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Construction Law: An Introduction for Engineers, Architects, and Contractors
ISBN-13: 9781118229033 / Angielski / Twarda / 2012 / 320 str.
Construction Law: An Introduction for Engineers, Architects, and Contractors
ISBN-13: 9781118229033 / Angielski / Twarda / 2012 / 320 str.
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For a construction business to function properly, architects, engineers, and contractors need to understand how the various state and federal laws affect their business and how to avoid disputes and exposure to liability. This book offers a comprehensive review of the US legal environment, both criminal and civil, focusing on the key legal concepts and issues applicable to a typical construction project. Construction professionals will find clear, concise introduction to a wide range of contractual issues related to project participants, as well as issues related to the actual construction and litigation.
Preface xix
1 Law and Government 1
1.1 Introduction / 1
1.1.1 The Powers of Governments / 1
1.1.2 City and County Governments / 2
1.1.3 The Powers of the Federal Government / 2
1.2 The Sources and Hierarchy of Law / 3
1.2.1 The Constitution / 3
1.2.2 Statutes and Ordinances / 3
1.2.3 Agency Regulations / 4
1.2.4 International Treaties / 4
1.2.5 Appellate Court Opinions / 4
1.3 The American Judicial System / 4
1.3.1 Structure of the Court Systems / 5
1.3.2 Federal Trial and Appeals Courts / 5
1.3.3 State Trial and Appeals Courts / 6
1. 4 Common Law / 6
1.4.1 Stare Decisis / 7
1.4.2 Restatements of the Law / 7
1.5 Legal Codes / 8
1.5.1 Uniform Codes / 8
1.5.2 The Uniform Commercial Code / 9
1.6 Legal Doctrines / 9
1.7 Choice–of–Law Clauses / 10
1.8 Criminal Law versus Civil Law / 11
1.9 Cause of Action / 11
1.10 Summary Judgment / 12
2 Basic Legal Principles 15
2.1 Legal Issues in Construction / 15
2.2 Principles of Contract Law / 15
2.2.1 Unilateral Contracts versus Bilateral Contracts / 16
2.2.2 Oral Contracts / 16
2.2.3 Third–Party Benefi ciaries / 17
2.2.4 Contract Interpretation / 17
2.3 Principles of Agency Law / 21
2.3.1 Apparent Authority / 21
2.3.2 The Principal s Liability for the Agent s Acts / 22
2.3.3 Ratifi cation / 22
2.4 Principles of Tort Law / 23
2.4.1 Intentional Torts / 23
2.4.2 Unintentional Torts (Negligence) / 23
2.4.3 Strict Liability / 27
2.4.4 Misrepresentation / 28
3 Project Participants 29
3.1 The Owner / 29
3.1.1 Access to the Building Site / 30
3.1.2 Restrictions on Use of the Property / 31
3.2 The Design Professional Team / 31
3.2.1 Site Evaluation Consultants / 32
3.2.2 The Geotechnical Consultant / 33
3.3 The Construction Team / 33
3.3.1 Subcontractors and Suppliers / 34
3.4 Construction Lenders / 34
3.4.1 Collateral Assignment to Lender / 35
3.4.2 Other Lender Requirements / 35
3.4.3 Construction Loans / 36
3.4.4 Bond Financing / 37
4 Project Delivery Systems 39
4.1 Design–Bid–Build / 39
4.2 Multiple Primes / 41
4.3 Construction Management / 41
4.3.1 Agency Construction Management / 42
4.3.2 Construction Management At–Risk (CMAR) / 42
4.4 Design–Build / 43
4.4.1 Design–Build Proposals / 44
4.4.2 Advantages and Disadvantages of Design–Build / 45
4.4.3 Bridging Consultants / 46
4.5 Engineer–Procure–Construct (EPC) / 46
4.6 Turnkey Construction / 47
4.7 Integrated Project Delivery (IPD) / 47
4.8 Fast–Track Construction / 47
4.9 Public–Private Partnerships / 48
4.9.1 History of Public–Private Partnerships / 49
4.9.2 Constraints on Public–Private Partnerships / 49
5 Construction Contracts 51
5.1 The Construction Contract / 51
5.1.1 Prebid Conferences / 51
5.1.2 Right to Reject Bids / 52
5.2 The Contract Documents (Owner–Contractor) / 52
5.2.1 The Contractor s Bid / 53
5.3 Confl icts between the Documents / 54
5.4 Errors in the Documents / 54
5.4.1 Latent Discrepancies / 55
5.5 Specific over General; Written over Printed / 56
5.6 Interpretation against Drafter / 56
5.7 Specifications / 57
5.8 Description of the Work under a Construction Contract / 57
5.9 Third–Party Beneficiaries / 58
5.10 Industry Standard Forms versus Custom Forms / 58
5.10.1 Drafting Custom Forms / 59
5.10.2 AIA Contract Documents / 60
5.10.3 Engineers Joint Contract Documents Committee (EJCDC) / 62
5.10.4 ConsensusDOCS / 63
5.10.5 Comparing the AIA, EJCDC, and ConsensusDOCS Documents / 64
5.10.6 AGC Forms / 65
5.10.7 Other Industry Standard Forms / 65
5.11 Commencement of Work Prior to Contract / 65
5.11.1 Letters of Intent / 66
6 The Design Process 67
6.1 Design Responsibilities / 67
6.1.1 Contractor s Responsibility for Design / 67
6.1.2 Value Engineering / 68
6.2 The Owner s Program / 68
6.3 The Design Agreement (Owner–A/E) / 68
6.3.1 Schematic Design Phase / 69
6.3.2 Design Development Phase / 69
6.3.3 Construction Documents Phase / 69
6.3.4 Bidding or Negotiation Phase Services / 70
6.3.5 Construction Phase Services / 70
6.3.6 Basic Services versus Additional Services / 71
6.3.7 The A/E s Compensation / 71
6.4 Standard of Care Applicable to Design Services / 71
6.4.1 Contractual Standard of Care / 72
6.4.2 Proving Violation of the Standard of Care / 73
6.4.3 Implied Warranties / 73
6.4.4 Designing to the Owner s Budget / 74
6.4.5 The A/E s Liability for its Estimate / 74
6.5 Ownership of the Design Documents / 75
6.5.1 Use of the Plans and Specifi cations / 75
6.6 Termination of the Design Agreement / 76
7 The Procurement Process 77
7.1 Selection of Contractors for Public Projects / 77
7.1.1 The Bid Package / 78
7.1.2 Duty to Award to the Lowest Bidder / 78
7.1.3 Bid Responsiveness / 78
7.1.4 Responsible Bidder / 79
7.1.5 Bid Protests / 80
7.1.6 Bid Security / 81
7.1.7 Best Value Awards / 81
7.2 Selection of Design Professionals / 82
7.3 Alternatives to Design–Bid–Build in the Public Sector / 83
7.3.1 Design–Build Construction in the Public Sector / 83
7.4 The Federal Acquisition Regulation (FAR) / 84
7.5 Procurement on Private Projects / 85
8 Pricing Construction Projects 87
8.1 Fixed–Price Contracts / 87
8.1.1 Fundamental Characteristic of a Fixed–Price Contract / 87
8.1.2 Allowances / 88
8.1.3 Material Price Escalation Clauses / 88
8.1.4 Index Pricing / 89
8.2 Cost–Plus Contracts / 89
8.2.1 Labor / 90
8.2.2 Subcontracted Work / 90
8.2.3 Heavy Equipment / 91
8.2.4 Small Tool Allowance / 91
8.2.5 Reasonableness or Necessity of Costs Incurred / 91
8.2.6 Contractor s Overhead and Profi t / 92
8.2.7 Estimates and Cost–Plus Contracts / 92
8.2.8 Timely Payment Discounts / 93
8.2.9 Audit Rights / 93
8.3 Cost–Plus with Guaranteed Maximum Price / 93
8.4 Unit–Price Contracts / 94
8.4.1 Variation in Estimated Quantities (VEQ) Clauses / 94
8.5 Unbalanced Bidding / 95
8.6 Bidding When the Design Is Incomplete / 96
9 Subcontractors and Suppliers 97
9.1 Subcontractors versus Suppliers / 97
9.2 Owner s Control over Subcontractor Selection / 98
9.3 Subcontractor Bids / 98
9.3.1 Enforcing a Subcontractor s Bid / 99
9.3.2 The Subcontractor s Right to Enforce Its Bid / 100
9.4 Incorporation by Reference / 100
9.5 Flow–down and Flow–up Provisions / 101
9.5.1 Rights and Liabilities of the Parties under Flow–down Provisions / 101
9.6 Duty to Cooperate and Coordinate Subcontract Work / 102
9.6.1 Limiting the Liability for Coordination / 102
9.6.2 Coordination of Multiple Primes / 103
9.7 Subcontractor Payment / 103
9.7.1 Pay–If–Paid versus Pay–When–Paid / 104
9.8 Subcontractor Claims against the Owner / 105
9.8.1 The Pass–through System / 106
9.8.2 Liquidating Agreements / 106
9.9 Conditional Assignment of the Subcontracts to the Owner / 107
9.10 Minority and Disadvantaged Business Programs / 108
9.10.1 Federal Minority and Disadvantaged Business Programs / 109
9.10.2 Agency DBE Programs / 111
10 Time for Performance 113
10.1 Time Is of the Essence / 113
10.1.1 Time–Is–of–the–Essence Clauses in Construction Contracts / 114
10.2 Date of Commencement/Time for Completion / 114
10.2.1 Delays in Commencement of the Work / 115
10.2.2 Waiver of Time for Completion / 115
10.3 Substantial Completion / 116
10.3.1 The Signifi cance of Substantial Completion / 116
10.3.2 Establishing Substantial Completion / 117
10.4 Final Completion/Final Payment / 117
10.4.1 Acceptance of Defective Work / 118
10.5 Delays / 119
10.5.1 Determining Whether a Delay Was within a Party s Control / 120
10.5.2 Delays Due to Weather / 121
10.5.3 Concurrent Delays / 122
10.6 Liquidated Damages / 122
10.7 Constructive Acceleration / 124
10.8 Right to Finish Early / 124
10.9 Milestones / 125
11 Construction Scheduling 127
11.1 Bar Charts / 127
11.2 Critical Path Scheduling / 128
11.2.1 Activity Logic / 128
11.2.2 Arrow Diagramming / 128
11.2.3 Precedence Diagramming / 129
11.2.4 As–Planned (Baseline) Schedule / 129
11.2.5 Float / 130
11.2.6 Critical Path / 130
11.2.7 Multiple Calendars / 131
11.3 Scheduling Specifi cations / 131
11.4 Schedule Updates / 132
11.5 Resource Leveling / 132
11.6 CPM–Based Methods for Proof of Delay Claims / 133
11.6.1 Total Time Analysis / 133
11.6.2 Impacted As–Planned ( What–If ) / 134
11.6.3 Collapsed As–Built ( But For ) / 134
11.6.4 As–Planned versus As–Built / 134
11.6.5 Windows Analysis / 135
11.7 Expert Witness Testimony / 135
11.8 Using CPM to Estimate Extensions of Time / 136
11.9 Using Bar Charts to Prove Delay Claims / 137
12 Contract Administration 139
12.1 The A/E s Role in Contract Administration / 139
12.2 A/E s Liability for Contract Administration / 140
12.2.1 Approval of Shop Drawings and Other Submittals / 140
12.2.2 Site Visits and Inspections / 141
12.2.3 AIA B101 Provisions / 142
12.2.4 The Right to Stop Work / 142
12.2.5 Approval of Progress Payments / 143
12.2.6 Responding to Change Order Requests / 144
12.2.7 Requests for Information, Interpretations, and Clarifications / 144
12.3 A/E s Role in Contractor Termination / 144
12.4 Initial Decision Maker (IDM) / 145
13 The Payment Process 147
13.1 Progress Payments / 147
13.1.1 Schedule of Values / 147
13.1.2 The Application for Payment / 148
13.1.3 Certifi cation of Payment / 148
13.2 Retainage / 149
13.2.1 Payment of Subcontractor s Retainage / 150
13.2.2 Claims on Retainage / 150
13.3 Accord and Satisfaction / 150
13.3.1 Payment of an Accord by Check / 151
13.4 Joint Checks / 152
13.4.1 Joint Payee versus Alternative Payee / 152
13.5 Title Insurance / 152
13.6 Obligations of the Lender / 153
13.7 Evidence of Financing / 153
13.8 Prompt Payment Acts / 154
13.8.1 The Progress Payment Request / 154
13.8.2 Payment on Subcontracts / 154
13.9 The Owner s Payment Obligation on Private Construction / 155
13.10 The False Claims Act / 155
13.10.1 Liability for False Claims / 156
13.10.2 Prosecution of False Claims / 156
13.10.3 State False Claims Act / 157
14 Changes to the Work 159
14.1 Contract Changes / 159
14.1.1 Construction Change Directives / 160
14.2 Pricing Change Orders / 160
14.2.1 Determination of Price by a Third Party / 161
14.2.2 Schedule Adjustments / 161
14.3 Constructive Changes / 161
14.3.1 Owner s Direction or Improper Rejection of Work / 162
14.3.2 Notice Requirements for a Constructive Change / 162
14.3.3 Waiver of Notice Requirement / 163
14.3.4 Extra Work versus Additional Work / 163
14.4 Federal Government Contracts / 163
14.4.1 Equitable Adjustments / 164
14.4.2 Escrow of Bid Documents / 164
14.5 Authority to Issue Changes / 165
14.5.1 Apparent Authority and Ratification / 165
14.6 Duty to Perform the Changed Work / 166
14.7 Reservation of Rights / 166
14.8 Changes Clauses in Subcontracts / 168
14.9 Documentation of Costs / 168
14.10 Cardinal Changes / 169
14.10.1 The Contractor s Options / 169
15 Differing Site Conditions 171
15.1 The Purpose of the Differing Site Conditions Clause / 171
15.2 Differing Site Conditions Claims / 172
15.2.1 Type I Conditions Materially Different Than Indicated / 172
15.2.2 Type II Conditions of an Unusual Nature / 173
15.3 Limitations on Claims for Differing Site Conditions / 174
15.3.1 Duty to Make a Site Inspection/Duty to Investigate / 175
15.3.2 Disclaimers / 175
15.3.3 Notice / 177
15.3.4 Waiver of Claims / 177
15.4 Variations in Estimated Quantities Clause / 177
15.5 Geotechnical Baseline Summary Report / 178
15.6 Hazardous Materials / 178
15.7 Tort and Breach–of–Contract Actions / 178
15.7.1 Misrepresentation (Intentional or Negligent) / 179
15.7.2 Owner s Breach of Implied Warranty of Plans and Specs / 179
15.7.3 Failure to Disclose Superior Knowledge / 179
15.7.4 Mutual Mistake / 180
16 Termination of the Construction Contract 181
16.1 Unilateral Termination / 181
16.2 Contractual Termination Provisions / 182
16.3 Termination by the Contractor for Cause / 182
16.4 Termination by the Owner for Cause / 183
16.4.1 Notice and Opportunity to Cure / 183
16.5 Wrongful Termination / 184
16.6 The Role of the Performance Bond Surety / 185
16.7 Termination for Convenience / 186
17 Mechanic s Liens 187
17.1 Purpose of a Mechanic s Lien / 187
17.2 Procedures for Filing a Lien / 188
17.3 Lien Entitlement / 188
17.3.1 Liens for Services / 189
17.3.2 Liens for Materials / 189
17.4 Enforcement of the Lien / 190
17.4.1 Priorities / 190
17.4.2 Bonding Off / 191
17.5 Interests Subject to a Lien / 191
17.5.1 Subcontractor and Supplier Claims / 192
17.5.2 Amount of the Lien / 192
17.6 Lien Waivers / 193
17.6.1 No–Lien Contracts / 194
17.7 Rights of Owners and Third Parties / 194
17.8 The Effect of Bankruptcy on a Mechanic s Lien / 194
17.9 Trust Fund Statutes / 195
17.10 Stop Notices / 195
17.11 Liens on Public Property / 195
18 Construction Insurance 197
18.1 Types of Insurance / 197
18.2 Commercial General Liability / 198
18.2.1 Bodily Injury and Property Damage / 198
18.2.2 Exclusions to Coverage / 199
18.2.3 Additional Insured Status / 200
18.3 Builder s Risk Insurance / 200
18.4 Workers Compensation Insurance / 201
18.5 Professional Liability Insurance / 201
18.6 Wrap–up Insurance Programs / 202
18.7 Waiver of Subrogation / 202
19 Surety Bonds 205
19.1 Use of Surety Bonds in the Construction Industry / 205
19.1.1 Bid Guarantees / 206
19.1.2 Payment Bonds / 206
19.1.3 Performance Bonds / 208
19.2 Rights and Remedies of Sureties / 208
19.2.1 Indemnity Agreements / 209
19.2.2 Discharge of the Surety s Obligations / 209
19.3 Bonding Requirements / 210
20 Liability for Defective Construction 211
20.1 Determining Liability / 211
20.2 Owner Claims against the Contractor / 212
20.2.1 Warranties / 212
20.2.2 Notice Requirements / 213
20.2.3 Tort Claims / 213
20.3 The Spearin Doctrine / 214
20.3.1 Application of the Spearin Doctrine / 214
20.3.2 Limitations on Spearin / 215
20.4 The A/E s Liability for Defective Construction / 216
20.5 Affi rmative Defenses / 217
20.5.1 Statutes of Limitation / 217
20.5.2 Statutes of Repose / 218
21 Calculations of Damages 221
21.1 Compensatory Damages / 221
21.1.1 Consequential Damages / 222
21.2 Punitive Damages / 222
21.3 Duty to Mitigate Damages / 223
21.4 Owner s Damages / 223
21.4.1 Owner s Damages for Late Completion / 223
21.4.2 Economic Waste / 224
21.4.3 Betterment / 224
21.5 Contractor s Damages / 226
21.5.1 Equipment Costs / 226
21.5.2 Home Offi ce Overhead / 227
21.5.3 Cost Increases for Labor and Materials / 228
21.5.4 Methods of Estimating Loss of Productivity / 228
21.6 Limitation of Liability / 230
21.6.1 Exculpatory Clauses / 230
21.6.2 Indemnifi cation Agreements / 231
21.6.3 Limitation–of–Liability Clauses / 232
21.6.4 Waiver of Consequential Damages / 233
21.7 Specifi c Performance / 234
21.8 Tort Claims / 234
21.9 Recovery of Damages in the Absence of an Express Contract / 235
21.9.1 Reliance Interest Promissory Estoppel / 235
21.9.2 Implied–in–Fact Contracts Quantum Meruit / 236
21.9.3 Restitution Interest Unjust Enrichment / 236
21.9.4 Quantum Meruit versus Unjust Enrichment / 237
22 The Economic Loss Doctrine 239
22.1 Tort versus Contract Law / 239
22.1.1 Definition of Economic Loss / 240
22.1.2 Development of the Economic Loss Doctrine / 240
22.1.3 Basis for the Doctrine / 241
22.1.4 Public Policy Considerations / 241
22.1.5 Strict Application of the Doctrine / 242
22.1.6 Exceptions to the Economic Loss Doctrine / 242
22.2 Claims of Defective Construction Products / 243
22.2.1 Damage to Other Property / 244
22.3 Claims of Defective Construction Services / 244
22.3.1 Claims of Defective Design Professional Services / 245
22.4 Potentially Dangerous Products (Risk of Harm Exception) / 246
22.5 Negligent Misrepresentation / 247
22.5.1 Negligent Misrepresentation Claimants / 247
22.5.2 Tort versus Contract Claims for Negligent Misrepresentation / 248
23 Alternative Dispute Resolution 249
23.1 Arbitration / 249
23.1.1 Arbitration Clauses / 250
23.1.2 Arbitration Statutes / 250
23.1.3 Arbitration Organization Rules / 251
23.1.4 Prehearing Activities / 251
23.1.5 Selection of Arbitrators / 252
23.1.6 The Arbitration Hearing / 252
23.1.7 The Award / 252
23.1.8 Appealing the Award / 253
23.1.9 Costs of Arbitration / 254
23.1.10 Typical Schedule for Arbitration / 254
23.1.11 Joinder and Consolidation / 254
23.1.12 Waiver of Arbitration Rights / 255
23.1.13 Effect of Arbitration on the Surety / 256
23.2 Litigation versus Arbitration / 256
23.3 Mediation / 257
23.4 Other Types of Alternative Dispute Resolution / 258
23.4.1 Med/Arb / 258
23.4.2 Mini–Trial and Summary Proceedings / 258
23.4.3 Dispute Resolution Boards / 259
23.4.4 Standing Neutrals / 260
23.5 Dispute Prevention / 260
Appendix A: List of Abbreviations 261
Appendix B: Table of Cases 265
Appendix C: Understanding Case Citations 267
Glossary 271
Index 279
Gail S. Kelley is a Professional Engineer and LEED Accredited Professional as well as a licensed attorney in Maryland and the District of Columbia. Gail has an extensive background in design and construction having worked in construction management, structural design, and structural evaluation.
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