CHAPTER 1 INTERFACE OF THE LAW WITH THE CONSTRUCTION INDUSTRY 1
The Typical Parties 2
Construction Contractors and Subcontractors 2
Architect/Engineers 2
Construction Owners 2
Service and Supply Organizations 3
Labor Force 3
Local,State,and Federal Governments 3
General Public 4
Rules for Participants 4
Contracts 4
Laws,Statutes,and Regulations of Governmental Agencies 5
Tort Law 7
Liability in the Construction Process 7
Contract Liability 7
Tort Liability 8
Statutory Liability 8
Strict Liability 8
Conclusion 9
Questions and Problems 10
CHAPTER 2 CONTRACT FORMATION,PRIVITY OF CONTRACT,AND OTHER CONTRACT RELATIONSHIPS 13
What Constitutes a Contract? 14
Offer 14
Acceptance 16
Consideration 17
Contract Must Not Be Contrary to Law—Nonenforceable Contracts 18
Privity of Contract and Other Contract Relationships 18
Privity of Contract 18
Third-Party Beneficiary Relationship 19
Third-Party Beneficiary Intent 20
Multiple Prime Contracts 20
Conclusion 22
Questions and Problems 22
CHAPTER 3 THE PRIME CONTRACT-AN OVERVIEW 25
The Parties to Construction-Related Prime Contracts 26
Owner-Architect Contracts and Owner-Engineer Contracts 26
Owner-Construction Manager Contracts 26
Owner-Contractor Contracts 26
The Nature of the Contractual Services Provided 27
Design Only Services 27
Construct Only Services 27
Design-Construct Services 27
Turnkey and Fast-Track Design-Construct Services 28
Construction Management Services 29
Commercial Terms 30
Cost Plus Percentage Fee Terms 31
Cost Plus Fixed FeeTerms 32
Target Estimate(Cost Plus Incentive Fee)Terms 32
Guaranteed Maximum Price Terms 33
Fixed-Price Contracts 33
Conclusion 35
Questions and Problems 35
CHAPTER 4 PRIME CONTRACT-FORMAT AND MAJOR COMPONENTS 39
Standard Forms-of-Contract 40
Federal Government Construction Contract 40
American Institute of Architects Contracts 41
Associated General Contractors Contracts 41
Engineers Joint Contract Documents Committee Contract 41
State Highway Department Contracts 41
Other Agency Contracts 42
One-of-a-Kind Contracts 42
Typical Documents Comprising the Contract 42
Bidding Documents 43
General Conditions of Contract 45
Supplementary Conditions of Contract 45
Specifications 46
Drawings 46
Reports of Investigations of Physical Conditions 46
Conclusion 47
Questions and Problems 47
CHAPTER 5 OWNER-CONSTRUCTION CONTRACTOR PRIME CONTRACT"RED FLAG"CLAUSES 51
Threshold"Red Flag"Clauses 52
Dispute Resolution and Governing Law Clause 53
Changes Clause 54
Differing Site Conditions Clause 54
Delays and Suspensions of Work 54
Terminations and Partial Terminations 55
Other Important " Red Flag"Clauses 56
Time Provisions 57
Liquidated or Actual Damages for Late Completion 57
Site Availability and Access to the Site 58
Payment and Retention Provisions 60
Reports of Physical Site Conditions 62
Exculpatory Clauses in General 65
Insurance and Bond Provisions 65
Indemnification Requirements 65
Measurement and Payment Provisions 66
Variation in Quantities Clause 66
Equal Employment Opportunity and Disadvantaged/Women-Owned Business Requirements 67
Escalation Provisions 68
Conclusion 68
Questions and Problems 68
CHAPTER 6 LABOR AGREEMENTS 71
The Parties 72
Common Types of Labor Agreements 73
Labor Agreement Threshold " Red Flag"Provisions 76
Union Security Provisions 76
Hiring Hall Provisions 77
Grievance Procedures 77
Work Stoppage/Lockout Provisions 78
Subcontracting Clause 78
Other"Red Flag" Provisions 78
Wage/Benefits Hourly Rates 79
Normal Workday and Workweek 79
Overtime Definition and Pay Premium 80
Shift Work and Pay Premium 80
Work Rules and Manning Provisions 81
Steward Provisions 82
Me Too/Most Favored Nation Provisions 83
Conclusion 83
Questions and Problems 84
CHAPTER 7 PURCHASE ORDER AND SUBCONTRACT AGREEMENTS 87
Purchase Orders 88
Goods or Provision of Services? 88
Use of Purchase Orders for Certain Jobsite Services 89
Purchase Order Quantity Limitations 89
Conflicts with Seller's Sales Quotations 89
Flow-Down Language from Prime Contracts 90
"Red Flag"Purchase Order Provisions 91
Necessary Identifying Information 91
Description of the Goods Purchased 91
Shipping Instructions 91
Pricing and Basis of Quantity Measurement 92
Payment and Retention Provisions 92
Specified Delivery Schedule 94
Required Delivery Point 94
Sales Taxes 95
Purchase Order General Conditions 95
Special or Supplementary Provisions 96
AGCC Forms of Purchase Order Agreements 97
Subcontract Agreements 97
Subcontract"Red Flag"Provisions 98
Necessary Identifying Information 98
Description of the Subcontract Work 98
Pricing and Basis of Quantity Measurement 99
Payment and Retention Provisions 99
Contractor Control of Performance Time Requirements 99
Damages in the Event of Late Completion 100
Subcontract Changes Clause 101
Insurance and Bond Requirements 101
Indemnification 101
48-Hour and 72-Hour Clauses 102
Union Labor Only Clause 102
AGCC Forms of Subcontract 103
Conclusion 103
Questions and Problems 103
CHAPTER 8 INSURANCE CONTRACTS 107
Worker's Compensation and Employer's Liability Policies 108
Worker's Compensation Section 109
Employer's Liability Section 109
USL＆HW Act and the Jones Act 109
Premium Structure 110
Premium Modifiers 110
Public Liability Policies 111
Normal Liabilities That Are Covered 112
Exclusions,Endorsements,and Deductibles 113
Monetary Limits—Primary and Umbrella Policies 113
Premium Structure 113
Definition of Occurrence 114
P＆I Polices 114
Builder's Risk Policies 114
Limitation on Policy Coverage 115
Named Peril v. All Risk Policies 115
Exclusions and Deductibles 115
Temporary Structures 117
Premium Structure 117
Monetary Limits of Policy 117
Reasons for Carrying Builder's Risk Insurance 118
Equipment Floater Policies 118
Method of Determining Loss 118
Premium Structure 119
Equipment Floater Insurance for Marine Equipment Operations 119
Evaluating the Need for Equipment Floater Insurance 119
Miscellaneous Policies for Special Situations 119
Owner-Provided Insurance Programs 120
" Red Flag"Insurance Provisions 120
Named Exclusions 120
Additional Named Insureds 121
Deductibles 121
PolicyTerm 121
Subrogation 122
Policy Cancellations 122
Recent Trends in the Construction Insurance Industry 122
Claims-Made v. Occurrence Policies 122
Premium Escalation and Diminished Coverage 123
Conclusion 123
Questions and Problems 123
CHAPTER 9 SURETY BONDS 127
Relevant Parties and Surety Bond Terms 128
Surety 128
Principal 128
Obligee 128
Guarantee 129
Penal Sum 129
Premium 129
Indemnitor 129
How Do Surety Bonds Work? 130
Indemnity Agreement 130
Surety Bonds v. Insurance Contracts 130
How Good Is the Guarantee? 130
Surety's Belief in Contractor's Ability to Perform 131
Bid Bonds 131
Bid Bond Guarantee 131
Bid Bond Penal Sum 131
Performance Bonds 132
Performance Bond Guarantee 132
Surety's Options to Make Good the Guarantee 132
Penal Sum—How Much Does the Surety Pay? 133
Owner's Misconception About Performance Bonds 133
Excess Early Contract Payments 134
Contractor Protection of Bonding Capacity 135
Labor and Material Payment Bonds 135
Labor and Material Payment Bond Guarantee and Claimants 135
Other First-Tier Bonds 137
Work Guarantee Bonds 137
Lien Discharge Bonds 138
Subcontract Bonds and Material Supplier Bonds 138
Conclusion 138
Questions and Problems 139
CHAPTER 10 JOINT-VENTURE AGREEMENTS 141
Joint and Several Liability 142
Conventional v. Item Joint Ventures 142
Conventional Joint Ventures 143
Formation and Termination Matters 143
Participation Percentages 144
General Management Matters 145
Working Capital Matters 146
Accounting Matters 147
Bond and Indemnification Matters 147
Insurance Matters 148
Partner Bankruptcy Provisions 149
Construction Equipment Acquisition and Disposal 149
Item Joint Ventures 150
Comparisons with Conventional Joint-Venture Agreements 150
Conclusion 151
Questions and Problems 151
CHAPTER 11 BIDS AND PROPOSALS 153
Public and Private Sector Bidding 154
Public Bidding Statutes 154
Federal Construction Contract Procurement Policy 155
Public Owners'Actions After Bids Received 156
Material Improprieties 156
Factual Determination of the Low Bid 156
Responsive and Responsible Bidders 158
Rejection of Late Bids 160
Rejection of All Bids 161
Bid Irregularities/Informalities 161
Major and Minor Irregularities/Informalities 162
Rule for Determining Major or Minor Irregularities 162
Bidder's Property Right to the Contract 163
Bid Protests 163
Status to File Bid Protests 164
Timeliness 164
Protest to Whom? 164
What Can be Gained by a Bid Protest? 164
Rejection of All Bids in the Public Interest 165
Conclusion 166
Questions and Problems 167
CHAPTER 12 MISTAKES IN BIDS 169
Firm Bid Rule and Doctrine of Mistake 170
Generalized Rules for Withdrawal 171
Timeliness in Reporting Mistakes 173
Proof of the Mistake 173
Duty to Verify a Low Bid 173
Possible Outcomes on Mistake Verification 176
Promissory Estoppel 177
Concept of Promissory Estoppel 178
Elements Necessary to Establish Liability 178
Conclusion 180
Questions and Problems 180
CHAPTER 13 BREACH OF CONTRACT 183
Breach of Contract and Materiality of Breach 184
Breach of Contract 184
Materiality of the Breach 184
Written Notice of Protest 186
Effect of Disclaimers or Exculpatory Clauses 187
Anticipatory Breaches of Contract 187
Express Obligations and Implied Warranties 188
Express Obligations 188
Implied Obligations(Implied Warranties) 188
Frequent Breach of Contract Situations 188
Failure to Make Payment for Completed Work 188
Interference with Contractual Performance 190
The Spearin Doctrine 191
Misrepresentation 192
Nondisclosure of Superior Knowledge 193
Improper Termination of Contract 194
Conclusion 195
Questions and Problems 195
CHAPTER 14 CONTRACT CHANGES 199
Contract Change Procedure 200
Federal Contract Changes Clause 200
Specifics in Changes Clauses 202
Distinctions Between Contract Change Terms 202
Who Is Empowered to Make Changes? 203
Who Is Empowered to Make Formal Changes to the Contract? 204
How are Price and Time Adjustments Determined? 205
“No Pay Without Signed Change Order”Language 205
Constructive Changes 206
Constructive Change Notice Requirements 208
Cardinal Changes 208
Price and Time Adjustments for Contract Changes 210
Forward Pricing 210
Retrospective Pricing 210
Force Account 210
Application of Force Account Provisions to Extended Performance Situations 211
Use of Force Account Records in Determining Breach of Contract Damages 211
Impact Costs 211
Change Order Payment Disputes 212
Judicial Attitude to Payment Disputes 213
Orders for Payment of Disputed Changes 215
Proper Contractor Reaction to Oral or Written Directives 215
Conclusion 216
Questions and Problems 216
CHAPTER 15 DIFFERING SITE CONDITIONS 219
The Federol Differing Site Conditions Clause 220
Type Ⅰ Differing Site Conditions 221
Type Ⅱ Differing Site Conditions 221
Duty of Contractor to Give Notice 222
Duty of Government to Promptly Investigate 223
Equitable Adjustment Provided 223
Differing Site Conditions and Government Liability 223
Other Differing Site Conditions Clauses 224
Does the Clause Cover Both Type Ⅰ and Type Ⅱ Conditions? 224
Does the Contract Contain Conflicting Exculpatory Clauses? 224
What are the Notice Requirements? 227
What are the Owner's Responsibilities Under the Clause? 227
Reasons for Denying Differing Site Condition Claims 228
Lack of Notice 228
Difference Not Material 229
Failure to Conduct an Adequate Pre-Bid Site Inspection 230
Dealing With Differing Site Conditions 232
Prompt Written Notice 232
Request for Owner's Instructions 232
Failure to Receive Determination or Receipt of Adverse Determination 232
Determination of the Equitable Adjustment 233
Conclusion 233
Questions and Problems 234
CHAPTER 16 DELAYS,SUSPEN SIONS,AND TERMINATIONS 235
Delays and Suspensions of Work 236
Time Is of the Essence 236
Delays v.Suspensions of Work 236
Compensable v. Excusable Delay 237
Contractual Provisions for Compensable Delay 238
The Federal Suspension of Work Clause 238
Delays and Suspensions in Other Contracts 239
No-Damages-For-Delay Clauses 239
Judicial Attitudes on No-Damages-For-Delay Clauses 239
Contracts with No Provisions for Delays 242
Delay in Early Completion Situations 242
Causes for Delays and Suspensions of Work 245
Defective Specifications 245
Site Availability Problems 245
Changes and Differing Site Conditions 246
Owner'S Failure to Act Administratively 246
Notice Requirements 246
Purpose of the Notice Requirement 246
Constructive Notice 247
Terminations 248
Requirement for an Enabling Clause 248
Default Terminations 248
Convenience Terminations 249
Conclusion 251
Questions and Problems 251
CHAPTER 17 LIQUIDATED DAMAGES,FORCE MAJEURE,AND TIME EXTENSIONS 253
Liquidated Damages 254
Conceptual Basis of Liquidated Damages 254
Liquidated Damages Provisions Are a Contract Remedy 254
Liquidated Damages Are Not a Penalty 255
Judicial Attitude Toward Liquidated Damages Provisions 256
Bonus/Penalty Clauses 256
Force Majeure 257
Common Conditions of Force Majeure 257
Contract Relief for Conditions of Force Majeure 257
Time Extensions 257
Importance of Notice of Claim 258
Contractor Responsibility to Prove Entitlement 259
Owner's Responsibility and Contractor Time-Extension Requests 259
Granting of Time Extensions 259
Conclusion 260
Questions and Problems 260
CHAPTER 18 ALLOCATING RESPONSIBILITY FOR DELAYS 263
Preliminary Points and Definitions 264
As-Planned,As-Built,and Schedule Update Networks 264
Owner Responsibility Delays 267
Contractor Responsibility Delays 268
Excusable Delays 269
Incorporation of Delays into the CPM Network for Delay Impact Analysis 269
Forward-Looking and Retrospective Impact Analysis 270
Consecutive and Concurrent Events 270
Four Principles Governing Delay Impact Analysis 270
Delay Impact Analysis For Single-Path Projects 273
Delay Impact Analysis For Multi-path(Concurrent Path)Projects 275
Delay Impact Analysis For Complex Projects With SeveralInterconnected Concurrent Paths 277
Owner Liability for Delay Damages 279
Has the Contractor Met the Burden of Performance? 279
Contractor-Caused Delay to Project 280
Contractor Liability for Liquidated Damages 280
Contractor Entitlement to Extension of Time 281
Summary of Delay Impact Analysis 281
Determining Damages Offset 281
Conclusion 281
Questions and Problems 282
CHAPTER 19 CONSTRUCTIVE ACCELERATION 285
Voluntary and Directed Acceleration 286
Acceleration and Voluntary Acceleration 286
Directed Acceleration 287
Constructive Acceleration 287
A Constructive Acceleration Example 288
Case 1—Delay with Time Extension 288
Case 2—Delay with No Time Extension 289
Case 3—Accelerated Performance Without Delay 289
Proving Constructive Acceleration 290
Entitlement to Time Extension 290
Failure of Owner to Issue Extension of Time 291
Proof of Extra Costs 291
Completion Before Date to Which Contract Should Have Been Extended 292
Effect of an Owner's Directive to Accelerate 292
Contractor's Proper Contractual Procedure 292
Conclusion 293
Questions and Problems 293
HAPTER 20 DOCUMENTATION AND RECORDS 295
Documentation 296
“Put-It-in-Writing”Rule 296
What is Documentation? 297
Value of Good Documentation 297
Exceptions to the Hearsay Rule 298
Conditions for Introduction of Job Records 298
Typical Job Records 299
Letters of Transmittal and Submittal 300
Letters of Notice 300
Letters Requesting or Disputing Instructions or Letters of Protest 301
Confirmations and Meeting Minutes 301
Routine Job Records 301
Contractual Notices,Orders,or Directives 301
Personal Diaries 302
Job Document Matrix 302
Conclusion 302
Questions and Problems 302
CHAPTER 21 DISPUTE RESOLUTION 305
Courts of Law 306
Lawsuits in the Federal Court System 306
Lawsuits in the State Court System 306
Determination of Venue 307
Features of Court Trials of Lawsuits 307
Hearings Before the Federal Boards of Contract Appeals 308
Arbitration 309
AAA Arbitration under Construction Industry Rules 310
Party Arbitration System 311
Single Arbitrator System 311
Features of Arbitration Proceedings 311
Alternative Dispute Resolution 312
Mediation 312
Mini-Trials 312
Disputes Review Boards 312
Conclusion 313
Questions and Problems 313
BIBLIOGRAPHY 315