Construction Engineering 380

1. Construction Engineering 380 Termination

3. Termination Termination for mutual convenience or when neither party is responsible is also allowed given certain circumstances are present Mutual convenience is �uncontracting�, so same requirements for contracting must be present Neither party responsible usually requires a dramatic triggering effect (9/11)

4. Termination Must send notice of termination as spelled out in the contract, then material and equipment ownership transfer occurs, final payment claims are submitted, and termination dispute arguments (if any) are entered

5. Bankruptcy Federal and state jurisdictions Case turned over to trustee when a company or individual can no longer make debt payments (simplified case) Company filing the bankruptcy is debtor (they owe) Companies owed money are creditors Trustee marshals and/or liquidates non-exempt assets to pay off creditors

6. Bankruptcy Types of bankruptcy Chapter 7- debt liquidation Unsecured debts discharged (creditor- no security) Law is specific about what debts can be discharged If business files Ch 7, debts are never discharged Ch. 7 usually means the company is going out of business Secured debts- underlying asset can be sold to make good on the debt (or a portion thereof) Exempt assets are listed in law

7. Bankruptcy Chapter 11- business reorganization Create breathing room to allow company to get back on its feet Debtor continues to operate as debtor-in-possession Can be forced into involuntary chapter 7 if they fall behind reorganization plan for credit K-Mart example

8. Bankruptcy Chapter 13- individual reorganization Individual chooses to pay only a portion of unsecured debts and discharge balance Complicated process for determination No adverse affect on credit rating & availability Credit card companies don�t like it

9. Bankruptcy Automatic stay- creditors cannot attempt to collect or harm the debtor (refuse to sell) Failure to abide by a stay is contemptible act with fines and imprisonment Mechanic�s liens- perfection of lien is allowed, but not enforcement Executory contracts- parties continue to have duties and obligations to each other in spite of bankruptcy. Construction contracts are usually considered executory

10. Bankruptcy Fraudulent transfer and preference- trustee can nullify money transfers made up to one year prior to filing Transfers off-shore or to family members can be fraudulent Preferential payment can be nullified as well Payment for which additional value is not received are deemed preferential (did not need to pay, or paid earlier than necessary)

11. Bankruptcy Construction bankruptcy actions Forced return of payment if fraudulent or preferential Liens may be filed Contract enforcement shifts to trustee of creditor group, no longer dealing with owner Retainage becomes an asset of bankruptcy- contractor must �stand-in-line� with other creditors

12. Bankruptcy Involuntary bankruptcy- person or business forced to declare chapter 7 or 11. Involuntary declaration in an attempt to control debtor actions by creditors Usually used when assets are being moved between companies DCT example