Recap from ‘Lost in the Rubble?’ – Remember Older Cases and Different Theories When Evaluating Issues

I recently attended a Continuing Education seminar in Scottsdale, Arizona where the subject was identified as, “’Lost in the Rubble?’ A Search for Neglected Arizona Construction Law Decisions.” The seminar highlighted two things unrelated to the dramatic title: 1) alternative claim theories in construction cases should be considered, and may be planned for in the beginning stages of a construction project; 2) a dearth of case law on basic issues encountered in construction cases, among many others—an issue encountered fairly often in Arizona.

Illustrative of the first subject was discussion of application of the UCC to construction disputes. The premise is that construction projects include both sale of goods and labor to install the goods. The rule applied by courts in Arizona is the “predominant purpose test,” which can be simplified to, “what cost more—the material or the cost to install?” This rule and how it was applied in Double AA Builders v. Grand State Const., 210 Ariz. 503 (App. 2006), and other cases, have assumed application of the UCC in construction cases Pace v. Sagebrush Sales Co., 114 Ariz. 271 (1977) and Elar Investments, Inc. v. Southwest Culvert Co., 139 Ariz. 25 (App. 1983). The Double AA case states the rule, that in the absence of contractual language to the contrary, determination whether the remedy in a construction dispute is under the UCC or under common law is by determining the “predominant purpose” of the contract. The rule has been simplified to a review of what cost more—for example, if windows cost more than their installation, disputes about windows that allegedly failed could be evaluated under the UCC. This creates interesting arguments and issues concerning conforming and non-conforming goods, notice of non-conforming goods, and requirement to provide early notification of the breach. I question the application of this rule to instances other than providing materials to the project—but that is not what Double AA seems to say. It provides food for thought…

The second takeaway from the seminar, and practicing construction law in Arizona, is demonstrated by looking at the law governing delay claims in Arizona. Richard E. Lambert, Ltd., v. City of Tucson Dept. of Procurement, 223 Ariz. 184 (App. 2009) is the one Arizona case which addresses how to prove delay claims in the state. The case only discusses defects in a general presentation of a “total delay” analysis without showing a delay to the critical path. There is no case in Arizona identifying whether something less than a critical path method schedule analysis is required to prove a delay claim—and no case requiring that type of detail. Most practitioners here—me included—would look to case law in federal court in evaluating delay and other claims where Arizona case law is thin. Therefore, as a rule of thumb, remember to evaluate all potential arguments, and where there is no local law on the subject, find the best alternative to supply the missing law.