid- build process. However, instead of the designer overseeing the design phase and a contractor overseeing the construction phase, a CMAR acts as a consultant to the project owner during the development and design phases, and then acts as general contractor during the construc -
tion phase. The CMAR holds all the contracts for the subcontracts and commits to delivering the project within a guaranteed maximum price. 7.3 Management of Construction Risk Construction risk is managed by indemnifica - tion, warranties, limitations of liability, waivers, insurance provisions and retainage. Indemnification is limited by New York General Obligations Law Section 5-322.1, which prohib - its a party involved in the construction, altera - tion, repair or maintenance of a building from contracting with another to indemnify or hold it harmless for injuries or damage to property caused by its own negligence, though the party may require indemnification for damages caused by the negligence of parties other than itself. Warranties are almost always limited in duration by express contract provision. New York General Business Law Section 777-a specifically creates warranties applicable to the sales of new con - struction homes that include a one-year warran - ty that the home will be free from defects due to poor workmanship and a six-year warranty that the home will be free from material defects. Limitations of liability and waivers of damages are limited to the extent that the liability or dam - ages were in contemplation of the parties at the time of entering into the contract, but will not be enforced if they purport to protect a party from liability for conduct that constitutes fraud, gross negligence or willful misconduct. The most common limitation of liability in construction contracts is a waiver of consequential damages. Owners and contractors can also limit risk by including a “no damages for delay” clause in a contract with a downstream party, which prohib - its a contractor or subcontractor from asserting claims to recover financially for damages caused
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