Common Sense Construction Law A Practical Guide for the Construction Professional by Thomas J Kelleher Jr and G Scott Walters
Contents of Common Sense Construction Law
- Legal Context of Construction
- Introduction
- Contract Law
- Breach of Contract
- Implied Contract Obligations
- Evolution of Construction Law
- Torts
- Intentional Torts
- Negligence
- Strict Liability
- Statutory and Regulatory Laws Affecting Construction
- Points to Remember
- Alternative Contracting Methods
- Traditional Approach to Construction: Advantages and
- Disadvantages
- Multiprime Contracting and Fast-Tracking
- Construction Management
- Agency Construction Management
- Program Management
- Construction ManagerGeneral Contractor
- Design-Build Contracting: What Works to Avoid Disputes
- The Design-Builder’s Perspective
- The Owner’s Viewpoint
- The Successful Design-Build Project
- Design Professional Liability Issues in
- a Design-Build Project
- CONTENTS
- Design-Build Aspects of Traditional Construction
- Performance Specifi cations
- Shop Drawings
- Secondary Design Review
- The Interpretations Clause
- Identifi cation of Patent Defects
- Compliance with Permits, Codes, and Regulations
- Contractor Liability Issues
- Engineer-Procure-Construct
- Limitations of Liability
- Liquidated Damages
- Private Public Partnerships
- Points to Remember
- Preparing to Work in a New State: Preproposal and
- Performance Considerations
- Qualifying to Do Business
- I State Registration Requirements: Bonds to Secure
- Payment of Taxes
- State Licensing and Qualifi cations
- Public Construction Awards
- State Statutes and Policies Affecting Contract Terms and
- Conditions
- Subcontractor General Contractor Relationships
- Contract Award Preference Regulations
- Public Policy Limitations on Contract Clauses
- Impact of New Legislation
- Preservation of LienBond Rights
- Preconstruction Knowledge of Lien Law Peculiarities Is Essential
- Lien Law Protections and Procedures Vary Greatly from
- State to State
- “Almost Right” Is Almost Always Not Good Enough
- A Valid Claim of Lien Does Not Guarantee Payment
- Arm Yourself Early with Accurate
- Lien Law Information
- Risk Assessment Checklists
- Information Sources
- Points to Remember
- Competing for the Contract
- Introduction: Sealed Bids to Negotiated Best-Value Awards
- I General Considerations in Bids for Public Contracts
- The Responsible Bidder
- The Responsive Bidder
- The “Lowest And Best” Bidder
- Negotiated “Best Value” Selection Process
- Electronic Bids
- Reverse Auctions
- General Considerations When Competing on Private Contracts
- Effect of Past Performance Evaluations on Award Process
- Past Performance Evaluation Procedures
- Challenges to Past Performance Evaluations
- Contractor Bid Mistakes
- Elements for Relief from Bid Mistake
- Owner’s Duty If Bid Mistake Is Suspected
- Withdrawal versus Reformation of Bid Mistake Bid Protests
- Protests on Federal Government Contracts
- Protests before or after Receipt of Bids or Offers
- Protests to the Contracting Agency
- Protests to the Comptroller General
- Bid Protests in Court
- Bid Protests on State and Local Public Contracts
- Bid Bonds
- “Bid Shopping”: What Is the Obligation of the Prime Contractor to the Subcontractor Submitting the Lowest Price?
- Holding SubcontractorsVendors to Their Bids
- Promissory Estoppel
- Elements of Promissory Estoppel
- Statute of Frauds Issues
- I Damages
- Points to Remember
- Intepreting the Contract
- The Importance of Contract Interpretation
- I What Is a “Contract”?
- The Goal of Contract Interpretation
- Defining Contract Terms
- Terms Defined by the Parties
- Technical Terms
- Generally Accepted Defi nitions
- Interpreting the Contract’s Wording
- The Contract Must Be Considered as a Whole
- Specific Terms versus General Terms
- Handwritten, Typed, and Preprinted Terms
- Order-of-Precedence Clause
- The Facts and Circumstances Surrounding Contract Formation
- Discussions and Conduct
- The Parties’ Prior Dealings
- Industry Custom and Usage
- Limitations on the Use of Facts and Circumstances
- Surrounding the Contract
- Resolving Ambiguities
- Construing the Contract against the Drafter
- Duty to Request Clarifi cation
- Implied Contractual Obligations
- Duty of Good Faith and Fair Dealing
- Duty to Cooperate
- Warranty of Plans and Specification
- The Spear in Doctrine
- Contractual Obligations Arising by Operation of Law
- Points to Remember
- The Uniform Commercial Code and the
- Construction Industry
- The Uniform Commercial Code
- I Applicability of the UCC to Construction
- Determining When Article Applies
- Modifying UCC Obligations
- Contract Formation under the UCC
- Agreement on All Terms and Conditions Is Not Required
- Methods of Acceptance
- Requirement for a Written Contract
- Withdrawal of an Offer
- Filling Gaps in Essential Contract Terms
- Risk of Loss
- Inspection, Acceptance, Rejection, and Revocation of Acceptance
- Inspection of Goods
- Rejection of Goods
- Acceptance and Notice of Breach
- Seller’s Right to Cure
- Revocation of Acceptance in Whole or in Part
- Warranties under the UCC
- Warranty Disclaimers
- Warranty Limitations
- Statute of Limitations and Commencement of the Warranty Period
- Performance Issues
- Anticipatory Repudiation Adequate Assurance of Performance
- Dealing with the Other Party’s Insolvency
- Excuse of Performance by Failure of Presupposed
- Conditions
- Buyer’s Remedies
- Seller’s Remedies
- Points to Remember
- Authority And Responsibility of the Design Offi cial
- Overview
- I Standard of Care and Professional Responsibility
- Authority of the Design Professional
- Actual Authority
- Implied Authority
- Apparent Authority
- Ratifi cation of the Design Professional’s Authority
- Supervisory and Administrative Functions of the Design
- Professional
- Interpretation of the Plans and Specifications
- Review and Approval of Shop Drawings and
- Submittals
- Inspections and Testing
- Issuance of Certificates of Progress or Certificates of
- Completion and Certificates for Payment
- Resolution of Disputes between the Owner and the Contractor
- Other Duties of the Design Professional
- The Design Professional’s Liability to the Contractor
- Negligence and the “Economic Loss Rule”
- Intentional Torts
- Third-Party Beneficiary Theory
- Professional Liability Coverage
- Statutes of Repose
- Effects of Contractual Limitations on Design
- Professional Liability
- Assumption of Design Liability by the Contractor
- Recent Standard-Form Contract Efforts Regarding Shared
- Responsibility and Risk
- The Design Professional’s Copyright for Design Documents
- Points to Remember
- Subcontract Administration and Dispute Avoidance
- Dispute Avoidance Begins at the Bidding Stage
- The Importance of the Low Price
- Know the Other Parties
- Problem Areas in Subcontract Bidding
- I Preparation of the Subcontract Agreement
- “Flow-Down” Obligations
- Scope of the Work
- Payment Obligations
- Subcontractor Termination
- No Damages for Delay, Except as Paid by the Owner
- Changes
- Subcontractor’s Indemnifi cation of the Contractor
- Labor Affi liation
- Disputes Procedures
- J. Federal Government Projects
- Should Subcontractors Be Bonded?
- Dispute Avoidance by Diligent Project Administration
- General Contractor’s Duty to Coordinate the Work
- Implied Duty to Cooperate
- Implied Duty to Coordinate
- Limitation of Liability
- Pay Applications and Partial Lien Waivers
- Prime Contractor Financing of Subcontractors
- Remedies for Defective Performance
- Remedies for Delayed Performance
- Relationship between Subcontractor and the Owner: Can the Prime Contractor Assert the Subcontractor’s Rights against the Owner?
- J. Prime Must Be Liable to the Subcontractor for the
- Pass-Through Claim: The Severin Doctrine
- K. States Have Adopted the Severin Doctrine
- L. Conclusion
- Points to Remember
- Contract Changes
- What Is a Changes Clause?
- I Recovery under the Changes Clause
- Is There a Change to the Contract Work?
- Deductive Changes
- Who Is Authorized to Order Changes?
- Implied Authority
- Apparent Authority
- Alternatives to Demonstrating Authority
- Written Documentation of Changes
- Written Directives
- Requirements for Written Notice of a Change
- Constructive Changes
- Informal Extra Work Directives
- Defective Plans and Specifi cations
- Misinterpretation of Plans and Specifi cations by the Owner
- Acceleration
- Cardinal Changes
- The Impact of Numerous Changes on Unchanged Work
- ImpossibilityImpracticability
- Points to Remember
- Differing Site Conditions
- “Differing Site Condition” Defi ned
- I Responsibility for Differing Site Conditions
- Standard Differing Site Conditions Clauses
- Federal Government Contracts
- Consensus DOCS
- Other Standard Forms
- Types of Conditions Covered
- Type I and Type II Changed Conditions
- Notice Requirements
- Operation of the Differing Site Conditions Clause
- Recovery for a Type I Changed Condition
- Recovery for a Type II Changed Condition
- Stumbling Blocks to Recovery
- Site Investigations
- Exculpatory Clauses
- Notice Requirements
- Relief in the Absence of a Contract Provision
- Misrepresentation
- Duty to Disclose
- Breach of Implied Warranty
- Mutual Mistake
- Points to Remember
- Schedules, Delays, and Acceleration
- Developments in Contractual Risk Allocation
- “Time Is of the Essence” Clause
- Contract Commencement and Completion Dates
- Substantial Completion and Final Completion
- Typical Contract Time and Scheduling Clauses
- I Use of Schedules In Project Management
- Types of Delays
- Excusable Delays versus Nonexcusable Delays
- Excusable Delays
- Compensable Excusable Delays
- Nonexcusable Delays
- Typical Causes of Excusable Compensable Delay
- Defective Drawings or Specifi cations
- Failure to Provide Access and Improper
- Site Preparation
- Failure to Supply Materials or Labor
- Failure to Provide PlansApprove Shop Drawings
- Failure to Coordinate Prime Contractors
- Failure to Give Timely Orders for Work
- Failure to Make Timely Payments to Contractors
- Failure to Inspect
- Suspensions
- J. Excessive Change Orders
- K. Failure to Accept Completed Work
- CONTENTS
- Concurrent Delay
- Traditional View: No Recovery by Either Party
- Modern Trend: Apportionment of Delay Damages
- Noncompensable Excusable Delays
- Weather
- Acts of God
- Labor Problems
- Acceleration
- Directed Acceleration
- Constructive Acceleration
- VContractual Limitations to Recovery
- Requirement for Written Notice
- No-Damages-for-Delay Clauses
- Trade-to-Trade Clauses
- Delay Claims and the Use of CPM Schedules
- Delay Claims Supporting Documentation
- Points to Remember
- Inspection, Acceptance, Warranties, and Commissioning
- Inspection
- Introduction
- Standard Inspection Clauses
- Safety-Related Inspection Obligations
- Costs of Inspection
- The Owner’s Right to Inspect
- Rejection and Correction
- Limitation on Owner’s Inspections
- Inspection by the Design Professional or Inspector
- Inspection by the Contractor
- I Acceptance
- Overview
- Types of Acceptance: Formal versus Constructive
- Authority as an Element of Constructive Acceptance
- Limitations on the Finality of Acceptance
- Contract Provisions Related to the Finality of Acceptance
- Substantial Completion
- Final Completion
- Revocation of Acceptance
- Contractual Warranties
- Express Warranties
- Implied Warranties
- Statutory Warranties
- Project Commissioning and Post-acceptance
- Facility Operations
- Commissioning Programs
- Bonding Considerations
- Points to Remember
- Management Techniques to Limit Risks and
- Avoid Disputes
- Construction: A Risk-Prone Business
- I Qualifying the Project and the Participants
- Qualifying the Project
- Qualifying the Project Participants
- Qualifying the Site and Locale
- Defi ning Rights, Responsibilities, and Risks: Parties and
- Their Contracts
- Contract Framework
- Standard Contract Forms
- Critical Contract Provisions
- Avoiding and Preparing for Disputes through Proper Management
- and Documentation
- Prudent and Responsible Estimating
- Establishing Standard Operating Procedures
- Establishing Lines of Communication
- Project Documentation
- Electronic Communications on Construction Projects
- Industry Forms Addressing Electronic
- Communications
- Web-Based Project Management Systems
- Building Information Modeling
- Collaborative Uses of BIM
- BIM’s Legal Implications
- Cost Accounting Records
- Monitoring the Work through Scheduling
- Preserving Electronically Stored Information
- Conclusion
- Points to Remember
- Consensus DOCS
- Contractor’s Statement of
- Qualifications for a Specific Project
- Checklist: PrebidProposal Environmental
- Considerations
- Checklist: Contracts in Foreign States
- Logs and Forms
- Payment Bonds
- Payment Bonds Required by Statute
- The Miller Act
- Little Miller Acts
- I Payment Bonds on Private Projects
- Qualifying for Payment Bond Coverage
- “Subcontractors” and “Suppliers”
- Suppliers of Customized Materials
- “Substantiality and Importance” of Relationship with
- Prime Contractor
- “Dummy” Subcontractors, Alter Egos, and
- Joint Ventures
- Claimants on Private Payment Bonds
- Work Qualifying for Payment Bond Coverage
- Labor and Materials
- Equipment Repairs and Rental
- Recovery under Payment Bonds for Extra Work, Delay Damages, or
- Lost Profi ts, and Other Costs
- Extra Work
- Damages for Delay and Lost Profi ts
- Attorneys’ Fees and Other Costs
- Distinguishing between Payment Bond Claims and
- Performance Bond Claims
- Procedural Requirements
- Time of Notice
- Time of Lawsuit
- Surety Response to Notice of Claim
- Effect of Payment Bonds on Lien Rights
- The Surety’s Defenses to Payment Bond Liability
- Pay-If-Paid Clauses
- Misrepresented Status of Payments
- Claim or Lien Waivers
- Points to Remember
- Performance Bonds and Termination
- Surety Performance Bonds
- Fundamentals of Suretyship Law
- Extension of Performance Bond Surety’s Liability to
- Third Parties
- Increase of the Surety’s Liability under a Performance Bond
- Surety’s Defenses to Performance Bond Liability
- Surety Entitlement to Contract Funds
- Industry Performance Bond Forms: A Comparison
- Effect on the Surety of Arbitration of Construction
- Disputes
- Alternatives to Bonds: “Subguard” Programs
- I Termination
- Overview
- Termination for Default
- Standard Form Contracts: Grounds for Default Termination
- Defenses of the Contractor
- Contractor Response to Termination Notices
- Remedies of the Owner
- Termination for Convenience
- Convenience Termination Costs
- Points to Remember
- Proving Costs and Damages
- Basic Damage Principles
- The Compensatory Nature of Damages
- Categories of Damages
- Causation
- Cost Accounting Records
- Mitigation of Damages
- Betterment
- I Methods of Pricing Claims
- The Total Cost Method
- Segregated Cost Method
- Modifi ed Total Cost Method
- Quantum Meruit Claims
- Contractor Damages
- Contract Changes and Extras
- Wrongful Termination or Abandonment
- Owner-Caused Delay and Disruption
- CONTENTS x
- Owner-Caused Acceleration
- Defective Drawings or Specifi cations
- Ineffi ciency Claims
- Owner Damages
- Direct Damages
- Consequential Damages
- Liquidated Damages
- Points to Remember
- Construction Industry Environmental and
- Safety Concerns
- Sources of Environmental Regulation and Liability
- Encountering Hazardous Materials on a Construction
- Site—CERCLA Liability
- Water Quality
- Air Quality
- I Minimizing Environmental Risks
- Conduct a Prebid Environmental Review of the
- Contract Documents
- Contract Provisions and Indemnifi cation
- Insurance
- Proper Management Techniques
- Management Review of Environmental Risks
- Have a Response Plan
- Immediately Stop Work in the Affected Area
- Provide Immediate Notice
- Do Not Resume Work without Proper Authorization
- Mold: Developing a Program to Limit Liability
- Environmentally Friendly Construction: Green Buildings
- LEED Certifi cation
- Design and Construction Issues Affected by Green Building
- Construction
- Bearing the Risk: Legal Issues Raised by LEED
- V Construction Safety
- Sources of Safety Requirements: OSHA-Specifi c
- Project Procedures
- Successfully Working with OSHA
- Who Is Responsible for Project Safety?
- Indemnifi cation
- Workers’ Compensation Statutes
- Points to Remember
- Construction Insurance
- Importance of Insurance Planning
- I Types of Insurance
- Commercial General Liability
- Builder’s Risk Insurance
- Errors and Omissions Insurance
- Alternatives to Traditional Insurance Programs
- Contract Requirements for Insurance
- Standard Contract Clause
- Waiver of Subrogation
- Proof of Insurance
- Prompt Action to Protect Potential Coverage
- Sensitivity to Insurance Issues
- Immediate Notice
- Insurer’s Response to Claims
- Reservation of Rights
- Litigation with the Insurer
- Routine Coverage Issues
- CGL Coverage Issues
- Builder’s Risk Coverage Issues
- Concurrent Causes
- Construction Insurance and Mold Claims
- The Insurance Industry Responds
- Mold Claims: Establishing whether Coverage is Available
- Points to Remember
- Labor and Employment Issues Affecting the
- Construction Industry
- Immigration Issues
- Immigration Documentation and Control
- Responses to Immigration Inquiries
- Immigration Issues in Public Contracting
- I Employee Safety and Health
- Wage and Hour Requirements
- Basic Calculation
- Overtime Calculation
- Independent Contractor Status Considerations
- Government Contracts
- Employee Benefi ts: ERISA
- Employment Discrimination
- Equal Employment Opportunity Commission
- Title VII of the Civil Rights Act of
- Americans with Disabilities Act
- Age Discrimination in Employment Act
- Discrimination and Public Contracting
- Offi ce of Federal Contract Compliance Programs
- Executive Order
- Uniform Service Employment and Re-Employment Rights
- Act
- Family and Medical Leave Act
- Union Activity
- Union-Organizing Tactics
- Appropriate Employer Responses to
- Union Activism
- Utilizing Employee Background Investigations
- Points to Remember
- Bankruptcy in the Construction Setting
- Introduction
- I The Players
- Bankruptcy Code
- Chapter Reorganization
- Chapter Liquidation
- Automatic Stay
- Sanctions for Violation of Automatic Stay
- Relief from the Automatic Stay
- Preferential Transfers
- Exceptions to the Preferential Transfer Rule
- Discharge
- Nondischargeable Debts
- Status of the Debtor’s Contracts
- Executory Contracts
- Affirmance or Rejection
- Assignment
- Minimizing the Impact on Executory Contracts
- Status of Materials and Equipment
- Property of the Debtor’s Estate
- Supplier’s Right to Recover Goods
- Stored Materials
- Voiding Unperfected Security Interests
- Status of Contract Funds
- Unearned Contract Funds
- Earned but Unpaid Contract Funds
- Other Sources of Funds
- Performance and Payment Bond Claims
- Mechanic’s Liens
- Guarantors
- Points to Remember
- Resolution of Construction Disputes
- Early Claim Recognition and Preparation
- I Early Involvement of Experts and Attorneys
- Demonstrative Evidence
- Contemporaneous Records
- Components of a Well-Prepared Claim Document
- Calculating and Proving Damages
- Pursuing Negotiation and Settlement
- Alternatives to Litigation
- Dispute Review Boards
- Minitrials Summary Jury Trials
- Mediation
- Arbitration
- Time and Costs of Arbitration
- Selection of Arbitrators
- Informality and Limited Appeals in Arbitration
- Enforceability of Agreements to Arbitrate
- Special Problems Involving Multiple Parties to
- Arbitration
- Med-Arb
- Arbitration Agreements and Procedures
- American Arbitration Association Rules and Procedures
- Center for Public Resources Rules and Procedures
- International Chamber of Commerce Rules and Procedures
- Party-Drafted Arbitration Agreements: Federal and State Law
- Considerations
- Litigation
- Profile of the Construction Trial
- The Court System
- Federal Rules of Civil Procedure
- Discovery
- Judge or Jury?
- Alternative Dispute Resolution in the Courts
- Trial
- Live Testimony
- Points to Remember
- Federal Government Construction Contract Disputes
- Historical Overview
- I Scope of the Contract Disputes Act
- The Freedom of Information Act: A Claim Preparation Tool
- Contractor Claims
- When Must a Claim Be Submitted?
- Notice Requirements
- Who May Submit a Claim?
- What Constitutes a Claim?
- Written Submission to the Contracting Officer
- Elements of a Claim
- Certification Requirement
- Monetary Threshold for Certification
- Modification of Claim Amount
- Certification Language
- Supporting Data
- Who Can Certify the Claim?
- Other Certification Requirements
- Certification of Subcontractor Claims
- Government Claims
- Contracting Offi cer’s Decision
- Time Allowed for Issuing the Decision
- Contents of the Final Decision
- Appeal Deadlines
- Choosing a Forum: Board or Court of Federal Claims
- Transfer and Consolidation of Cases
- ADR and Government Contract Disputes
- I Recovery of Attorneys’ Fees in Government Contract Claims
- False or Infl ated Contract Claims
- Points to Remember