Smith, Currie & Hancock's Common Sense Construction Law

Preface xxv Author Biographies xxvii 1 The Legal Context of Construction 1 I. Introduction 1 II. Contract Law 1 III. Evolution of Construction Law 3 IV. Torts 4 V. Statutory and Regulatory Laws Affecting the Business of Construction 7 2 Interpreting the Contract 11 I. The Importance of Contract Interpretation 11 II. What is a Contract? 11 III. The Goal of Contract Interpretation 12 IV. Defining Contract Terms 12 V. Interpreting the Contract’s Language 13 VI. The Facts and Circumstances Surrounding Contract Formation 15 VII. Resolving Ambiguities 18 VIII. Implied Contractual Obligations 19 IX. Contractual Obligations Arising by Operation of Law 23 3 Alternative Contracting Methods 26 I. Traditional Approach to Construction: Advantages and Disadvantages 26 II. Integrated Project Delivery 27 III. Multiprime Contracting and Fast-Tracking 31 IV. Construction Management 32 V. Design-Build Contracting 35 VI. Design-Build Aspects of Traditional Construction 43 VII. Contractor Liability Issues 47 VIII. Engineer-Procure-Construct 48 IX. Building Information Modeling 51 4 Public-Private Partnerships 56 I. The P3 Alternative 57 II. P3 Project Participants 64 III. P3 Financing Strategies 68 IV. P3 Risk Allocation 73 V. Conclusion 77 5 International Construction Contracts 79 I. Unique Issues 79 II. Project Delivery Methods and Contract Forms 81 III. Dispute Resolution 92 6 Working in a Different State 96 I. Qualifying to Do Business 96 II. State Registration Requirements: Bonds to Secure Payment of Taxes 97 III. State Licensing and Qualifications 98 IV. Public-Sector Construction 99 V. State Statutes and Policies Affecting Contractual Relationships and Terms 101 VI. Preservation of Lien/Bond Rights 107 VII. Project Risk Assessment—“Foreign States” 109 VIII. Information Sources 110 Appendix 6.1 Checklist: Projects in “Foreign Jurisdictions” 112 7 Competing for the Contract 115 I. Introduction: The Rationale for Competition 115 II. Key Concepts in Traditional Public Competitive Bids—Responsiveness and Responsibility 116 III. The “Lowest and Best” Bidder 122 IV. Negotiated “Best Value” Selection Process 124 V. Electronic Bids 126 VI. Reverse Auctions 128 VII. General Considerations When Competing on Private Contracts 129 VIII. Effect of Past Performance Evaluations on Award Process 130 IX. Contractor Bid Mistakes 136 X. Bid Protests on State or Local Government Contracts 140 XI. Bid Bonds 142 XII. “Bid Shopping”: What is the Prime Contractor’s Obligation to the Subcontractor Submitting the Lowest Price? 144 XIII. Holding Subcontractors and Vendors to Their Bids 146 XIV. Statute of Frauds Issues 149 XV. Damages 150 8 The Uniform Commercial Code and the Construction Industry 152 I. Applicability to Construction Projects—Purchasing Equipment and Materials 152 II. Determining When Article 2 Applies 153 III. Modifying U.C.C. Obligations 153 IV. Contract Formation Under the U.C.C. 154 V. Risk of Loss 156 VI. Inspection, Acceptance, Rejection, and Revocation of Acceptance 157 VII. Warranties Under the U.C.C. 160 VIII. Statute of Limitations and Commencement of the Warranty Period 162 IX. Performance Issues 164 9 The Design Professional’s Authority and Responsibility 169 I. Overview 169 II. Standard of Care, Professional Responsibility, and Liability 169 III. The Design Professional’s Authority 176 IV. The Design Professional’s Administrative Functions 179 V. The Design Professional’s Other Duties 189 VI. The Design Professional’s Liability to the Contractor and Third Parties 190 VII. Statutes of Repose 196 VIII. Effects of Contractual Limitations on Design Professional Liability 198 IX. Assumption of Design Liability by the Contractor 201 X. Shared Responsibility and Risk 203 XI. The Design Professional’s Copyright for Design Documents 205 10 Subcontract Administration and Dispute Avoidance 209 I. Dispute Avoidance Begins at the Bidding Stage 209 II. The Subcontract Agreement 214 III. Should Subcontractors Be Bonded? 233 IV. Dispute Avoidance by Diligent Project Administration 234 11 Contract Changes 245 I. What is a Changes Clause? 245 II. Recovery Under the Changes Clause 251 III. Constructive Changes 259 IV. Cardinal Changes 264 V. The Impact of Numerous Changes on Unchanged Work 266 VI. Impossibility/Impracticability 266 12 Differing Site Conditions 269 I. “Differing Site Condition” Defined 269 II. Responsibility for Differing Site Conditions 269 III. Standard Industry Differing Site Conditions Clauses 270 IV. Comparison of Differing Site Condition Provisions 277 V. Operation of the Differing Site Conditions Clause 279 VI. Stumbling Blocks to Recovery 288 VII. Relief in the Absence of a Contract Provision 294 Appendices—Site Investigation Checklists 299 Appendix 12.1 Project Checklist: Qualifying the Site 300 Exhibit A: Site Investigation Record 301 Appendix 12.2 Pre-Bid Environmental Considerations 303 13 Schedules, Delays, and Acceleration 305 I. Allocating the Risk of Performance Time in the Contract 306 II. Use of Schedules in Project Management 311 III. Analysis of Project Delay 314 IV. Typical Causes of Compensable Delay 316 V. Concurrent Delay 322 VI. Excusable but Noncompensable Delays 323 VII. Acceleration 325 VIII. Contractual Limitations to Recovery for Delays 327 IX. Owner Claims for Delay 330 X. Delay Claims and the Use of CPM Schedules 331 XI. Documentation to Support Delay Claims 332 14 Inspection, Acceptance, Warranties, and Commissioning 337 I. Inspection 338 II. Acceptance 348 III. Contractual Warranties 355 IV. Project Commissioning and Post-Acceptance Facility Operations 359 15 Management Techniques to Limit Risks and Avoid Disputes 364 I. Construction: A Risk-Prone Business 364 II. Qualifying the Project and the Participants 365 III. Defining Rights, Responsibilities, and Risks: Parties and Their Contracts 371 IV. Contract Framework 372 V. Avoiding and Preparing for Disputes Through Proper Management and Documentation 376 VI. Prudent and Responsible Estimating 376 VII. Establish Standard Operating Procedures 377 VIII. Establish Lines of Communication 378 IX. Project Documentation 378 X. Electronic Communications on Construction Projects 383 XI. Cost Accounting Records 387 XII. Monitoring the Work through Scheduling 388 XIII. Preserving Electronically Stored Information 389 XIV. Conclusion 390 Appendix 15.1 ConsensusDocs 221—Contractor’s Statement of Qualifications for a Specific Project 391 Appendix 15.2 Logs and Forms 406 Appendix 15.2A Format for Notice Checklist 407 Appendix 15.2B Sample Partial Notice Checklists 409 Appendix 15.2C Forms 413 Appendix 15.2D Request for Information 418 Appendix 15.2E Telephone Conversation Memorandum 419 Appendix 15.2F Sample Daily Report 420 Appendix 15.2G Notice of Backcharge 421 Appendix 15.2H Field Order Status Chart 422 Appendix 15.2I Log: Incoming Correspondence 423 Appendix 15.2J Log: Outgoing Correspondence 424 16 Payment Bonds 425 I. Payment Bonds Required by Statute 426 II. Payment Bonds on Private Projects 431 III. Who is Protected by Payment Bonds 432 IV. Work Qualifying for Payment Bond Coverage 437 V. Recovery Under Payment Bonds for Extra Work, Delay Damages, or Lost Profits and Other Costs 439 VI. Distinguishing between Payment Bond Claims and Performance Bond Claims 441 VII. Procedural Requirements for Payment Bonds 442 VIII. Effect of Payment Bonds on Lien Rights 446 IX. The Surety’s Defenses to Payment Bond Liability 446 17 Performance Bonds and Terminations 451 I. Surety Performance Bonds 451 II. Termination 465 18 Proving Costs and Damages 480 I. Basic Damage Principles 480 II. Methods of Pricing Claims 485 III. Contractor Damages 488 IV. Owner Damages 502 19 An Overview of Environmental and Safety Concerns on the Construction Site 509 I. Sources of Environmental Regulation and Liability 509 II. Minimizing Environmental Risks Prior to Contracting 518 III. Management Techniques for Environmental Risks during Contract Performance 523 IV. Mold: Developing a Program to Limit Liability 525 V. Environmentally Friendly Construction: Green Buildings 526 VI. Construction Safety 530 20 Construction Insurance 540 I. Importance of Insurance Planning 540 II. Introduction to the Language of Insurance Policies 541 III. Types of Insurance 543 IV. Contract Requirements for Insurance 548 V. Prompt Action to Protect Potential Coverage 551 VI. Insurer’s Response to Claims 552 VII. Routine Coverage Issues 553 VIII. Concurrent Causes 559 IX. Construction Insurance and Mold Claims 560 21 Labor and Employment Issues Affecting the Construction Industry 566 I. Immigration Issues 566 II. Employee Safety and Health 571 III. Wage and Hour Requirements 572 IV. Employee Benefits: ERISA 581 V. Employment Discrimination 583 VI. Family and Medical Leave Act 588 VII. Union Labor 590 VIII. Employee-Background Investigations 590 IX. Workers’ Compensation—Exclusive Remedy Assertions 593 22 Bankruptcy in the Construction Setting 595 I. Introduction 595 II. The Players 595 III. Key Terms 596 IV. Bankruptcy Code 598 V. Status of the Debtor’s Contracts 606 VI. Status of Materials and Equipment 610 VII. Status of Contract Funds 613 VIII. Other Sources of Funds 617 23 Resolving Construction Disputes 623 I. Early Claim Recognition and Preparation 624 II. Early Involvement of Experts and Attorneys 625 III. Demonstrative Evidence 626 IV. Contemporaneous Records 627 V. Components of a Well-Prepared Claim Document 627 VI. Calculating and Proving Damages 629 VII. Pursuing Negotiation and Settlement 630 VIII. Arbitration 633 IX. Litigation 643 24 Federal Government Construction Contracting—An Overview 651 I. Introduction: The Key Differences 651 II. Contractor Selection 656 III. Social-Economic Policies 663 IV. Resolution of Contract Disputes 684 V. Standards of Conduct for Contractors 694 Appendix 24.1 Internet Resources for Federal Government Construction Contracts 704 Index 705