CNST 2341 Final

For any contract to be enforceable in a court of law it must have the following 4 elements of legally enforceable contracts:

Capacity to contract Legal subject matter Mutual consent Consideration

Written requirement

Changes and extras must be pre-authorized therefore be in writing = ENFORCEABILITY!!! Owner may waive by act-gives oral instructions & grant them = Will be considered only if owner suffers economic harm or prejudice

Termination for Default

It is a contractual right given to the owner to end the contract because of contractor's breach (violation) of contract terms.

DESCRIPTIVE SPECs

Provide details: material, properties, inst. Example: Concrete mix 4:2:1:0,5 (3000 psi). Specifier assumes performance liability Being used less Sometimes the only choice

Termination for convenience

contractual right given to the owner but contractor is paid for work in place to end the contract at no fault of the contractor.

3 methods of payment common in the construction industry

- Lump sum - Unit price - Cost plus Most common

CSI 16-DIVISION FORMAT

50 different sections Broken down for different scopes of work

PROPIETARY SPECs

Contents: Manufacturer's name Brand name Model #/ catalogue # Type & other designations Types: Closed Open proprietary

Warranties

Guarantee of performance during a set period of time.

Design-Bid-Build

Project Owner -> Architect/Engineer and Construction Lender and Prime/General Contractor -> Prime/General Contractor -> Bonding Company (Surety) and Subcontractor Subcontractor -> Supplier and Lower tier subcontractor

Lump sum

a single payment made at a particular time

Non-collusion affidavit

a written document stating that the bidder did not collaborate/cooperate/share any specifics of its bid with other bidders.

Occupational Safety and Health Act

is a federal law that establishes and promotes workplace safety standards for businesses.

Obligee

party benefiting from bond (owner)

Liquidated Damages

Unique to construction contracts. They compensate the owner for losses due to late completion of the project caused by contractor. $/day for every day past the contract completion date

AIA

American Institute of Architects

Float

Amount of time a task can be delayed without delaying another task

Plaintiff

Brings Case

CSP

Competitive Sealed Proposal

Bid shopping

The exercise in which a GC is unfairly pitting bidders against one another to get each to lower its price. During the bidding time no subcontracts are executed. Subcontracts are executed later only after the contractor is awarded the contract This can create problems because it corrupts the bidding process and fair action on a low bid.

picketing

The gathering of striking workers at a business site as a sign of protest. The purpose may be to interfere with the normal operation of the business establishment or to inform others about the nature of the labor dispute.

Substantial Completion

The point at which all punch list work has been completed and the owner can occupy or take possession of the new facility.

UCC

Uniform Commercial Code

Performance bond

a guarantee ensuring the obligee that the principal will perform all work in accordance with the terms of the agreement

right-to-work law

a state law that prohibits prehire agreements. States that enacted such laws are known as right-to-work states. These laws are found only in states in which union strength has been diminished (Texas is one of the states)

Lien statutes (mechanics & materials liens)

allow parties providing labor or material to obtain security interest in the owner's property. Labor and material has improved the value of owner's property, and therefore the providers should look to the property as the security for their eventual payments. A fully perfected lien (a lien that satisfied all the required steps by the Statute) is like a mortgage on a property. It must be paid before a clear title to ownership is provided to the project owner.

Payment bond

also known as "labor and material bonds," guarantees the obligee that the principal will pay their bills for labor and materials provided on the project.

Delays

can be devastating for some contractors and subcontractors. This issue is often addressed in subcontracts.

Surety

party guaranteeing principal's performance (bonding comp)

Principal

party under obligation (contractor)

Unit Price

the cost per unit. Mostly used between contractor and subcontractor

Overhead

• OH&P - overhead and profit • Home office overhead

Agreement Forms

Standard forms by professional societies, government agencies, institutes, trades Standardization: save effort, assure completeness; acceptability; familiarity Modification must be coordinated with GC AIA (A101, A201) & EJCDC (#1910-8-A-1): Standard statements + blanks to be filled for specifics of a contract

The notice requirement

When C receives instructions/orders if constitute a change, must promptly give written notice to owner If worked without notice cannot claim $$$$$ Not given owner a chance to stop change

merit shop

A business whose labor relations are not governed by a labor agreement. The employer, rather than a negotiated labor agreement, dictates how labor relations decisions are made

Contract

A contract is an agreement to do or not to do certain thing

Allowances

Allowances shall cover the cost to the Contractor of materials and equipment delivered.

Debarment

Can't work for said entity anymore

Statute of Repose

From that date going forward if the contractor has any error in the job they have to come back to fix them.

General Contractor

GCs usually self perform 0-20% of the total scope of work; the rest is performed by the subcontractors.

No damage for delay

Given time extension, but not monetary damages for the extension

SDI vs. Bonds

In general SDI is lower cost, more flexible and have claims processed faster when compared to a surety bond.

Design/Bid/Build

Most common w/lump sum Government does this a lot Example: Building a McDonald's where the owner has the plans already

"3-PART" FORMAT

Part 1: General Part 2: Products Part 3: Execution

Design-Build

Project Owner-> E/C Firm and Construction Lender E/C Firm -> Subcontractor and Supplier and Bonding Company (Surety) Subcontractor -> Lower tier subcontractor and Supplier

Promissory Estoppel

Protects contractors from the harm of key subs backing out If a party relies to its detriment on the promise of another party, the other party must be held responsible to its promise to avoid harm to the first party. A sub will be forced to honor its price or pay the resulting extra cost if it backs out of an offer. This is not based on breach of contract, since there was no contract formed at the time of the offer (price quotations).

Critical Path

Shortest overall duration to get a job done

Change order

Written instructions to contractor signed by owner and A/E authorizing: Addition, deletion, or revision of work, or adjustment of contract sum/time after execution of the contract

Termination for Default entitles the owner to:

o withholding all money due to contractor o seizing contractor's materials and equipment on site o holding contractor liable for increased costs.

lower tiers of subs and suppliers:

subcontractors may subcontract parts of their scope to other subs and suppliers

Change clauses

1. The notice requirement 2. Written requirement

When is termination for convenience exercised?

1. owner faces financial problems 2. the need for the project is eliminated.

minority business enterprise (MBE)

A business that is at least 50% owned and managed by minority group members

open shop

A business whose labor relations are not governed by a labor agreement. Employees are not required to be or become union members as a condition of employment

Joint

A contract in which a number of individuals are represented as one party and forgiveness of any individual by the plaintiff implies forgiveness of the rest of the individuals making that party.

Several

A contract in which a number of individuals are represented as one party but forgiveness of any individual by the plaintiff does not imply forgiveness of the rest of the individuals making that party...plaintiff can select and choose.

Cost Plus

A contract where payment is for material and labor, with a profit factor added. Used when you are uncertain what the price will be. Renovation

Buy America Act of 1933

A law that requires the use of U.S. produced or U.S. mined goods unless a local shortage exists

Who determines Substantial Completion?

Architect determines Substantial Completion

CHANGES TO CONSTRUCTION DOCUMENTS

Bid documents: Addenda Contract documents: Change order

Construction Management

Collaborative At risk means there is a maximum price to the owner Owner wants the contractor and architect to work to together Fast track work. Begin construction before the design is complete Owner is involved Example: Building a McDonald's for the first time.

Difference between collusion and bid-shopping

Collusion is illegal Bid shopping is legal, but unethical

Types of damages:

Compensatory damages Liquidated damages Actual damages

Indemnification

Contractor shall indemnify and hold harmless the Owner, Architect, Architect's consultants, and agents and employees of any of them from and against claims, damages, losses, and expenses... arising out of or resulting from performance of the Work, provided that such claim, damage, loss, or expense is attributable to bodily injuries, etc.

Owner-Subcontractor Relationship

Contractually, the subcontractor will enter into an agreement with the general contractor. In the subcontract, the GC will establish a relationship with the subcontractor so that the subcontractor is an independent contractor. This contractual association does not include the owner. Therefore, the subcontractor has a direct responsibility to the GC but not the owner.

What method would a contractor be paid to work premium/over time?

Cost-plus

Pay when paid

Courts have interpreted this as payment required of GC and when is only a question of timing.

EMR

Experience modifier rating. Below 1 good

Methods of Invitation

Open Invitation Closed Invitation

Turn Key

Owner is turning over the design and construction to a company to design and build

Pay if Paid

Owner must pay for GC to have the obligation to pay subs. This makes subs and the GC both liable for owner insolvency. With such legal verbiage a sub may not get paid due to issues other than its own performance.

The two conditions for ending a contract are:

Performance of the contract Termination of the contract

collective bargaining

Process by which a union representing a group of workers negotiates with management for a contract

GC's Functions

Serves as one point of responsibility to the owner Facilitates Interpretation of documents for subs Coordinating the work and the schedule to ensure timely completion of the project Responsible for the jobsite safety

Design/Build

Something the owner can easily describe Owner is turning over the design and construction to a company to design and build

Subcontractors

Subcontractors are mainly the specialty trades: Mechanical, Electrical, Fire, Glazing, Painters

Davis Bacon Act of 1931

This law requires the payment of "prevailing wages" to employees of contractors and subcontractors working on government construction projects valued above $2,000. Workers are paid on a weekly basis. Primary purpose is to protect the local wage rates and economy of each community.

Compensatory damages

To compensate for losses incurred by the non-breaching party and place it back in the same economical position prior to the breach.

Indemnify Law and Legal Definition

To indemnify means to reimburse another for a loss suffered because of a third party's or one's own act or default. It can also refer to a promise to reimburse another for such a loss or to give another security against such a loss. For e.g., insurance companies indemnify their policyholders against damage caused by such things which are specified by the terms of the contract between the company and the insured. The right to indemnity and the duty to indemnify commonly comes from a contractual agreement, which generally protects against liability, loss, or damage.

Insurance

WC insurance - Workman's comp BR - Builder's risk insurance EMR. Experience modifier rating. Below 1 good CGL Insurance. Contractor's general liability insurance

Subcontractor Default Insurance (SDI), commonly referred to by Zurich Insurance Group's trade name "Subguard"

an alternative to bonding. Purchased by the prime contractor, to protect themselves from subcontractor default. Unlike with a bond which is a three party agreement, SDI is a two party agreement between the prime contractor and the insurance company.

patent defect

an obvious flaw in a product or a document (such as leaving out the property description in a deed)

Indemnity agreement

between principal & surety where principal pledges assets that the surety can obtain to offset any expense or loss on the bond.

Privity

contract with someone; you can sue them, they owe you duties.

Miller Act of 1935

requires contractors who do over $200,000 of work on public buildings to protect the government with performance bonds and to protect those who directly supply labor and materials with payment bonds

4 corners rule

the meaning of a document is to be gathered from the entire (all four corners) document. Applies to any agreement including contracts, subcontracts, insurance policies, bonds, lending consent agreements, etc.

Bid bond

used to ensure that the principal will honor their bid and enter into a contract with the obligee for the bid amount after the bid opening. Usually covers the difference between the low bid and the second lowest bid typically up to 10% of the bid price.

Bonds

used to protect the owner in cases where the contractor fails to perform in accordance with the contract. Bonds are three party agreements between an obligee (owner), a principal (contractor), and the surety (bonding company).

Contractor's warranty

usually last for one year and begins at Substantial Completion or project final acceptance The best a contractor can do is not to acknowledge the supplier's terms and to create uncertainty regarding what terms really govern the sale to have a chance to recover.

Open Invitation

v. Open to all responsible bidders vi. Responsible means having financial ability, experience, and required resources vii. In the private sector, both prequalification (i.e., before bidding) and post-qualification (i.e., after bidding) are common. viii. In the public sector, only pre-qualification is acceptable to avoid possible disputes with the apparent lowest bidder that is missing other requirements. ix. The invitation is usually posted as an advertisement in newspapers, national journals (e.g., ENR, Dodge report, AGC Daily News, etc), regional journals (e.g., construction news). x. State laws dictate: where, how many times, how long each ad should run

Surety bond

written document given by principal & surety to oblige guaranteeing a specific obligation

Methods to deliver a project in the construction industry

• Design/Bid/Build • Design/Build • Turn Key • Construction Management

PERFORMANCE SPECs

• Detail the results required • State verification methods • Relatively new & expanding Needs: Flexible design concepts Reduced construction time & cost Alteration overnight Translation to specs: Structural system spanning 2 rooms HVAC system compatible with changes Ceiling & lighting systems Movable interior partition system Clear expression of requirements Clear definition of satisfactory performance Clear definition of verification tests

Time

• NTP - Notice to Proceed • Schedule • Critical path • Float • Compensable damages • Non-compensable damages

Scheduling

• No damage for delay • Act of god • C of O - certificate of occupancy - code officials issue this • Substantial Completion _ architect issued