Gavin Howe
In North Carolina, general contracting is defined as any person, firm, or corporation that constructs buildings, highways, public utilities, grading, or any improvement or structure costing $40,000 or more. While there is no explicit mention of a rescind contract law for general contractors in North Carolina, there are various laws and regulations that govern contracting practices in the state. These include statutes related to competitive bidding, payment procedures, licensing requirements, and the rights of buyers and sellers to cancel or rescind contracts under certain conditions. Understanding these laws is crucial for both contractors and consumers to ensure legal compliance and protect their rights in the event of contract disputes or cancellations.
| Characteristics | Values |
|---|---|
| Definition of general contractors | Persons, firms, or corporations that bid upon, contract, or construct projects involving the construction of any building, highway, public utilities, grading, or any improvement or structure costing $40,000 or more |
| Licensing requirements | General contracting includes many activities that require the proper type and level of licensure |
| Indemnification | Provisions for indemnification for damages caused by negligence are unenforceable |
| Architect regulations | The practice of architecture is highly regulated for individuals and corporations or partnerships |
| Engineer regulations | The practice of professional engineering is highly regulated for individuals and corporations or partnerships |
| Bid bond | Required for most formal bids on public works in North Carolina, with a minimum value of 5% of the bid amount |
| Payment bond | Required for most public projects, with a value of 100% of the construction contract |
| Performance bond | Required for most public projects, with a value of 100% of the construction contract |
| Prompt payment to subcontractors | On public and most private projects, prime contractors must pay subcontractors within 7 days of receiving payment from the owner, or interest accrues at 12% per annum |
| Pay-if-paid subcontract provisions | Unenforceable in North Carolina |
| Competitive bidding | Required for most state and local public construction projects |
| Formal bidding | Required for most state and local public construction projects |
| Construction methods | Contracts are awarded using methods such as multi-prime, single-prime, dual bidding, construction management at risk, design-build, and more |
| Buyer's right to cancel | Buyers have the right to cancel and receive a refund if goods or services are not delivered within 30 days in a home-solicitation sale, unless a later delivery date is agreed upon in writing |
| Seller's performance before cancellation | If the seller has substantially begun performing the contract before the buyer's notification of cancellation, the goods cannot be returned in the same condition, and the buyer does not return the goods, cancellation may not be possible |
| Restoration of property and cancellation of contract | The Attorney General may order the restoration of money or property and the cancellation of any contract obtained as a result of a practice that violates G.S. 75-1.1 |
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What You'll Learn
North Carolina's definition of a general contractor
In North Carolina, a general contractor is defined as a person, firm, or corporation that bids on, contracts, or constructs construction projects. These projects include the construction of any building, highway, public utilities, grading, or any improvement or structure costing $40,000 or more. The term "general contractor" is used in two different contexts. Firstly, it refers to a contractor who retains other contractors or subcontractors to perform specific aspects of the work required by the contractor's agreement. Secondly, it refers to the nature of the contracting arrangement, where a party hires a general contractor to be responsible for the entire project, including the retention of the right subcontractors.
North Carolina has specific laws and regulations that govern the practice of general contractors in the state. These laws are designed to protect the public from incompetent builders and ensure that contractors are properly licensed and regulated. The state requires that anyone who contracts with another person or entity to construct or make improvements to any building, highway, or public utilities costing $30,000 or more be licensed as a general contractor. This licensure requirement is enforced by the Supreme Court of North Carolina, which has observed that unlicensed contractors may not recover payment for their work, even if there are no defects, as the contract is considered void due to non-compliance with the licensure requirement.
General contractors in North Carolina are subject to various regulations and requirements, including those related to bidding, payment, and subcontracting. For example, on most public projects, contractors are required to procure bid bonds, payment bonds, and performance bonds. Additionally, general contractors must comply with prompt payment regulations, with interest accruing at 12% per annum if payment to subcontractors is not made within 7 days of receipt of payment from the owner.
The state also regulates the practice of architecture and engineering for individuals and corporations or partnerships. North Carolina's construction laws include provisions for indemnification for damages caused by negligence, with specific statutes governing construction contracts, architects, and engineers. Overall, North Carolina's definition of a general contractor encompasses a broad range of activities and is subject to specific laws and regulations designed to protect consumers and ensure competent practices in the construction industry.
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Indemnification for damages caused by negligence
North Carolina's anti-indemnity statute, General Statute 22B-1, was created to prevent a party from shifting liability for damages resulting from their own negligence to another party. This statute is of utmost importance as it determines whether a contractor is responsible for damages and legal fees in the event of a legal dispute.
In the context of construction contracts, the statute prohibits "self-indemnification", meaning a contractor cannot require a local government to indemnify them for their own negligence, and vice versa. This does not, however, prevent cross-indemnification, where each party agrees to hold the other harmless for their acts. Such provisions are enforceable only if the fault of the promisor (the party agreeing to indemnify) or its derivative parties is a proximate cause of the loss, damage, or expense suffered by the promisee (the other party to the contract).
For example, if a contractor's employee is injured on the job and sues the contractor and the local government, the local government cannot require the contractor to defend it, but if the contractor's negligence is found to be a proximate cause of the damages suffered by the local government, the latter may pursue recovery of legal expenses and costs from the contractor if the indemnification provision in their contract provides for this.
It is important to note that North Carolina's anti-indemnity statute applies to express indemnity, which is an indemnity provision contained in a written contract. Courts are more likely to strike down intermediate and broad-form indemnity clauses as void and unenforceable, while limited-form indemnity clauses are more narrowly tailored to the indemnitor's own negligence and may be upheld.
Additionally, there is a statute of limitations for bringing an action to recover damages arising out of defects to improvements to real property, which is generally six years from the last act or omission of the defendant or the completion of the improvement.
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Payment bonds and performance bonds
In North Carolina, the law requires contractors to procure appropriate bonds for most public projects. These include bid bonds, payment bonds, and performance bonds.
A payment bond ensures that subcontractors and material vendors are paid. If subcontractors are not paid on time and they make a valid claim, the surety will pay them and then attempt to collect the money from the general contractor. An action on a public works payment bond must be brought no later than a year from the day when the last labour was performed or material furnished by the claimant, or a year from the final settlement with the contractor, whichever is longer.
A performance bond, on the other hand, is a bond that guarantees the completion of a construction project as per the plans, specifications, and contract obligations. The cost of a bond is generally around 3% for jobs under $800,000, and the percentage decreases as the contract amount increases. The premium for a performance bond is calculated by multiplying the bond amount by the premium rate, which is determined by the surety and reflects the risk of extending credit to the principal. The obligee establishes the required bond amount, which is typically 100% of the construction contract amount.
In North Carolina, a performance and payment bond is required when the total amount of construction contracts awarded for a project exceeds $300,000, and the contract is more than $50,000. The performance bond and payment bond must be executed by a legally authorized surety company in North Carolina and become effective upon the awarding of the construction contract.
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Prompt payment to subcontractors
In North Carolina, the Prompt Payment Act ensures that contractors and suppliers are paid promptly on both public and private construction jobs. The state's prompt payment provisions cover both private and public projects, imposing penalties for late payment in the form of interest.
On public projects, and most private projects, if the prime contractor fails to pay subcontractors within 7 days of receiving payment from the owner, interest at 12% per annum accrues on the amounts owed. The interest rate is set at 1% per month, unless a lower rate is agreed upon in the contract. This applies to all other payments down the chain, including any sub-subcontractors or suppliers.
There are some circumstances where payments can be withheld in good faith, and if these reasons are present, there will be no penalties for late payment. These circumstances include failure to make required payments to the parties below.
Retainage on private projects is regulated by the contract, but it cannot exceed the percentage retained on the contract between the owner and the prime contractor. On public projects, retainage is limited to 5% of any periodic payments, and once the project reaches 50% completion, the owner should no longer withhold retainage if the contractor has been performing satisfactorily.
Progress payments to prime contractors on public projects are governed by the contract terms, while final payments must be made within 45 days of either acceptance of the project or occupancy of the improvement, whichever is earlier.
Overall, the Prompt Payment Act in North Carolina helps to ensure that everyone on a construction project, including subcontractors, receives timely payment for their work.
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Buyer's right to cancel or contract cancellation
In North Carolina, consumers generally have the right to cancel contracts within three days of the transaction. This right applies to specific transactions, including loans secured by the borrower's residence, off-premises sales of consumer goods or services, and certain prepaid entertainment contracts. For instance, dance lessons, dating or social clubs, martial arts, health or athletic clubs, and campground memberships for more than a year.
The state also has specific regulations for the construction industry. General contractors are broadly defined and are required to be licensed. On public projects, contractors must procure appropriate bonds, including bid bonds, payment bonds, and performance bonds. There are also prompt payment requirements for subcontractors, with interest accruing if payment is not made within seven days.
In real estate transactions, both buyers and sellers have the right to terminate contracts in certain instances upon written notice. Standard termination forms are provided by the North Carolina Bar Association and the North Carolina Association of REALTORS®, covering various scenarios, including unilateral termination by either party and mutual termination with or without the release of the earnest money deposit.
If individuals have complaints or concerns about cancelling a contract in North Carolina, they can seek assistance by calling 1-877-5-NO-SCAM toll-free within the state.
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Frequently asked questions
General contractors are persons, firms, or corporations that bid on, contract, or construct projects involving the construction of any building, highway, public utilities, grading, or any improvement or structure costing $40,000 or more.
Some of the North Carolina statutes that affect the construction industry include the requirement for contractors to procure appropriate bonds on public projects, such as bid bonds, payment bonds, and performance bonds.
On public and most private projects, if the prime contractor fails to pay subcontractors within 7 days of receiving payment from the owner, interest at 12% per annum accrues on the amounts owed.
Yes, according to Chapter 75, such contracts must be in writing and duly signed by the party agreeing not to enter into business in the state.
According to the North Carolina General Statutes, a buyer has the right to cancel a contract and receive a refund if they have not received the goods or services within 30 days, provided the delay is the seller's fault.
