Contracts

1. Contracts

2. Parts of a Contract • Drawings • General conditions – Boilerplate – Establishes right, responsibilities, authority, and obligations. • Supplementary conditions – Specific to each job, • Specifications – include all of contract except drawings

3. Technical Specifications • Qualitative description of items on project • Either specs govern over drawings or the architect/engineer decides when drawings and specs do not agree. • Need to be technically accurate and adequate • Definite & clear stipulations • Fair & equitable requirements • Easy to use during bidding and construction • Legally enforceable

4. Design Specifications • material and workmanship specifications (method and materials) • - 2x4 @ 16” o.c.

5. Performance Specification • spec finished product, let the contractor select the material and method. • Wall must support a 300 pound/LF vertical load • Can incorporate both design and performance specs to specify finished product and method and materials. • Wall must support a 300 pound/LF vertical load and be constructed from 8” x 8” x 16” concrete block

6. Specifications • Closed Spec – requires spec’d item • Proprietary Spec - name supplier • Open Spec – Required for public projects • Or Equal – AVOID – lets engineer spec 1 item and then allow for other “equal” items • Or Approved Equal – Architect/engineer can decide whether a product is equal • Reference Spec - References tests, product names, part of the technical spec. • Standard Spec – Standards from one job to the next.

7. As Built Drawings • Very important • Provide the final location of all underground utilities, and facilities and all above ground facilities. • Used as the reference document for future work on site • Cheshire fair

8. Matter of time • Major aspect of contracts - Contracts can specify that a job be completed in either XX working days or XX calendar days. • Working days • used when weather delays can be expected - Any day except Saturday, Sunday and holidays. • Calendar days are used when a definite opening date is desired. • Dept store must open before thanksgiving

9. How many days • Project schedule • submitted prior to starting work • sets work schedule. • Limitation of Operations • Times owner does not want contractor operating on the site. • Liquidated Damages • Compensation for financial & other losses due to late opening. ($10,000/day after Nov 20)

10. Types of Delays • Delay caused by contractor or contractor’s agents – owner can fire contractor • Delay caused by owner or owner’s agents - contractor can ask for time extension • Delay caused by force majeure or act of God. Usually no $ for either owner or contractor • No damage for delay clause – protects party from liability due to delays caused by that part

11. Exceptions • Delay not contemplated – Labor strikes, back orders on supplies. • Active interference – action by a 3rd party which causes work to slow or stop - environmental pickets • Delays of unreasonable duration – delays by owner which are unreasonable in length • Fraud or bad faith

12. Exceptions • Allow contractor/owner to get time extensions for project • Extension of Time – if running late, get an extension of time. • Excusable Delay – act of God, labor strike, flooding, etc.

13. What can Happen • Acceleration • Actual – owner says hire more workers. Owner pays • Constructive – owner refuses time extension – so contractor has to hire more help. If owner is cause of delay, which leads to falling behind, contractor may be able to collect for extra help.

14. What can Happen • Suspension of Work • gives owner ability to stop work. Owner may have financial trouble • Termination: • Default of contractor • Convenience of owner • Owner may find that the project is too expensive and decide to terminate the project.

15. Effect of Delays • Delay caused by contractor or contractor’s agents – owner can fire contractor • Delay caused by owner or owner’s agents - contractor can ask for time extension Delay caused by force majeure or act of God. Usually no $ for either owner or contractor

16. Home Office Overhead • Operations & Maintenance of home office • Eichleay Formulae • OHproj = (Billingsproj)/(Billingstotal)*OHTotal • For Delay • OHdelay = (OH/Duration)proj*(days of delay)

17. CONTRACT DESCRIPTORS • Contract • Agreement between two parties that is enforceable by law for their mutual benefit. • Litigation • Court decision, which is binding on both parties • Executed • When both parties have fully performed in accordance with the contract terms, i.e., • Executory • When some portion of agreement remains undone,

18. Contracts can be • Bilateral • Both parties promise something to each other. Most construction contracts are bilateral. • Unilateral • One party promises something while the other party exchanges something other than a promise. Action may substitute for promise, i.e., I’ll sell you 100 RR ties for $6 each > You send me a check for $600 you own RR ties. You are in control of whether or not contract is formed.

19. Contracts can be • Expressed • Terms are clear, concise, explicit and well defined. • Implied • Terms not clearly stated but established thru inference and deduction, i.e. Drive to parking lot, give attendant $2 and park car • An expressed contract can be altered by an implied contract if the project described in the expressed contract, once signed, is significantly changed. Then an implied agreement to do the work for hourly rates could become binding.

20. Contracts can be • In Joint Agreement • individual parties joined into one party in legal and liability sense, • Several or Separate • Each party has a liability that is separate from any other party. • Joint and Several • Binds individuals as a unit + each individual accepts separate accountability.

21. Contract disputes • Usually solved by courts. By using standard provisions in contracts it makes it easier for the courts to reach a decision.

22. Torts • disputes that relate to matters not addressed by statutory law or contract obligations. • Wrongs committed against others that do not involve contracts. • Common law interpretation required • Can result from a special action or can be caused by failure to act • Offense against person that does not involve a crime or law violation • A tort can be a crime

23. To file a tort • 1) Establish that one party had a duty to the other party & breach in performance of duty • 2) How damage is direct consequence of (1) • Examples: slander, libel • Standard of care – Conduct expected of someone in a given capacity. • Attractive Nuisance – A construction site is an attractive nuisance. A tort action of trespass could be denied because of this. • Contributary Nuisance – Offered as a defense to avoid liability from an injury. Injury occurred due to actions of injured party.

24. Bond Terms • Principal • Principal debtor is party whose performance is guaranteed • Surety • Company pays if principal does not perform • Obligee • Party to whom promise of principal’s performance is made

25. Bonds • Miller Act (1935) • Surety bond required for all federal assistance projects. • Bid bond • Bond that contractor will enter into binding contract & will provide payment & performance bonds. • Performance bond • Payment bond • Protects owner if the general contractor does not pay the subs or suppliers

26. Elements of a Contract • Meeting of Minds • Agreement on a basic meaning & legal implications of the contract. • Unreality of Consent • cannot agree on basics>>no contract • Contract is based on fact.

27. Contract is null and void if • Unilateral mistake or mutual error (Unintentional) • Parties do not have same perception of the identity of the subject of the agreement • Subject does not exist due to death, destruction, etc. • Misrepresentation • Fraud (intent to deceive) • Fraud (deliberate failure to provide relevant information vital to the agreement) • Duress (forced consent) • Error in plans

28. Offer & Acceptance • Offer • one person signifies to another a willingness to enter into a binding contract on certain terms. • Acceptance • creates contract provided it was made in the manner & time specified in the offer. • Counter Offer • if acceptance is not definite, unqualified and unconditional. Once a counter offer is made, the original offer is no longer valid.

29. Consideration • Something of value • Prime reason for entering a contract. Both parties must have consideration or contract is void. Consideration does not have to be actual benefit, i.e., pay someone not to marry – binding upon acceptance.

30. Lawful Subject Matter • Contracts must have it. • Subject matter cannot violate any fundamental dictate of common law, or be contrary to public policy. Collusion or bid rigging is illegal and any contract between two parties for the purpose of rigging bids is void.

31. Competent parties • Cannot be insane, drunk, or a minor.

32. Estoppel • Contract becomes binding in spite of the fact that no formal agreement was made between parties. • Implied agreement, i.e., go to a movie, pay $ >> see movie or get a refund. • Promissary Estoppel • Frequently encountered in construction. Bid by phone, which is used in a larger bid package, is binding.

33. Assignment of Contracts • Transfer rights and responsibilities to a 3rd party not originally involved in the contract. • Second party cannot be placed in a worse position than it would have without the assignment. Loans, etc.

34. Real Property • Real Property • Land and attachments (buildings, permanent fixtures on land) • Liens • Legal claim on property. Party has the right to retain property until debt is satisfied. • Tax Lien – Right of government to retain possession of property until taxes are paid. • Mechanics Lien – Right to place a claim on land on which work was performed. Includes all craftsmen and suppliers. Needs written contract

35. Real Property • Eminent Domain • Right of public to take land at fair market value when the land will be used to provide a benefit (service) to the public. • Condemnation – exercising the right of eminent domain. • Zoning

36. Stop Notice • Notify owner of non-payment by general contractor. Can be placed by supplier, sub, worker.

37. Agents • Principal is liable for all contracts made by the agent. • Agents • must display complete loyalty & good faith, • obey instructions, • not exceed authority, • cannot compete with the principal, • profit at principal’s expense, • or do any self dealing.

38. Contingent Liability • Injured 3rd party is not or should not be affected by a contract between two other parties. Therefore, injured worker can sue owner and contractor. Engineers can be 3rd parties – due to inspection.