In 1958, President Dwight D. Eisenhower issued a proclamation designating May 1st as “Law Day,” and he “especially urged the legal profession, the press, and the radio, television and motion-picture industries to promote and to participate in the observance on that day.” In honor of the same, we’re going to take a look at the somewhat controversial role that law plays in the construction space, and the state of the law in the modern world.
Construction Law Is Ancient
The below embedded video is of Steven Kazan, an attorney at Kazan Law, tracing the history of our civil justice system. As it turns out, in tracing the history and original principles of modern civil law, one must examine the earliest principles of construction law. That’s because one of the earliest written codes of law in recorded history largely pertain to the building environment.
The Code of Hammurabi is one of the earliest examples of many modern legal ideas such as the publication of laws, the presumption of innocence, the ruling of precedent and the suggestion that the accused and accuser have the opportunity to provide evidence. It also contains a number of provisions governing the relationship between a builder and a property owner. As you can see from the below, even in our current legal environment, builders who make mistakes are now getting off pretty easy:
229: If a builder build a house for someone, and does not construct it properly, and the house which he built fall in and kill its owner, then the builder shall be put to death.
230: If it kill the son of the owner, the son of the builder shall be put to death.
232: If it ruin goods, he shall make compensation for all that is ruined, and in as much as he did not construct properly this house which he build and it fell, he shall re-erect the house from his own means.
It seems natural that construction law would have ancient roots. Construction and building has been a part of our civilization for as long as records exist, and accordingly, must be the fountainhead of some of the world’s initial civil disputes.
Modern construction law will not sentence contractors to death. However, as we’ll explore in the next section, it may metaphorically kill the contractor or the contractor’s business with the weight of its complexity and fairness.
Are There Too Many Lawyers In Construction?
In modern history, the law related to construction projects has grown exponentially in its complexity. Eugene Heady of Smith, Currie & Hancock put together a pretty revealing timeline about this evolution in his article “Construction Law – The History is Ancient.” The timeline starts in 1857 with the founding of the American Institute of Architects and pushes into 2003 when the International Building Code started to spread across the country.
But has construction law gotten too complex?
An interesting Viewpoints article written by a construction management consultant (Walter J. “Johnny” Wells, Jr, P.E.) was published this week by ENR.com titled “Lawyer as Constructor.” As the title suggests, the author wonders whether attorneys are now in the driver’s seat on construction projects. The result of such a phenomena is slower projects, less production, higher costs and unsavory disputes. His article ends with this quip:
As if there weren’t sufficient risks already inherent in the business of bending nature to our will, we have added a new, highly potent risk: The risk that the other party to our contract has better lawyers than we do. Is the American construction industry better off for that? I think not.
An opposite viewpoint is taken by Philip Bruner – obviously, a lawyer – in a 2007 legal article: The Historical Emergence of Construction Law. Quoting former Supreme Court Justice Oliver Wendell Holmes, Jr., Bruner asserts that the complexity in construction law simply mirrors the real-life complexity of construction projects, as “[T]he life of the law has not been logic: it has been experience.”
I think the answer lies somewhere in the middle of these two points.
I agree with Wells that the current legal environment in the construction industry is toxic.
Of course, construction law must necessarily involve some complexity given the nature of the underlying contracts and projects. It should not, however, require project managers to be “looking over their shoulder constantly to be sure their day-to-day actions and decisions pass legal muster,” as claimed to be the case by Wells’ Viewpoints essay.
I agree with Wells that the current legal environment in the construction industry is toxic.
Builders, architects, subcontractors and suppliers have gotten sucked into a theory that the constant jockeying for the best legal position is conducive to them in some way. They work with lawyers to sign ridiculous complicated construction contracts, and then whenever anything on the project goes awry (and everything on a project eventually goes awry), they start to bicker about every fine point of the agreement.
Unfortunately, these disputes are all for naught, as the legal system is broken. As I explain in the next section, everyone relying on attorneys to resolve problems at the construction job site are worshipping a false god.
Don’t Look To Lawyers For Help Because The Legal System Sucks
It’s not secret that the modern legal system has serious flaws. In fact, there is not enough room on this blog to do this conversation justice.
Lawyers will argue about anything, and the courts will hear it. And by hear it, I mean the courts will let the lawsuit get filed and then entertain the question of whether the argument does or does not have merit for a period of months or years. As demonstrated with example after example, the lawyers use this perpetual litigation nightmare to “churn that bill.“
The toxic environment isn’t just creating a bad experience for commerce and the public, but for lawyers as well. The Wall Street Journal, for example, just published an article about Lawyers Behaving Badly because a “tide of rudeness has engulfed the legal profession.” This is likely because lawyers are depressed and unhappy with their life’s work. Hell, there are even studies showing that pessimism breeds better attorneys!
The cost, complexity and delay associated with litigation makes it impossible for smaller parties to compete with the larger outfits, and so the larger outfits start to view legal disputes as a profit center.
Lawyers can’t get jobs. Law schools can’t make money. Oh, I almost forgot: When you get down to the actual cases, legal decisions are unpredictable, frequently wrong, and actually pretty rare considering the rate of settlements.
Why would contractors, suppliers and architects want to be wrapped up in all of this?
In the next section I answer this question by asking another one: Who is to blame? Unfortunately, all of the problems with our legal system actually play into someone’s favor. It is a pretty good forum for well-funded companies. These larger operations use the broken system to out maneuver smaller opponents.
The cost, complexity and delay associated with litigation makes it impossible for smaller parties to compete with the larger outfits, and so the larger outfits start to view legal disputes as a profit center. Hold back money and blow disputes out of proportion, and then wait. You’ll be able to settle for pennies on the dollar.
How can a smaller outfit compete with this? One way that we’ve explored here on the blog is to create leverage. As a small contractor or a supplier stuck between contractor disputes you’re not able to compete with the prime contractor’s or developer’s resources. However, you can create great leverage using a mechanics lien filing.
In fact, I left the legal profession because of these very problems, and I saw the mechanics lien instrument as a tool to really simplify the complexities of construction law and level the playing field a bit. The task I took was to make the mechanics lien remedy accessible. The mechanics lien, rich with legal history in itself, was specifically designed for this.
Who Is To Blame? The Lawyers Or The Industry?
What exactly created this tipping point of litigation and complexity in the construction industry?
Wells’ ENR Viewpoints article complains that construction projects are overlawyered. If so, who is to blame? The lawyers? The prime contractors? The subcontractors? What exactly created this tipping point of litigation and complexity in the construction industry?
The above section hinted that well-funded construction outfits were to blame for the modern litigious environment. That is probably partly true, and my own personal bias. Nevertheless, I’m confident there are arguments from every angle, and much finger pointing opportunities In fact, I welcome comments to this article about who is to blame, whether the industries (both legal and construction) have a problem, and the like.
And so on “Law Day,” a day that President Eisenhower created to encourage the people of the United States to “remember with pride…the great heritage of liberty, justice and equality under law which our forefathers bequeathed to us,” I leave you with a quote from speaker Philip K. Howard in his TED talk (video embedded at the start of this article) about how and whether we can fix a “broken legal system:”
We’ve been taught to believe that law is the foundation of freedom, but somehow or another in the last couple of decades the land of the free has become a legal minefield.