Construction Law Basics

Construction Law Basics 101

What is Construction Law?

Construction law is a broad topic that refers to the legal framework governing commercial, governmental, and private construction projects. Construction law per se is not one area of the law. Instead, construction law encompasses a variety of legal issues. Some issues, as we will see, involve contract law, tort law, workers’ compensation, as well as state and federal statutory and regulatory schemes.

Having a basis of understanding in construction law is helpful to anyone involved in a construction project, big or small. General contractors, architecture firms, subcontractors, and tradesmen can benefit from knowing something about construction law. However, construction law can be extremely complicated.

You should contact an attorney who has considerable experience in the construction law field if you have any questions about your rights and responsibilities. You should not try to manage construction law issues that arise on your own. Doing so could leave you with significant legal trouble. You could also lose significant legal rights if you do not seek legal help immediately.

What are the areas of Construction Law?

Construction projects touch many areas of the law. Primarily, construction projects are built upon a series of contracts. Therefore, contract law permeates every construction project.

A contract is an agreement to supply a service or good for a fee. There are numerous individual contracts involved even in a relatively small project like building a house. Contracts involved in building a house could include:

  • Contract for the purchase of the land;
  • Contract with a general contractor or builder to construct the house according to the agreed-upon plan;
  • A contract between the general contractor and subcontractor to provide services like plumbing, electric service, and masonry;
  • Each tradesman engages in another contract to purchase the materials they need to perform their contract;
  • Payment of workers’ wages; and
  • The buyer is contracting with a lending institution for a mortgage.


As you could probably imagine, the more the project increases in scale, the more numerous contracts become.

Contract law is more than an agreement to provide a service for a fee. Contract laws specify how the parties can amend an agreement, how to amend a contract, how to supplement a contract, and how to terminate a contract. These are all incredibly important points of law that often arise in construction projects.

Construction contracts should be memorialized in writing. Furthermore, the relevant terms such as price, date of completion, when payments must be made and how much, and what substantial compliance means. The parties should be specific to avoid ambiguity.

Two contract issues that frequently come up are mechanics’ liens and prompt payment. A mechanics lien is a right conferred by state statute to any person who works on a project as a tradesman. The tradesman could place a lien on the project in accordance with state law to ensure payment. Prompt payment, on the other hand, allows a subcontractor to demand payment within seven days of completing work. The subcontractor must complete the work in a good and workmanlike manner to have standing to demand prompt payment.

Property law plays a prevalent part of a construction project. Property law is involved with the sale or lease of land for the construction project. Additionally, the principles of property law will inform the purchaser whether the deed has any building restrictions. As a potential purchaser, you might have to clear a “cloud on the title” before a mortgage company will sell you a title insurance policy. Moreover, property laws dictate how easements will affect the property as well.

A corollary to property law is municipal law. Municipal law is the general term used to describe the requirements cities and towns impose on builders. Depending on the location of the project, a general contractor will need a building permit at a minimum. Municipalities might have other requirements too such as abiding by zoning laws or applying for a variance. Some municipalities have conservation requirements which limit where you can build. They also require builders to take certain steps to protect watersheds and other environmentally sensitive areas.

Public works contracts have similar restraints. However, a contractor has to win a bid for a public works contract. That means the company engaged by the government to perform the work requested has to follow state and municipal bidding rules.

State and local governments often issue bonds to raise money to pay for public works contracts. A contractor might have to wait until a bond is passed before starting the work on the project. Additionally, municipalities often require contractors to post a bond with the town. In this instance, a bond acts like an insurance policy. The local government can act on the bond if the general contractor encounters a problem or does not complete the work satisfactorily.

State professional licensing laws are relevant to construction law as well. Every person who works on a project must hold a professional license or work under the auspices of a license holder. Professional licenses include general contractors, electricians, plumbers, pipe-fitters, heavy equipment operators, and crane operators, to name a few.

State Laws and Construction Projects

As we discussed above, the law of contract is a large part of construction law. Nearly every construction project has some setbacks. Setbacks do not mean that any party breached a contract. However, construction contracts may allow submission of change orders so that the project stays on track.

When something goes off the rails, general contractors withhold payment as a remedy until the problem is fixed. Construction contracts will explicitly say when the general contractor can hold back payment. Conversely, the party that wants to get paid can rely on the contract doctrine of substantial compliance to justify demand for payment.

Construction projects often employ a considerable number of workers. Some might be tradesmen while others might be general laborers. Whatever their designation, their employers must abide by state wage laws, irrespective of the project’s progress. In other words, a contractor must pay its employees no matter what. Employers could face criminal charges for not paying their employees. Additionally, union workers might be working on the project. Unions are still influential. Union workers will assert their rights if they believe that someone violated their contract.

Contract documents in public works and commercial construction projects will apportion the risk of loss among the parties. Each party to the contract must have liability insurance to cover losses. Notwithstanding, the parties need to agree on who bears the responsibility for the project should something catastrophic happen like a fire or collapse.

Employers must have workers’ compensation insurance under state law. Unfortunately, workers suffer injuries on the job and their employer has to indemnify them from loss according to the workers’ compensation laws of the state. Workers’ compensation is a no-fault system. In other words, the worker does not have to prove their employer negligently or otherwise caused their injuries. All they have to prove is that they suffered a work-related injury.

Often, workers’ compensation settlements do not make the injured employee whole. As a result, they might choose to pursue a personal injury case. If, for example, the employee was hurt while using a piece of equipment, the employee might have a legal claim under a products liability theory against the manufacturer of the equipment.

An injured employee might have other options as well. They may choose to pursue a civil case against their employer under a theory of negligent retention or negligent hiring if a fellow employee hurt them.

Which Federal Laws May Apply to Construction Projects?

The Miller Act is a prominent federal law that applies to federal construction projects. The Miller Act requires contractors to file a payment bond that ensures sub-contractors receive payment for their work. The sub-contractor could file a claim against the bond if the general contractor did not tender payment for work performed. Some states might have laws similar to this as well.

The Health and Safety at Work Act of 1974 is one major piece of legislation that permeates every industry. This law gives the Occupational Safety and Health Administration, better known as OSHA, its authority to enforce workplace safety rules. OSHA regulations are strict, and the agency has a substantial amount of authority. OSHA will shut down projects over safety violations, especially if a violation lead caused an injury or death.

Federal environment laws are prominent as well. The Environmental Protection Agency (EPA) can substantially influence the progress of a construction project. For example, the EPA could regulate the noise emitting from a job-site as well as order dust remediation and filtration as well.

Both OHSA and the EPA have significant roles in asbestos remediation. Handling asbestos is dangerous, and it must be handled correctly. If mishandled, asbestos fibers could escape into the air and become lodged in workers’ lungs. The employee could suffer mesothelioma, asbestosis, and lung cancer as a consequence.

How Are Construction Disputes Resolved?

Not every dispute winds up in court. The parties often can resolve the issues through negotiation and fair dealing. However, filing and defending lawsuits is a necessary part of construction law. Protracted litigation is harmful to all parties. As a result, they could choose to resolve their disputes efficiently, with less expense, through alternate dispute resolution.

Alternative dispute resolution can help the parties resolve their differences through mediation, arbitration, or dispute resolution boards. However, many claims cannot be resolved without going to court.

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