Presented by: L. Skip Vernon, CLT, Inc.

1. Introduction to Common Coating Contract Evaluation Presented by: L. Skip Vernon, CLT, Inc.

2. Introduction This webinar provides an overview of basic contract terminology and contract language that owners and contractors should be aware of at the outset of any project.

3. Learning Outcomes • At the end of this webinar, you will be able to: • Explain the primary purpose of a contract • Recognize the basic content and purpose of the various contract documents • Identify the general principles of contract interpretation • Recognize various forms of dispute resolution

4. Basic Contract Principles • What is a contract? • Why are contracts necessary? • Who are the parties to a contract?

5. What is a Contract? • An exchange of promises a court will enforce • Also can refer to the document memorializing an enforceable agreement

6. Why Are Contracts Necessary? • To facilitate the orderly conduct of business and personal transactions • To memorialize and describe the promises

7. Who Are the Parties to a Contract? • Who, promised whom, to do what, where, how, when . . . . (contract privity) • Owner • General Contractor • Subcontractor • Sub-subcontractor • Supplier (Manufacturer)

8. Owner General Contractor Subcontractor Subcontractor Subcontractor Sub-subcontractor Supplier Distributor Supplier Supplier Supplier Contract Privity

9. Typical Contract Documents • Contract or subcontract • Specifications • Plans - Drawings • Supplemental Agreements

10. Contract or Subcontract • Contains the “legal” language • Rights, remedies, duties of contract management • Purchase orders

11. Specifications • Integral part of contract • Promises made by subcontractor (painter) • Should be specific and objective

12. Types of Specifications • Prescriptive • Performance • Proprietary

13. Specification Sections • General Conditions • Supplemental General Conditions • Special Provisions

14. Standards in Specifications • Standards (e.g., SSPC-SP 5, SP 10, SSPC PA 1, 2, etc.) • Reason for use • Part of contract • Latest revision • Standards referencing standards • SSPC SP 6 references SSPC AB 1

15. Plans - Drawings

16. Supplemental Agreements • Submittals • Change Orders • Correspondence

17. Contract Interpretation • What was promised? • Where do we find the promises? • Owner and General Contractor • General Contractor and Subcontractor • Subcontractor and sub-subcontractors or suppliers

18. Who Interprets Disputed Contracts? • Judge • Jury • Arbitrator • Mediator • NOT the parties

19. General Principles of Contract Interpretation • Implied Warranty of Suitability • Course of Past Dealings • Industry Practice • Reasonable Party • Ambiguities

20. Implied Warranty of Suitability (Spearin Doctrine) • Owner implied warrants that the specifications are sufficient for their intended purpose

21. Course of Past Dealings • If the contract is not clear the Court will look to the past dealings of the parties to decide contract rights and responsibilities: How have the parties deal with these issues in the past?

22. Industry Practice • If the contract language is not clear the Court will look to the standard industry practice to decide contract rights and responsibilities: What would a reasonable contractor/owner/supplier (party) have done?

23. Reasonable Party • Judges will ask, “What would a similarly situated reasonable person (contractor, owner, supplier,) have done?”

24. Ambiguities • Contract requirements which can be reasonably read to have two or more possible meanings; indefinite or vague • Generally interpreted against the drafter

25. Typical Coating Contract Claims • Differing Site Condition Claims • Type 1 • Type 2 • Breach of Contract • Breach of Warranty

26. Differing Site Condition Claims • A physical condition other than the weather, or act of God, discovered on a coating project that differs in a material respect from what was indicated in the specifications or from what was reasonably anticipated

27. Differing Site Condition Claims: Type 1 Elements 1-3 (6 total) 1. Contract documents make indications regarding the conditions that form the basis of the claim. 2. Contractor interpreted the documents as would a reasonably prudent contractor. 3. Contractor must have reasonably relied on the indications of the concealed conditions in the contract documents.

28. Differing Site Condition Claims: Type 1 Elements 4-6 4. Conditions encountered must have been materially different from what was indicated in the contract documents. 5. Actual conditions must have been reasonably unforeseeable. 6. Contractor must prove increased costs arising solely from the difference in the actual and indicated conditions.

29. Differing Site Condition Claims: Type 2 Elements 1. The recognized and usual conditions at the site. 2. The physical conditions actually encountered. 3. The physical conditions actually encountered differed materially from the known and usual. 4. The actual conditions caused an increase in the cost of performance.

30. Differing Site Condition Claims: Sight Investigation Clause • Contract clause that requires contractor to investigate the site (e.g., “The contractor shall visit the site and fully familiarize itself with all aspects of the work”) • Only a reasonable site investigation required • Latent v patent

31. Differing Site Condition Claims: Barriers to Recovery • Failure to investigate the site in abrogation of site investigation clause. • Lack of notice • Disclaimers • Releases • Exculpatory Clauses

32. Breach of Contract • Material deviation from the terms and conditions of the contract

33. Breach of Warranty • Breach of warranty promise • Express Warranty by Seller • Implied Warranty of Merchantability • Implied Warranty of Fitness for a Particular Purpose • Breach of contract • Separate written or verbal promise

34. Breach of Warranty: Defenses • Product as specified, constructed as specified, specified product defect, failure to maintain, failure to use properly, failure to apply as specified, UCC disclaimers

35. Breach of Warranty v. Breach of Contract • Contract finalized – final acceptance • Final Acceptance – definition (See contract) • Contract terms no longer apply • Demand for repair • Determination of responsibility/liability

36. Construction Contract Review • Review the contract focusing on language and terms • Before signing any contract it should be read cover to cover and fully understood • Objectionable, ambiguous, unclear or unfair clauses should be addressed • Discuss • Offer alternative language • Refuse to sign

37. Construction Dispute Resolution Methods • Mediation • Arbitration • Litigation/Court

38. Mediation • Each side presents its case to the mediator or mediation panel and the mediator tries to persuade the parties to settle • Binding or Non-binding

39. Arbitration • Each side presents its case to the arbitrator or arbitration panel and a decision is rendered • Binding and non-binding forms • Typically more rules

40. Litigation/Court

41. Summary A contract is an exchange of promises a court will enforce. Typical contract documents include contract or subcontract, specifications, plans and drawings, and supplemental agreements. Implied Warranty of Suitability, Course of Past Dealings, Industry Practice, Reasonable Party, and Ambiguities are the principles by which contracts are interpreted. Contract dispute resolution may be handled through mediation, arbitration, or litigation.

42. For More Information on Contracts Sign up for the SSPC course: Evaluating Common Coating Contract Clauses Call 1-877-281-7772 to register.