Sparky Electric is an experienced contractor. Most of its business has been in light commercial construction, such as midsize office buildings, an occasional strip mall and a few schools. Now a large project is in the works, and the owner is looking for design/build electrical contractors.
An electrical contractor, let’s call him Sparky Inc., was running into financial difficulty. My client, call him Cathode Inc., entered into negotiations to buy Sparky and, in the meantime, agreed to finish one of Sparky’s jobs on a university building as an electrical subcontractor.
There may not be a “typical” changes clause for construction contracts, but most contracts have something giving the right to the owner or general contractor to order changes. Each of these clauses will have variations regarding written notice, time extensions, paperwork requirements, etc.
How would you react if you discovered—after the fact—that you had signed a contract that permitted the other contracting party (owner or general contractor) to act arbitrarily, to actively interfere with your work, to act in bad faith, and even to be guilty of fraud?
When drafting an electrical subcontract, it is fairly standard for a general contractor (GC) to refer to the contract between the owner and GC. GCs typically want to include the owner’s terms and conditions.
In the construction industry, many projects end with unresolved claims. The outstanding matters may be a result of an accumulation of changes encountered during the job for which a final price, or even acknowledgment that there is an extra, remains to be negotiated.
Recently, a client asked me to review a set of general terms and conditions issued by the owner of a large project. To do this task, which I perform frequently for clients, I apply certain review protocols I developed to ensure all clauses that affect time or money are highlighted.
I posed nine multiple choice questions in my September 2011 column. The following are answers and analyses. As you review the problem analyses, keep in mind that, if you gave serious thought to the questions, you have gone a long way to being right regardless of your answer.
Let’s test what you have learned from my articles. The following questions can be answered by recalling the most important points and applying them to different scenarios. Keep your answers, and check them against those I will provide in the next issue. 1.
Less than 10 percent of construction lawsuits go to trial. There are reports that the number is actually less than 5 percent. Many reasons are obvious: The cost of litigation, its detrimental effect on the litigants’ business, and the personal toll exacted from being in court.
If you are late in paying your utility bill, mortgage or installment on a purchase, you may be charged a late fee. There also may be set fees for the cancellation of orders, insufficient funds in an account or even bank inactivity.
Pillage, plunder, despoil. These words conjure up images of Conan the Barbarian robbing and destroying whole villages. “Spoliate” is a less bloody but similarly archaic word. Spoliation has a unique position in the law and, when proven, can lead to severe consequences.
For most contracts, a contractor’s application for final payment must be accompanied by final waivers of lien and verified statements that all amounts due are accounted for. Where there are outstanding claims, the request for final payment becomes problematic.