Legal Aspects of Architecture, Engineer, and Construction Process

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ISBN: 9780534464677 | 053446467X
Cover: Hardcover
Copyright: 5/21/2004

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The primary focus of this text is to provide a bridge for students between the academic world and the real world. This bridge is built through an understanding of what is law, how law is created, how law affects almost every activity of human conduct, and how legal institutions operate. Intended mainly for architectural and engineering students, but increasingly for those in business schools and law schools, this text features a clear, concise, and jargon-free presentation. It probes beneath the surface of legal rules and uncovers why these rules developed as they did, outlines arguments for and against these rules, and examines how they work in practice. Updated with the most recent developments in the legal aspects of architectural, engineering, and the construction processes, this text is also a valuable reference for practitioners that has been cited in over twenty-five court decisions.

Sources of Law: Varied and Dynamic

(5)

Relevance

(1)

The Federal System

(1)

Constitutions

(1)

Legislation

(1)

The Executive Branch

(1)

Administrative Agencies

(1)

Courts: The Common Law

(1)

Contracting Parties

(1)

Publishers of Standardized Documents

(1)

Summary

(1)

The American Judicial System: A Forum for Dispute Resolution

(11)

State Court Systems: Trial and Appellate Courts

(1)

The Federal Court System

(1)

Statute of Limitation: Time to Bring the Lawsuit

(1)

Hiring an Attorney: Role and Compensation

(2)

Jurisdiction of Courts

(1)

Parties to the Litigation

(1)

Prejudgment Remedies

(1)

Pleadings

(1)

Pretrial Activities: Discovery

(1)

The Jury

(1)

Trials: The Adversary System

(1)

Judgments

(1)

Enforcement of Judgments

(1)

Appeals: The Use of Precedent

(1)

International Contracts

(1)

Forms of Association: Organizing to Accomplish Objectives

(9)

Relevance

(1)

Sole Proprietorships

(1)

Partnerships

(3)

Generally: Uniform Partnership Act

(1)

Creation

(1)

Operation

(1)

Fiduciary Duties

(1)

Performance Obligations, Profits, Losses, Withdrawal of Capital and Interest

(1)

Authority of Partner

(1)

Liability of General Partnership and Individual Partners

(1)

Transferability of Partnership Agreement

(1)

Dissolution and Winding Up

(1)

Limited Partnership

(1)

Profit Corporations

(2)

Use

(1)

General Attributes

(1)

Preincorporation Problems: Promoters

(1)

Share Ownership

(1)

Piercing the Corporate Veil

(1)

Activities, Management, and Control: Insider Misconduct

(1)

Profits and Losses

(1)

Life of the Corporation

(1)

Dissolution

(1)

Nonprofit Corporations

(1)

Professional Corporations, Limited Liability Companies (LLC), and Limited Liability Partnerships (LLP)

(1)

Joint Ventures

(1)

Unincorporated Associations

(1)

Loose Associations: Share-Office Arrangement

(1)

Professional Associations

(2)

Problems

(1)

The Agency Relationship: A Legal Concept Essential to Contract Making

(6)

Relevance

(1)

Policies Behind Agency Concept

(1)

Commercial Efficiency and Protection of Reasonable Expectations

(1)

Relationships Between Principal and Agent

(1)

Other Related Legal Concepts

(1)

Creation of Agency Relationship

(1)

Actual Authority

(1)

Apparent Authority

(2)

Problem

(1)

Termination of Agency

(1)

Disputes Between Principal and Third Party

(1)

Disputes Between Agent and Third Party

(1)

Contracts and Their Formation: Connectors for Construction Participants

(13)

Relevance

(1)

The Function of Enforcing Contracts: Freedom of Contract

(1)

Preliminary Definitions

(1)

Contract Classifications

(1)

Express and Implied

(1)

Subject Matter

(1)

Bargain and Adhesion

(1)

Capacity to Contract

(1)

Mutual Assent

(5)

Objective Theory of Contracts: Manifestations of Mutual Assent

(1)

Offer and Acceptance in the Assent Process

(2)

Contracts by Correspondence

(1)

Reasonable Certainty of Terms

(1)

A More Formal Document: Preliminaries

(1)

Agreements to Agree

(1)

Agreements to Negotiate in Good Faith

(1)

Memorandum of Understanding

(1)

Letter of Intent

(1)

Defects in the Mutual Assent Process

(2)

Fraud and Misrepresentation: Duty to Disclose

(1)

Economic Duress

(1)

Mistake

(1)

Unconscionability

(1)

Formation Defects and Restitution

(1)

Consideration as a Contract Requirement

(1)

Functions of Consideration

(1)

Definitions: Emergence of Bargain Concept

(1)

Reliance

(1)

Past Consideration

(1)

Promises Under Seal

(1)

Writing Requirement: Statute of Frauds

(3)

History

(1)

Transactions Required to Be Evidenced by a Sufficient Memorandum

(1)

Sufficiency of Memorandum

(1)

Avoiding the Writing Requirement

(1)

Problem

(2)

Remedies for Contract Breach: Emphasis on Flexibility

(9)

An Overview

(1)

Relationship to Other Chapters

(1)

Money Awards and Specific Decrees: Damages and Specific Performance

(1)

Compensation and Punishment: Emergence of Punitive Damages

(1)

Protected Interests

(1)

Limits on Recovery

(4)

Causation

(1)

Certainty

(1)

Foreseeability: Freak Events and Disproportionate Losses

(1)

Avoidable Consequences (The Concept of Mitigation)

(1)

Lost Profits

(1)

Collateral Source Rule

(1)

Contractual Control: A Look at the UCC

(1)

Noneconomic Losses

(1)

Cost of Dispute Resolution: Attorneys' Fees

(1)

Interest

(2)

Problem

(1)

Losses, Conduct, and the Tort System: Principles and Trends

(31)

Relevance to the Construction Process

(1)

Tort Law: Background

(3)

Definition

(1)

Function

(1)

Threefold Classifications

(1)

Historical Patterns

(2)

General Factors in Determining Tort Liability

(1)

Coverage of Chapter

(1)

Negligence: The ``Fault'' Concept

(9)

Emergence of the Negligence Concept

(1)

Elements of Negligence

(1)

Standard of Conduct: The Reasonable Person

(1)

The Objective Standard and Some Exceptions

(1)

Unreasonable Risk of Harm: Some Formulas

(1)

Common Practice: Custom

(1)

Violations of or Compliance with Statutes

(2)

Res Ipsa Loquitur

(1)

Legal Cause: Cause in Fact and Proximate Cause

(1)

Cause in Fact

(1)

Proximate Cause

(1)

Duty

(1)

Protected Interests and Emotional Distress

(1)

Defenses

(1)

Assumption of Risk

(1)

Contributory Negligence

(1)

Independent Contractor Rule

(1)

Nonintentional Nonnegligent Wrongs: Strict Liability

(2)

Abnormally Dangerous Things and Activities

(1)

Vicarious Liability

(1)

Employment Accidents and Workers' Compensation

(1)

Product Liability

(1)

Claims by Third Parties

(1)

Lost Consortium

(1)

Survival and Wrongful Death Statutes

(1)

Immunity

(1)

Charitable Organizations

(1)

Employers and Workers' Compensation

(1)

Public Officials

(1)

Sovereign Immunity

(1)

Misrepresentation

(1)

Scope of Discussion

(1)

Representation or Opinion

(1)

Conduct Classified

(1)

Person Suffering the Loss

(1)

Type of Loss

(1)

Reliance

(1)

Generalizations

(1)

Duty of the Possessor of Land

(3)

Relevance

(1)

To Passersby

(1)

To Trespassing Adults

(1)

To Trespassing Children

(1)

To Licensees

(1)

To Invitees

(1)

Movement Toward General Standard of Care

(1)

Nondelegability of Legal Responsibility

(1)

Product Liability

(7)

Relevance

(1)

History: From Near Immunity to Strict Liability

(1)

Section 402A of the Restatement of Torts

(1)

Product Use

(1)

Parties

(1)

Defenses

(1)

Economic Losses

(1)

Disclaimers

(1)

Design Defects: Duty to Warn: Two Restatements

(2)

Government-Furnished Design

(1)

Beyond Products: Sellers of Services

(1)

Future Developments

(1)

Remedies

(4)

Compensation

(1)

Collateral Source Rule

(1)

Punitive Damages

(1)

Attorneys' Fees: Cost of Litigation

(1)

Interest

(1)

Problems

(1)

Introduction to the Construction Process: Ingredients for Disputes

(8)

Relationship to Rest of Book

(1)

The Eternal Triangle: Main Actors

(4)

The Owner

(3)

The Contractor

(1)

The Design Professional

(1)

The Industry

(1)

The Supporting Cast on a Crowded Stage

(1)

The Owner Chain: Spotlight on Lender

(1)

The Contractor Chain

(1)

The Design Professional Chain

(1)

Insurers

(1)

The Construction Contract

(1)

The Delivery Systems

(1)

The Applicable Law

(1)

The Construction Site

(1)

Contract Administration

(1)

International Transactions

(1)

Unresolved Disputes and Litigation

(1)

Limits on Ownership: Land Use Controls

(23)

Nuisance: Unreasonable Land Use

(1)

Soil Support

(1)

Drainage and Surface Waters

(1)

Easements for Light, Air, and View

(1)

Restrictive Covenants: Common Interest Communities (CIC)

(2)

Development of Land: Expanded Public Role

(1)

Limitations on Land Use Controls: Takings

(2)

Local Land Use Control: The Process

101

(2)

Original Enabling Acts and Euclidean Zones: The MLDC

103

(1)

Flexibility: Old Tools and New Ones

104

(2)

Variances and Special Use Permits

104

(1)

Nonconforming Uses

104

(1)

Rezoning

104

(1)

Contract and Conditional Zoning

105

(1)

Floating Zones

105

(1)

Bonus Zoning

105

(1)

Planned Unit Development

106

(1)

Open Space

106

(1)

Aesthetics and Control

106

(1)

Historic and Landmark Preservation

107

(1)

The Environmental Movement and Owner Liability

108

(3)

National Environmental Policy Act (NEPA)

108

(1)

Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)

109

(1)

Resource Conservation and Recovery Act (RCRA)

110

(1)

State Law

111

(1)

Judicial Review

111

(1)

Housing and Land Use Controls

112

(4)

Residential Zones

112

(1)

Subdivision Controls

112

(1)

Exclusionary and Inclusionary Zoning

113

(1)

Phased Growth

114

(2)

Professional Registration and Contractor Licensing: Evidence of Competence or Needless Entry Barrier?

116

(32)

Overview

116

(1)

Public Regulation: A Controversial Policy

116

(3)

Justification for Regulation

116

(1)

Criticism of Licensing Laws

117

(1)

Importance of Attitude Toward the Regulatory Process

118

(1)

Judicial Attitudes Toward Registration Laws

119

(1)

Administration of Licensing Laws

119

(1)

The Licensing Process

120

(9)

Admission to Practice

120

(1)

Postadmission Discipline: Duncan v. Missouri Board for Architects, Professional Engineers and Land Surveyors

120

(9)

Types of Licensing Laws

129

(1)

Licensing of Architects and Engineers: Holding Out and Practice Statutes

129

(1)

Contractor Licensing

130

(1)

Variations on the Traditional Contracting System

130

(1)

Statutory Violations

130

(5)

Preliminary Issue: Constitutionality

130

(1)

Holding Out

130

(1)

Practicing

130

(1)

Architecture and Engineering Compared

131

(2)

Statutory Exemptions

133

(1)

Possessor of License

134

(1)

Out-of-State Practice

134

(1)

Substantial Compliance

135

(1)

Sanctions for Licensing Law Violations

135

(5)

Criminal and Quasi-Criminal Sanctions

135

(1)

Recovery for Work Performed: Payment Refunds

136

(2)

The Future?

138

(1)

Summary

139

(1)

Should Contractors Be Licensed?

140

(1)

Purpose of Licensing Laws

140

(1)

Harmful Effects

141

(1)

Contractor Licensing Laws

141

(1)

The Unlicensed Contractor: Civil Sanctions

142

(3)

Recovery for Work Performed

142

(1)

Exceptions

143

(1)

Substantial Compliance

143

(1)

Observations

144

(1)

Indirect Effect: Forum for Consumer Complaints

145

(1)

The Trained but Unregistered Design Professional: Moonlighting

145

(3)

Unlicensed Persons: A Differentiation

145

(1)

Ethical and Legal Questions

145

(1)

Recovery for Services Performed

146

(1)

Liability Problems

146

(1)

Problems

147

(1)

Contracting for Design Services: Pitfalls and Advice

148

(14)

Authority Problems

148

(2)

Private Owners

148

(1)

Sole Proprietors

148

(1)

Partnerships

149

(1)

Corporations

149

(1)

Unincorporated Associations

149

(1)

Spouses or Unmarried Cohabitants

149

(1)

Public Owners

150

(1)

Financial Capacity

150

(3)

Importance

150

(1)

Private Clients

150

(1)

Retainers and Interim Fees

150

(1)

Client Resources

151

(1)

One-Person and Closely Held Corporations: Individual Liability of Officers

151

(1)

A Surety or Guarantor

151

(1)

Real or Personal Property Security

151

(1)

Client Identity

151

(1)

Spouses or Unmarried Cohabitants

151

(1)

Mechanics' Liens

152

(1)

Public Owners

153

(1)

Competing for the Commission: Ethical and Legal Considerations

153

(2)

Competition Between Design Professionals: Ethics

153

(1)

Brooks Act

153

(1)

Federal Art-in-Architecture Program

154

(1)

Interference With Contract or Prospective Advantage

154

(1)

Professional Service Contracts: Some Remarks

155

(7)

Profits and Risk

155

(1)

Good Faith, Fair Dealing, and Fiduciary Relationships

155

(2)

Variety of Types: Purchase Orders

157

(1)

Interpretation

158

(1)

The Parol Evidence Rule and Contract Completeness

159

(2)

Formal Requirements: Recent California Legislation

161

(1)

Problems

161

(1)

Professional Design Services: The Sensitive Issues

162

(57)

Range of Possible Professional Services: Fees and Insurance

162

(1)

Traditional Roles of Design Professional: B141-1997

163

(1)

Cost Predictions

164

(19)

Inaccurate Cost Prediction: A Source of Misunderstanding

164

(1)

Two Models of Cost Predictions

164

(1)

Creation of a Cost Condition: Frank Lloyd Wright and the Johnson Building and Griswold & Rauma v. Aesculapius

165

(6)

Contract Completeness and the Parol Evidence Rule

171

(1)

Preliminary Issues

172

(1)

Existence of Cost Condition

172

(1)

Standard Contracts and Disclaimers: A Look at AIA Standard Contracts

173

(1)

An Illustrative Case: Griswold and Rauma, Architects, Inc. v. Aesculapius Corp.

174

(4)

Negligent Cost Predictions

178

(1)

Interpretation of Cost Condition

178

(1)

Dispensing with the Cost Condition

179

(1)

Nonperformance as a Breach: Recovery of Damages

179

(2)

Relationship Between Principal Design Professional and Consultant

181

(1)

Advice to Design Professionals

181

(1)

Problem

182

(1)

Assistance in Obtaining Financing

183

(1)

Economic Feasibility of Project

183

(1)

Approval of Public Authorities: Dispute Resolution

184

(1)

Services of a Legal Nature

185

(1)

Site Services

186

(16)

Relation to Chapter 14

186

(1)

Supervision to Observation: Watson, Watson, Rutland/Architects v. Montgomery County Board of Education

186

(10)

Submittals: Design Delegation

196

(5)

Use of Project Representative

201

(1)

Use of Construction Manager

201

(1)

Statutory and Administrative Regulations

201

(1)

Problem

202

(1)

Hazardous Materials

202

(1)

Who Actually Performs Services: Use of and Responsibility for Consultants

203

(3)

Within Design Professional's Organization

203

(1)

Outside Design Professional's Organization: Consultants

204

(1)

Problem

205

(1)

Ownership of Drawings and Specifications

206

(3)

Time

209

(1)

Cessation of Services: Special Problems of the Client-Design Professional Relationship

209

(6)

Coverage

209

(1)

Specific Contract Provision as to Term

209

(1)

Conditions

210

(1)

Suspension

211

(1)

Abandonment

212

(1)

Termination Clauses

212

(1)

Material Breach

213

(1)

Subsequent Events

213

(1)

The Lender's Perspective

214

(1)

Problem

215

(1)

Judicial Remedy for Breach: Special Problems of the Client--Design Professional Relationship

215

(4)

Coverage

215

(1)

Client Claims

215

(2)

Design Professional Claims

217

(1)

Problem

218

(1)

Compensation and Other Owner Obligations

219

(10)

Contractual Fee Arrangements

219

(6)

Limited Role of Law: Methods of Compensation

219

(1)

Stated Percentage of Construction Costs: Square Footage

219

(1)

Multiple of Direct Personnel Expense: Daily or Hourly Rates

220

(1)

Professional Fee Plus Expenses

221

(1)

Fixed Fee

221

(1)

Reasonable Value of Services or a Fee to Be Agreed On

222

(1)

Additional Services

222

(2)

Reimbursables

224

(1)

Fee Ceilings

224

(1)

Adjustment of Fee

224

(1)

Deductions from the Fee: Deductive Changes

225

(1)

Project Risks

225

(1)

The Fee as a Limitation of Liability

225

(1)

Time for Payment

225

(2)

Service Contracts and the Right to Be Paid as One Performs

225

(1)

Interim Fee Payments

226

(1)

Monthly Billings

226

(1)

Late Payments

226

(1)

Suggestions Regarding Interim Fee Payments

227

(1)

Payment Despite Nonperformance

227

(1)

Other Client Obligations

228

(1)

Problems

228

(1)

Professional Liability: Process or Product?

229

(63)

Claims Against Design Professionals: On the Increase

229

(2)

Changes in Substantive Law

229

(1)

Procedural Changes

229

(1)

Ability of Design Professionals to Pay Court Judgments

229

(1)

Access to Legal System

229

(1)

Societal Changes

230

(1)

Enterprise Liability: Consumerism

230

(1)

Design Centrality

230

(1)

Codes

231

(1)

Expansion of Professional Services

231

(1)

Site Services

231

(1)

Overview of Chapters 14 and 15

231

(1)

Applicable Law

231

(1)

Types of Harm

231

(1)

Claims Against Design Professionals: Some Illustrations

232

(2)

Specific Contract Standard

234

(4)

Likelihood of Specific Standard

234

(1)

Client Satisfaction

235

(1)

Fitness Standard

236

(1)

Quantitative or Qualitative Performance Standards

237

(1)

Indemnification

237

(1)

Cost Overruns Caused by Design

237

(1)

Contractual Diminution of Legal Standard

238

(1)

The Professional Standard: What Would Others Have Done?

238

(9)

Defined and Justified: City of Mounds View v. Walijarvi

238

(3)

Expert Testimony and the Professional Standard

241

(1)

Building and Housing Codes: The Americans with Disabilities Act

241

(3)

Contractual Diminution of Standard: Informed Consent

244

(2)

Tort and Contract

246

(1)

Expert Testimony

247

(8)

Purpose and Exceptions to General Rule

247

(2)

Admissibility of Testimony: National Cash Register Co. v. Haak

249

(4)

Critique of System

253

(1)

Advice to Expert Witnesses

254

(1)

Implied Warranty: An Outcome Standard

255

(2)

Third-Party Claims: Special Problems

257

(23)

Potential Third Parties

257

(1)

Contracts for Benefit of Third Parties

257

(2)

Tort Law: Privity and Duty

259

(1)

Negligent Misrepresentation: Ossining Union Free School District v. Anderson La Rocca Anderson

260

(5)

Economic Loss Rule: Losses Unconnected to Personal Harm or Damage to Property

265

(3)

Interference with Contract or Prospective Advantage---The Adviser's Privilege

268

(1)

Safety and the Design Professional: Pfenninger v. Hunterdon Central Regional School District and CH2M Hill, Inc. v. Herman

269

(10)

Action Taken on Site

279

(1)

Safety Legislation

280

(1)

Summary

280

(1)

Special Legal Defenses

280

(5)

Approval by Client

280

(1)

Acceptance of the Project

281

(1)

Passage of Time: Statutes of Limitations

281

(2)

Decisions and Immunity

283

(1)

Recent Legislative Activities

284

(1)

Remedies

285

(1)

Against Design Professionals

285

(1)

Against Co-Wrongdoers

286

(1)

Current Controversies: Some Observations

286

(6)

The Professional Standard: Should Professionals Be Treated Differently?

286

(1)

The Design Professional's Duty to Workers

287

(2)

Injection of Tort Law into the Commercial World: A Wild Card

289

(1)

The Effect of Expanded Professional Liability

290

(1)

Problems

291

(1)

Risk Management: A Variety of Techniques

292

(14)

Sound Economic Basis: Bargaining Power

292

(1)

Evaluating the Commission: Participants and Project

292

(1)

Contractual Risk Control

293

(4)

Scope of Services

293

(1)

Standard of Performance

293

(1)

Exclusion of Consequential Damages

293

(1)

Limiting Liability to Client

294

(2)

Immunity: Decision Making

296

(1)

Contractual Statute of Limitations

297

(1)

Third-Party Claims

297

(1)

Dispute Resolution

297

(1)

The Residue

297

(1)

Some Suggestions

297

(1)

Indemnity: Risk Shifting or Sharing

297

(1)

Professional Liability Insurance: Risk Spreading

298

(6)

Requirement of Professional Liability Insurance

298

(1)

Volatility of Insurance Market

299

(1)

Regulation

299

(1)

Premiums

299

(1)

Policy Types: Occurrence or Claims Made

300

(1)

Coverage and Exclusions

300

(2)

Deductible Policies

302

(1)

Policy Limits

302

(1)

Notice of Claim: Cooperation

303

(1)

Duty to Defend

303

(1)

Settlement

304

(1)

Multiparty Policies

304

(1)

Termination

304

(1)

Preparing to Face Claims

304

(2)

Problems

305

(1)

Intellectual Property: Ideas, Copyrights, Patents, and Trade Secrets

306

(21)

Relevance to Design Professional

306

(1)

An Overview

306

(1)

Specificity of Discussion

306

(1)

Purpose of Protection

307

(1)

Exclusions from Discussion: Trademarks and Shop Rights

307

(1)

The Copyright Law of 1976

307

(3)

Common Law Copyright Abolished

307

(1)

Statutory Copyright

307

(1)

Classification of Copyrightable Works

307

(1)

308

(1)

Codification of Fair Use Doctrine

308

(1)

Obtaining a Copyright

308

(1)

Remedies for Infringement: Increase in Statutory Damages

309

(1)

Works Commissioned by U.S. Government

309

(1)

Special Copyright Problems of Design Professionals

310

(11)

Attitude of Design Professionals Toward Copyright Protection

310

(1)

What Might Be Copied?

310

(1)

Common Law Copyright and Publication

310

(1)

Statutory Copyright

310

(1)

Architectural Works Copyright Protection Act of 1990

311

(1)

312

(1)

Ownership of Documents and Copyright: License to Use

312

(2)

Infringement: Sturdza v. United Arab Emirates

314

(6)

Advice to Design Professionals

320

(1)

Moral Rights of Artists

321

(1)

Patents: Some Observations and Comparisons

321

(1)

Scope of Coverage

321

(1)

Patent and Copyright Compared

321

(1)

Trade Secrets

322

(3)

Definition

322

(1)

Context of Trade Secret Litigation

322

(1)

Contrast to Patents: Disclosure vs. Secrecy

323

(1)

Adjusting Competing Social Values

323

(1)

Availability of Legal Protection

324

(1)

Duty Not to Disclose or Use: Confidential Relationship and Contract

324

(1)

Nature of Information

324

(1)

Employee Cases

325

(1)

Scope of Remedy

325

(1)

Duration of Protection

325

(1)

Advice to Design Professionals

325

(2)

Planning the Project: Compensation and Organization Variations

327

(39)

Overview

327

(1)

Some Attributes of the Construction Industry

327

(1)

Owner's Objectives

327

(1)

Blending Business and Legal Judgments

327

(1)

Public vs. Private Projects

328

(1)

Pricing Variations

328

(10)

Fixed-Price or Lump-Sum Contracts: Some Variations

328

(2)

Cost Contracts

330

(2)

Value Engineering

332

(2)

Unit Pricing

334

(3)

Cash Allowance

337

(1)

Contingencies

337

(1)

Problems

337

(1)

Traditional Organization: Owner's Perspective

338

(1)

Traditional System Reviewed

338

(1)

Weaknesses

338

(1)

Modern Variations

339

(21)

Introductory Remarks

339

(1)

Phased Construction (Fast-Tracking)

340

(1)

Separate Contracts (Multiple Primes): Broadway Maintenance v. Rutgers

341

(7)

Construction Management

348

(4)

Turnkey Contracts

352

(1)

Combining Designing and Building (DB)

352

(5)

Partnering

357

(1)

Teaming Agreements

358

(1)

Build--Operate--Transfer (BOT)

358

(2)

Summary

360

(1)

Administrative Problems

360

(6)

Overview

360

(1)

Authority: Special Problems of Construction Contracts

360

(3)

Communications

363

(1)

Problems

364

(2)

Competitive Bidding: Theory, Realities, and Legal Pitfalls

366

(31)

Basic Objectives Reconsidered

366

(1)

Competitive Bidding: Theories and Some Pitfalls

366

(3)

The Competitive Bidding Process

369

(6)

Objectives

369

(1)

Invitation to Bidders

369

(1)

Prequalification

369

(1)

Two-Step Process

370

(1)

First Article

370

(1)

Deposits

370

(1)

Alternates

370

(1)

Information to Bidders

371

(1)

Bid Proposals: Changes

371

(1)

Bid Opening

372

(1)

Evaluations of Bids

372

(1)

Notification to Bidders

373

(1)

Postaward Changes

373

(1)

Signing the Formal Contract

373

(1)

Readvertising

373

(1)

Special Rules for Public Contracts

374

(1)

Some Legal Aspects of Competitive Bidding

375

(20)

Project Labor Agreements

375

(2)

Duty to Disclose

377

(1)

Bid Proposal

377

(1)

Award and Waiving of Irregularities---Remedies---Conduit and Foundation Corp. v. Metropolitan Transportation Authority

378

(5)

Withdrawal or Correction of Mistaken Bids: Sulzer Bingham Pumps, Inc. v. Lockheed Missiles and Space Company, Inc.

383

(6)

Bid Deposit

389

(2)

The Formal Contract

391

(1)

Bidding Documents

391

(1)

Judicial Review of Agency Action

392

(1)

Illegal Contracts

393

(2)

Subcontractor Bids

395

(2)

Problems

395

(2)

Sources of Construction Contract Rights and Duties: Contract Documents and Legal Rules

397

(17)

Contract Documents: An Electronic Age

397

(11)

Bidding Documents

397

(1)

Basic Agreement

398

(1)

Drawings (Plans)

399

(1)

Specifications---Fruin-Colnon v. Niagara Frontier and Blake v. United States---Work Preservation Clauses

399

(6)

Conditions: General and Supplementary

405

(1)

Site Subsurface Test Reports

406

(1)

Prior Negotiations and the Parol Evidence Rule

406

(1)

Modifications

407

(1)

Judicially Determined Terms

408

(6)

Necessity to Imply Terms

408

(2)

Custom

410

(1)

Building Laws

411

(1)

Good Faith and Fair Dealing

412

(1)

Unconscionability

413

(1)

Contract Interpretation: Chronic Confusion

414

(16)

Basic Objectives

414

(1)

Language Interpretation: Newsom v. United States

414

(7)

Resolving Conflicts and Inconsistencies

421

(7)

Within the Written Agreement

421

(1)

Between Documents: Unicon Management Corporation v. United States and Hensel Phelps v. United States

422

(6)

Reformation of Contracts

428

(2)

Problems

429

(1)

Changes: Complex Construction Centerpiece

430

(20)

Definitions and Functions of a Changes Clause: Watson Lumber Co. v. Guennewig

430

(4)

Shifts in Bargaining Power

434

(1)

Types of Changes

435

(3)

Cardinal Change

435

(1)

Constructive Change

436

(1)

Deductive Change (Deletion)

437

(1)

Minor Change

438

(1)

Tentative Change

438

(1)

Change Order Mechanisms

438

(10)

Judicial Attitude Toward Changes Mechanisms

438

(1)

Limitation on Power to Order Changes

439

(1)

Authority to Order Change

440

(2)

Misrepresentation of Authority

442

(1)

Duty to Order Change from Contractor

443

(1)

Formal Requirements

444

(1)

Intention to Claim a Change

444

(1)

Excusing Formal Requirements

445

(2)

Pricing Changed Work

447

(1)

Effect of Changes on Performance Bonds

448

(2)

Problems

449

(1)

Payment: Money Flow as Lifeline

450

(26)

The Doctrine of Conditions

450

(1)

Progress Payments

451

(9)

Function

451

(1)

Schedule of Values

451

(1)

Application for Payment Certificate

451

(1)

Observations and Inspections: Representations from Certificate Issuance

452

(1)

Amount Certified for Payment: Incorporation into the Project

452

(2)

Time of Payment

454

(1)

Passage of Title

454

(1)

Assignment of Payments

454

(1)

Lender Involvement

455

(1)

Joint Checks

455

(1)

Surety Requests That Payment Be Withheld

456

(1)

Remedies for Nonpayment

457

(2)

Payment as Waiver of Defects

459

(1)

Progress Payments and the Concept of Divisibility

459

(1)

Payment as Preference

460

(1)

Retainage

460

(2)

Substantial Completion

462

(1)

Completion and Final Payment

463

(2)

Payment for Work Despite Noncompliance

465

(9)

The Doctrine of Conditions

465

(1)

Substantial Performance: Plante v. Jacobs

465

(7)

Divisible Contract

472

(1)

Restitution: Unjust Enrichment

472

(1)

Waiver

473

(1)

The Certification and Payment Process: Some Liability Problems

474

(2)

Problems

475

(1)

Expectations and Disappointments: Some Performance Problems

476

(26)

Introduction to Chapters 23 through 28

476

(1)

Affirmative Legal Doctrines: The Bases for Claims

476

(4)

Introduction: The Shopping List

476

(1)

Fraud

476

(1)

Concealment of Information

477

(1)

Misrepresentation

477

(1)

Negligence

477

(1)

Strict Liability

478

(1)

Breach of Contract

478

(1)

Express Warranty

478

(1)

Implied Warranty

479

(1)

Consumer Protection Legislation

479

(1)

Defenses to Claims

480

(5)

Introduction: Causation and Fault

480

(1)

Contractual Risk Assumption

480

(1)

Mutual Mistake

481

(1)

Impossibility: Commercial Impracticability

481

(1)

Frustration

482

(1)

Acceptance

483

(1)

Passage of Time: Statutes of Limitation

483

(1)

Release

484

(1)

Sovereign Immunity: Federal and State

484

(1)

Restitution

485

(1)

Specific Applications of General Principles

486

(16)

Increased Cost of Performance

486

(1)

Labor Disruptions: The Picket Line

486

(2)

Partial or Total Destruction of Project: Insurance and Subrogation Waivers

488

(3)

Governmental Acts

491

(1)

Misrepresentaton Through Defective Specifications: United States v. Spearin

492

(5)

``Impossible'' Specifications

497

(1)

Weather

498

(1)

Financial Problems

498

(1)

Asbestos and Other Hazardous Materials

499

(2)

Problems

501

(1)

Defects: Design, Execution, and Blurred Roles

502

(21)

Introduction: The Partnership

502

(2)

Basic Principle: Responsibility Follows Control

504

(1)

Displacing the Basic Principle: Unconscionability

505

(2)

Good Faith and Fair Dealing: A Supplemental Principle

507

(1)

Acceptance of Project

508

(1)

Owner Claims and Divided Responsibility

509

(1)

Third-Party Claims

510

(1)

Claims Against Liability Insurer

511

(1)

Warranty (Guarantee) Clauses

512

(6)

Relationship to Acceptance

512

(1)

Purposes: St. Andrew's Episcopal Day School v. Walsh Plumbing Co.

513

(4)

Warranty and Correction of Work Under A201

517

(1)

Implied Warranties in the Sale of Homes: Strict Liability

518

(5)

Home Buyers and Their Legal Problems

518

(1)

The Implied-Warranty Explosion of the 1960s

518

(1)

Current Problems

518

(2)

Insurance Protection

520

(1)

Deceptive Practices Statutes

520

(1)

Problems

520

(3)

Subsurface Problems: Predictable Uncertainty

523

(17)

Discovery of Unforeseen Conditions

523

(2)

Effect on Performance

523

(1)

Causes

523

(1)

Two Models

523

(1)

Enforceability of a Promise to Pay More Money

524

(1)

Supervening Geotechnical Conditions and Mistake Claims

524

(1)

Common Law Rule

525

(1)

Information Furnished by Owner

526

(1)

Risk Allocation Plans

527

(2)

Disclaimers---Putting Risk on Contractor

529

(1)

Contractual Protection to Contractor

530

(7)

Public Contracts: The Federal Approach

530

(4)

AIA Approach: Concealed Conditions

534

(1)

EJCDC Approach

535

(1)

The FIDIC Approach

536

(1)

Some Advice to Courts

537

(3)

Problems

537

(3)

Time: A Different but Important Dimension

540

(30)

An Overview

540

(1)

Commencement

540

(2)

Acceleration

542

(1)

Specific: The Changes Clause

542

(1)

Constructive Acceleration

542

(1)

Voluntary: Early Completion

542

(1)

Completion

542

(1)

Schedules: Simple and Critical Path Method (CPM)

543

(6)

Approaches to Scheduling

543

(2)

The Critical Path Method (CPM)

545

(3)

Other Legal Issues

548

(1)

Causation: Concurrent Causes

549

(1)

Allocation of Delay Risks

550

(2)

Compensable vs. Noncompensable

550

(1)

Common Law

550

(1)

Fault

550

(1)

Force Majeure Clauses

550

(1)

Weather

551

(1)

Subcontractor-Caused Delay

551

(1)

Role of Architect

552

(1)

Time Extensions

552

(1)

Role of Design Professional

552

(1)

Duration of Extension

552

(1)

Notice

553

(1)

Unexcused Contractor Delay

553

(8)

Actual Damages

553

(1)

Liquidated Damages: Bethlehem Steel Corp. v. Chicago and Rohlin Constr. Co. v. City of Hinton

554

(7)

Owner-Caused Delay

561

(9)

Assumed Contractual Risk: No-Damage Clauses: Triple R Paving, Inc. v. Broward County

561

(7)

Subcontractor Claims

568

(1)

Liquidated Damages

568

(1)

Measurement

568

(1)

Records

568

(1)

Problems

568

(2)

Claims: By-Products of Construction Process

570

(37)

Introduction

570

(1)

Measurement: Contractor versus Owner

570

(15)

Illustrations

570

(1)

Cost Contracts

570

(1)

Project Never Commenced

571

(1)

Project Partially Completed: Damages

571

(1)

Project Partially Completed: Restitution

572

(2)

Project Completed: Complete General Construction Co. v. Ohio Department of Transportation and New Pueblo Constructors v. State of Arizona

574

(1)

Denial of Restitution

574

(1)

Site Chaos and Productivity

575

(1)

Extended Home Office Overhead: Eichleay Formula

576

(5)

Preferred Formulas: Measured Mile and Industry Productivity Studies

581

(1)

Total Cost

581

(1)

Jury Vedict

582

(3)

Measurement: Owner versus Contractor

585

(5)

Illustrations

585

(1)

Project Never Begun

585

(1)

Project Partially Completed

585

(1)

Defective Performance: Correction Cost or Diminished Value?

586

(3)

Delay

589

(1)

Certainty

590

(1)

Records

591

(1)

During Performance

591

(1)

After Dispute Arises

591

(1)

Consequential Damages

591

(2)

Defined

591

(1)

Owner Claims

592

(1)

Contractor Claims

592

(1)

Waiver of Consequential Damages: AIA Approach

592

(1)

Avoidable Consequences: The Concept of Mitigation

593

(1)

Collateral Source Rule: Off-Setting Benefits

594

(1)

Noneconomic Losses: Erlich v. Menezes

594

(5)

Punitive Damages

599

(2)

Cost of Dispute Resolution: Attorneys' Fees

601

(1)

Interest

601

(1)

Disputes and Settlements: Rich & Whillock v. Ashton Dev.

601

(3)

Claims Against Multiple Parties

604

(1)

Security for Claims

605

(2)

Owner Claims

605

(1)

Prime Contractor Claims

606

(1)

Subcontractor Claims

606

(1)

Summary

606

(1)

Problems

606

(1)

The Subcontracting Process: An ``Achilles Heel''

607

(29)

An Overview of the Process

607

(3)

The Subcontractor Bidding Process

610

(4)

Using Sub-Bids

610

(1)

Irrevocable Sub-Bids

611

(1)

Bargaining Situation: Shopping and Peddling

611

(2)

Avoiding Drennan

613

(1)

Uniform Commercial Code

613

(1)

A Suggestion

614

(1)

Teaming Agreements

614

(1)

Subcontractor Selection and Approval: The Owner's Perspective

614

(2)

Sources of Subcontract Rights and Duties: Flow-Through Clauses

616

(4)

Subcontractor Defaults

620

(1)

Claims by Contract-Connected Parties

620

(1)

Claims by Third Parties

620

(1)

Responsibility of Prime Contractor

620

(1)

Payment Claims Against Prime Contractor

621

(3)

Payment Claims Against Property, Funds, or People Other Than Prime Contractor

624

(8)

Court Judgments and Specific Remedies

624

(1)

Statutory and Nonstatutory Remedies

624

(1)

Public and Private Work

625

(1)

Mechanics' Liens

625

(4)

Stop Notices

629

(1)

Trust Fund Legislation: Criminal Penalties

629

(1)

Michigan Homeowners Construction Lien Recovery Fund

630

(1)

Texas Trapping Statute

630

(1)

Compulsory Bonding Legislation

630

(1)

Nonstatutory Claims

630

(2)

Joint Checks

632

(1)

Other Subcontractor Claims

632

(4)

Against Prime Contractor

632

(1)

Pass-Through Claims Against Owner: Liquidating Agreements and Severin Doctrine

633

(1)

Against Third Parties

634

(1)

Problems

635

(1)

The Design Professional as Judge: A Tradition Under Attack

636

(10)

Relevance: Relation to Chapter 30

636

(1)

The Doctrine of Conditions

636

(1)

Excusing the Condition

637

(1)

The Design Professional as Judge: Reasons

637

(1)

Jurisdiction of Decision-Making Powers

638

(1)

Who Can Make the Decision?

639

(1)

The Contract as a Control on Decision-Making Powers

639

(1)

Procedural Matters

639

(3)

Requirements of Elemental Fairness: A201

639

(1)

Standard of Interpretation

640

(1)

Form of Decision

641

(1)

Appeal

642

(1)

Costs

642

(1)

Finality of Design Professional Decision

642

(2)

Finality: A Comment

644

(2)

Problem

645

(1)

Construction Disputes: Arbitration and Other Methods to Reduce Costs and Save Time

646

(38)

Introduction

646

(1)

The Law and Arbitration

646

(3)

Agreements to Arbitrate and Their Validity

649

(3)

Manifestations of Mutual Assent: An Agreement to Arbitrate and Unconscionability

649

(2)

Other Validity Attacks on Arbitration Clauses

651

(1)

Specific Arbitration Clauses: Jurisdiction of Arbitrator and Timeliness of Arbitration Requests

652

(3)

Jurisdiction Conferred by Clause

652

(2)

Timeliness of Arbitration Demand

654

(1)

Who Decides Jurisdiction and Timeliness

654

(1)

Waiver of Arbitration

655

(1)

Prehearing Activities: Discovery

656

(1)

Selecting Arbitrators

657

(1)

Place of Arbitration

658

(1)

Multiple-Party Arbitrations: Joinder and Consolidation

658

(2)

The Hearing

660

(3)

A Differentiation of Issues: Desirable versus Required

660

(1)

Waiver

661

(1)

Time

661

(1)

Proceeding Without the Presence of One of the Parties

661

(1)

The Arbitrators

661

(1)

Rules for Conducting the Hearing

661

(1)

Opening Statements

661

(1)

Production of Evidence: Subpoena Powers

662

(1)

Legal Rules of Evidence

662

(1)

Documentary Evidence

662

(1)

Questioning Witnesses

662

(1)

Visiting the Site

662

(1)

Ex Parte Communications

663

(1)

Transcript

663

(1)

Reopening Hearing

663

(1)

Substantive Standards

663

(1)

Remedies: Interim Relief

664

(1)

Award

665

(1)

Enforcement and Limited Judicial Review

666

(2)

Insurers and Sureties

668

(1)

Arbitrator Immunity

669

(1)

Arbitration and Litigation Compared

669

(3)

Private Systems

672

(7)

Arbitration

673

(2)

Mediation

675

(1)

Mediation-Arbitration

676

(1)

Mini-Trials

676

(1)

Dispute Review Board

677

(1)

Project Neutral

677

(1)

Project Counsel

677

(1)

Partnering

677

(1)

Conflict Manager

677

(1)

Court-Appointed Arbitrators: Adjudicator (Great Britain)

678

(1)

Multi-Tier Systems

678

(1)

Architect/Engineer Resolution

678

(1)

Adjuncts of Judicial Systems

679

(1)

Special Masters and Referees

679

(1)

Summary Jury Trials

679

(1)

Public Contracts

679

(2)

Federal Procurement Contracts

680

(1)

State and Local Contracts

680

(1)

International Arbitration: FIDIC

681

(3)

Problems

683

(1)

Indemnification and Other Forms of Shifting and Sharing Risks: Who Ultimately Pays?

684

(18)

First Instance and Ultimate Responsibility Compared

684

(1)

Contribution Among Wrongdoers

684

(1)

Noncontractual Indemnity: Unjust Enrichment

685

(5)

Basic Principle: Unjust Enrichment

685

(1)

Noncontract and Contract Indemnity Differentiated

686

(1)

Some Classifications

686

(2)

Employer Indemnification

688

(1)

Comparative Negligence

688

(1)

Preemption

689

(1)

Settlements

690

(1)

Implied Contractual Indemnity

690

(1)

Contractual Indemnity

690

(12)

Indemnification Compared to Exculpation, Liability Limitation, and Liquidated Damages

690

(1)

Indemnity Clauses Classified

691

(1)

Functions of Indemnity Clauses

692

(1)

Statutory Regulation

693

(2)

Common Law Regulation: Specificity Requirements

695

(1)

Interpretation Issues

696

(1)

Losses and Indemnity Coverage

696

(1)

Work-Relatedness of Injury

697

(1)

Amount Payable

697

(1)

Who May Enforce Indemnity Clause

698

(1)

The AIA Indemnity Clause

699

(1)

Insurance

700

(1)

Problems

701

(1)

Surety Bonds: Backstopping Contractors

702

(14)

Mechanics and Terminology

702

(1)

Function of Surety: Insurer Compared

703

(1)

Judicial Treatment of Sureties

703

(1)

Surety Bonds in Construction Contracts

704

(1)

Bid Bond

705

(1)

Performance Bond

705

(1)

Payment Bond

706

(1)

Subcontractor Bonds

707

(1)

Other Bonds

707

(1)

Some Legal Problems

707

(9)

Who Can Sue on the Bond?

707

(2)

Validity of Bond

709

(1)

Surety Defenses: On Demand Bonds

709

(1)

Surety Responsibility

710

(2)

Bond Limits

712

(1)

Bankruptcy of Contractor

713

(1)

Asserting Claims: Time Requirements

713

(1)

Reimbursement of Surety

713

(1)

Regulation: Bad-Faith Claims

714

(1)

Problems

715

(1)

Terminating a Construction Contract: Sometimes Necessary but Always Costly

716

(1)

Termination: A Drastic Step

716

(2)

Termination by Agreement of the Parties

718

(1)

Contractual Power to Terminate

718

(9)

Default Termination

718

(2)

Termination or Suspension for Convenience

720

(1)

Events for Which Neither Party Is Responsible

721

(1)

Role of Design Professional

721

(2)

Waiver of Termination and Reinstatement of Completion Date

723

(1)

Notice of Termination

724

(1)

Taking Over Materials and Equipment

725

(1)

Effect on Existing Claims for Delay

726

(1)

Disputed Terminations

726

(1)

Public Contracts and Constitutional Protection

727

(1)

Termination by Law

727

(4)

Material Breach

727

(2)

Future Breach: Prospective Inability and Breach by Anticipatory Repudiation

729

(1)

Bankruptcy

730

(1)

Restitution When a Contract Is Terminated

731

(1)

Keeping Subcontractors After Termination

731

(1)

Problems

731

Appendix A Standard Form of Agreement Between Owner and Architect (AIA Doc. B141-1997)

(1)

Appendix B Standard Form of Agreement Between Owner and Contractor (AIA Doc. A101-1997)

(1)

Appendix C General Conditions of the Contract for Construction (AIA Doc. A201-1997)

(1)

Appendix D Performance and Payment Bonds (AIA Doc. A312)

(1)

Appendix E Standard Form of Agreement Between Contractor and Subcontractor (AIA Doc. A401-1997)

(1)

Appendix F Construction Industry Dispute Resolution Procedures

(1)

Appendix G Standard Form of Agreement Between Owner and Engineer for Professional Services (EJCDC E-500)

(1)

Appendix H Suggested Form of Agreement Between Owner and Contractor for Construction Contract (Stipulated Price) (EJCDC C-520)

(1)

Appendix I Standard General Conditions of the Construction Contract (EJCDC C-700)

(1)

Subject Index

(1)

Case Index

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Legal Aspects of Architecture, Engineer, and Construction Process

Summary

Table of Contents

Supplemental Materials