USA – NORTH CAROLINA Law and Practice Contributed by: John Livingston and Brittani Miller, Kilpatrick
7.4 Management of Schedule-Related Risk Schedule-related risk on construction projects is managed through various contract mechanisms, including liquidated damages clauses, no-dam - age-for-delay provisions, force majeure claus - es, milestone payments, incentive clauses and extension of time provisions. Liquidated damages clauses allow owners to receive monetary com - pensation for delays if milestone or completion dates are not achieved, often expressed as a daily penalty, provided the amounts are reasonable and not punitive, as excessive penalties are unen - forceable. No-damage-for-delay clauses, which limit contractors to time extensions rather than monetary compensation for delays, are generally enforceable unless delays result from owner inter - ference, bad faith or unforeseen events. Force majeure provisions offer relief for delays caused by uncontrollable events, typically in the form of schedule extensions. Milestone payments and incentive clauses tie contractor compensation to timely progress or early completion. Parties are allowed to agree that an owner is enti - tled to monetary compensation if certain mile - stone and completion dates are not achieved, provided the amounts are reasonable and not punitive. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance It is common for owners to seek performance and payment bonds as security for the contrac - tor’s performance of the work. 7.6 Liens or Encumbrances in the Event of Non-Payment A contractor and/or designer is permitted to place a lien against the property in accordance with Chapter 44A of the North Carolina General Statutes in the event of non-payment for labour,
The allocation of responsibilities generally depends on the chosen method and contract terms, but common divisions include: • Owner: Provides project requirements, fund - ing and oversight. Ensures compliance with legal and regulatory frameworks. • Design professional: Develops plans and specifications, and ensures the design com - plies with codes and standards. Can be liable for design errors under certain methods (eg, Design-Bid-Build). • Contractor: Executes construction work according to design specifications. Liable for construction defects and delays. • Subcontractors: Perform specialised portions of the work (eg, plumbing, electrical) under contractor supervision. • Construction manager (if applicable): Pro - vides cost estimates and scheduling, and manages construction risks. • Design-build firm (if applicable): Assumes combined responsibility for both design and construction phases. 7.3 Management of Construction Risk Construction risk is managed through indemni - fications, warranties, limitations of liability, waiv - ers of damages, insurance requirements, perfor - mance and payment bonds, and force majeure clauses, each tailored to allocate and mitigate risks effectively. Indemnification clauses transfer liability, but state law prohibits broad indemnity for an owner’s sole negligence, ensuring such provisions are narrowly drafted. Contractors generally warrant that work will be completed in a good and workmanlike manner and consist - ent with applicable laws, and agree to a period within which they must cure any defect (between one and three years).
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