CM 334 Module III Exam
What are statutes of limitations?
SoL on patent and latent defects in California apply to all types of construction except some types of residential
Who is responsible for materials and equipment on prescriptive specifications?
The owner because he or she has power to control the architect
What happens if negotiations fail?
triggers the particular dispute resolution processes
Initiation must occur within a set number of days
typically 21 days, of the event or condition causing the claim
dispute review boards
widely used for public construction projects; consist of 3 members: 1. a board member selected by the owner 2. a board member selected by the contractor 3. those two board members select a third board member
What is suspension by the owner for convenience?
work can be suspended for good reason or for no reason at all; most convenience clauses place some limitation on the owner however by giving contractor grounds to terminate the contract for repeated suspensions, delays or interruptions contractor is ordinarily entitled to additional money and time as a consequence of suspension by owner
Typical termination clause enables the owner to do the following:
1) exclude the contractor from the site and take possessions of all materials, equipment, tools and construction equipment and machinery thereon owned by the contractor 2) accept assignment of subcontractors; and 3) finish the work by any reasonable method
If upon conducting an inspection, nonconforming work is discovered, the designer may choose to:
1. Accept the nonconforming work 2. Require correction of the nonconforming work 3. Reject the nonconforming work and have it torn out and replaced; or 4. If appropriate, terminate the construction contract for cause
Claims can be categorized under three different types of legal actions:
1. breach of contract, 2. breach of warranty, or 3. torts
Initial decision maker has a set number of days (usually 10) to take one or more of the following actions:
1. request additional supporting data from the other party 2. reject the claim in whole or in part 3. approve the claim 4. suggest a compromise 5. advise the parties that the initial decision maker is unable to resolve the claim
What is the initial decision maker?
2007 AIA allowed parties to enable a third party who is NOT the architect to be the decision-maker has two roles: 1. makes an initial decision on claims by either the owner or the contract 2. makes a determination if grounds exist for the owner to terminate the contractor for cause
What is assurance?
A pledge, warranty or guarantee that gives confidence or security
Construction contracts in continental EUROPE typically give decision-making powers to an independent third-party.
Designer is not given authority to resolve disputes, not even the authority to make a decision subject review or the opportunity to make a non-binding initial decision; reasons in support of this are: 1. the decision-maker must make impartial decision that respect interests of all parties 2. the designer may have a fiduciary duty to do what is in the best interest of the owner 3. the designer cannot make impartial decisions because the designer is the fiduciary agent the owner
Breach of warranty occurring after substantial completion is NOT a material breach
However, breach of warranty after substantial completion still gives rise to liability
Purpose of an inspection is to protect the
OWNER; not the contractor
If the problem arose because of the way that something was constructed then the contractor is usually held responsible. An exception would occur, making the owner responsible instead, if the quality problem were inherent in the way that the work was required to be constructed.
Presumptions are: 1. the contractor did exactly what the contractor was instructed to do in the contract documents 2. any inherent quality problems that the contractor knew of (or should have known of) were reported to the designer, who then instructed the contractor to proceed as directed in the contract documents.
Construction contracts in the USA typically give broad decision-making powers to the desginer
Reasons is support of this are: 1. Stature and integrity is associated with the architecture and engineering professions; there is a general sense that these professionals behave ethically and fairly 2. the architect or engineer created the design; therefore, he or she is the best-informed interpreter of the meaning and intent of the design 3. the architect or engineer's knowledge is superior to that of the owner; therefore, as they provide professional advice that protects the owner and champions the owner's best interest. 4. any alternative to the design professional as decision maker would be worse for the owner 5. a quick decision by the architect or engineer, even if it is the wrong decision, is better than a decision by a third-party that would take much longer to make.
Inspection
The owner has a right but generally NOT the obligation to inspect work of the contractor
Which of the following is not a factor used to decide whether or not a breach was material?
Whether or not both parties profited from the contract; As long as there is consideration in the bargain it is irrelevant whether the contract is a profitable one or not, to either of the parties
What is a warranty?
a certification that certain aspects of a project are as promised, effective for a certain period of time will include an express warranty and these three elements 1. materials & equipment will be new and of good quality; 2. the work will conform to the contract documents; and 3. the work will be free from defects
What is arbitration?
a contractual choice; a written agreement to arbitrate must exist before the dispute occurs, conducted at a formal hearing in front of a professional arbitrator weakness of arbitration is that arbitration decisions can rarely be appealed; once the arbitrator makes a decision, it is final
What is a claim?
a demand or assertion by one of the parties seeking payments of money, or other relief with respect to the terms of the contract; includes other disputes between the owner and contractor arising out of or relating to the contract documents
What is mediation?
a private, informal process in which disputantas are assisted by one or more neutral third parties in their efforts toward settlement contractors like mediation
What is a legal condition?
a provision of a contract, the fulfillment creates or extinguishes a duty to perform under the contract; failure to satisfy a legal condition is NOT a breach of contract and does not give rise to liability for damages
What is a patent defect?
a significant act or omission in the contractor's performance that clearly presents itself in the course of an ordinary inspection common law will NOT hold contractor liable for patent acts, omissions or defects that are discovered after substantial completion
What is a latent defect?
a significant act or omission in the contractor's performance that conceals itself from discovery in the course of an ordinary inspection common law WILL hold contractor liable for latent acts, omissions or defects that are discovered after substantial completion
A Board of Contract Appeals
a unique facet of federal agency contracting; composed of full-time professional attorneys at law; in their capacity as hearing officers and administrative judgest hey are vested with authority to administer oaths, issue subpoenas, hodl hearings, examine witnesses, receive evidence, hear arguments and write legal opinions for the purpose of deciding appeals of contract disputes with federal agencies.
What is an express warranty?
a warranty expressed in WRITING!
What is an implied warranty?
a warranty that arises from law
Most construction disputes are settled by what?
an alternative dispute resolution (ADR) method; the most common of which are mediation and arbitration
What is a summary jury trial?
an invention of the federal court system; lawyers present combined opening and closing arguments in front of a jury, usually in a day or less
What is constructive change?
arises from circumstances that have the effect of requiring the contractor to perform extra work as if a change order existed but where a formal change order does not in fact exist
What is suspension by the owner for cause?
authorizes the owner to stop the work in the event of specific actions by the contractor, such as: 1) failing to correct work that does not conform to the contract documents; or 2) repeatedly failing to carry out the work in conformance with the contract documents owner must issue a written order to stop work
What is a claim document?
consists of a recitation of all pertinent information that is needed to describe, evaluate and settle a claim main body: factual narrative that tells the story should also include copies of all invoices and other docs to support these costs
What is documentary evidence?
consists of project records, memoranda, daily logs, computer files, photographs, etc.
What is a minor breach?
creates liability for damages in the breaching party non-breaching party must continue to perform on the contract; typically non-breaching party will make a claim for damages, if the breaching party refuses to pay the claim, the non-breaching party has the option to litigate
What is suspension by the contractor?
enables a contractor to stop work; usually enabled for specific circumstances related to payment failures such as: 1) the designer's failure to issue a certificate for payment within a set number of days, typically 7 days, after receipt of the contractor's application for payment 2) the owner's failure to pay the contractor within a set number of days, typically 7 days, of the payment set out in the contract documents
What is termination by the contractor?
enables a contractor who is not at fault to terminate its contract when a work stoppage of a set number of days, typically 30 consecutive days was caused by specific reasons state in the contract documents, such as: 1) a court order requiring all work to be stopped 2) a declaration war or other emergency issued by the government 3) the designer, w/o justifiable cause has neither issued a certificate for payment nor has notified the contractor of the reason for withholding certification 4) the owner has failed upon request by the contractor to provide information to enable the contractor to enforce its mechanics' lien rights
What is termination by the owner for cause?
enables an owner to terminate its contract for reasons such as when the contractor: 1) repeatedly refuses or fails to supply enough properly skilled workers or proper materials 2) fails to make payment to subs for materials or labor in accordance with the respective agreements between the contractor and its subs 3) repeatedly disregards applicable laws, statutes, ordinances, codes, rules and regulations, or lawful orders of a public authority 4) otherwise is guilty of substantial breach of a provision of the contract documents
What is discovery?
engages legal devices such as interrogatories depositions motions for entry upon land (a demand to make the jobsite, a warehouse, a fabrication shop or any other physical location available to the opposing party for a visual inspection) production of documents.
What is a material breach?
evidenced by a substantial failure to perform on a contract in the event of a material breach, non-breaching party is excused from further performance on the contract
Contract documents may set a max time limit, such as 10 years,
for initiating binding dispute resolution btu that time limit can be reduced by the applicable statute of limitations in the state where the work is being performed.
What is a mini-trial?
formed to resolve disputes, efficient low cost substitute for other forms of non-binding dispute resolution; conducted by a mediator
What is a one year correction period?
if warranty work is discovered during this correction period the owner has a contractual duty to notify the contractor in writing
Material and equipment quality problems can be categorized as
improperly installed, improperly specified (unsuitable for design purposes), or improperly manufactured (quality problems arise during manufacturing)
What is demonstrative evidence?
includes such things as bar charts, pie charts, scatter plots, graphs, Gantt charts, pert diagrams, s-curves, resource loading diagrams, photographs, animations, stimulations and videos more persuasive than the tedious recitation of facts
If contract documents are silent about dispute resolution processes, the parties can
litigate their dispute; litigation (traditional way of resolving disputes) is a lawsuit for damages
Arbitration v. Litigation
litigation is the default resolution method arbitration is the usual alternative binding dispute resolution method Lawyers = Lit ; Arbitrators = Arb Fees for arbitration are higher than fees for lawsuits Consolidation and joiner easier to accomplish in litigation Litigation = public ; Arbitration = private Arbitrators more experienced with construction than judges Arbitration seeks to give both parties something rather than all or nothing Discovery is required in litigation not arbitration but it may occur in arbitration
What is erroneous rejection of acceptable work?
occurs because an inspector who has contractual authority to accept work has a corollary and implied authority to reject work inspector has no authority to change the contract but could wrongfully reject acceptable work
Some projects have experimented with a single expert
referred to as a standing neutral; provides many of the same benefits as a project neutral or dispute review board, but at much lower cost
What is a project neutral?
resembles a dispute review board; formed at the beginning of the project, holds regular meetings, improves communication and avoids or settles disputes before they become disruptive to the project
What are consequential damages?
secondary cost effects that occur after actual damages are incurred; an indirect source or a result of such breach for a consequential damages waiver to be fully effective, contractors should flow the waiver language down into their contracts with subs and suppliers likewise owner should insert mutual waiver of claims for consequential damages within owner-architect agreement
What are general conditions?
standard form construction contracts all set out various clauses in a boilerplate document that enable a project to be managed
What is warranty work?
the contract documents will set out rules for correcting work that does not meet the contractor's express or implied quality warranties contractor must correct this work at is own expense
Who is responsible for materials and equipment on performance specifications?
the contractor
Dispute resolution
the role of courts to peacefully settle disputes and keep order in society
How are most construction claims resolved?
through negotiations between owner's representative and the contractor's representative
What is litigation?
traditional method of resolving disputes; a lawsuit in whatever court has legal jurisdiction over the matter in dispute
