Understanding & negotiating construction contracts : a contractor's & subcontractor's guide to protecting company assets / Kit Werremeyer.

Format:

Book

Author/Creator:

Werremeyer, Kit.

Language:

English

Subjects (All):

Construction contracts--United States--Popular works.

Construction contracts.

United States.

Genre:

Popular works.

Physical Description:

xxxvii, 291 pages ; 28 cm

Other Title:

Understanding and negotiating construction contracts

Place of Publication:

Kingston, MA : Reed Construction Data, [2006]

Summary:

Construction is a complex business. Each project has its own unique physical and commercial considerations. Since there's no such thing as a "standard" or "typical" construction project, construction contracts should not be looked on as standard either. They must be carefully managed in order to have a successful outcome and to protect the company's interests and assets.

This book will show you how to identify, understand, and evaluate high-risk terms and conditions typically found in construction contracts-then negotiate to lower or eliminate the risk, improve terms of payment, and reduce exposure to claims and disputes. You don't have to be a lawyer to understand the risks and to be able to negotiate better and less risky commercial terms and conditions. The author has written this book without using "legalese," instead providing real-life examples you can relate to from actual projects-from small residential and retail to large commercial, industrial, and international work.

This book will help you manage all these elements of the contract: Scope of Work & Schedule, Terms of Payment & Cash Flow, Assurances of Performance, Insurance, Bonding, Indemnity, & Warranties, Changes to the Contract, Disputes & Their Resolution, Damages, Termination & Suspension, Force Majeure, International Contracting.

Contents:

The Goals of This Book xxi

What Are the Benefits of This Book? xxi

Contractor & Owner Conventions xxii

Private Contracts or Government Contracts? xxii

Key Contracting Concepts xxii

Two Types of Commercial Terms & Conditions xxiii

The Most Important Commercial Terms & Conditions xxiv

The Contracting Process xxv

Excuses for Not Negotiating Better Commercial Terms & Conditions xxv

The Concept of Risk Transfer xxvi

This is a Book Developed Just for Contractors xxvi

Three Final Suggestions xxvii

Chapter 1 Contracts: Basic Training 1

What Is a Contract? 1

The Steps to a Contract 1

Coming to the Party? 2

"Here's My Proposal" 3

"Consideration," or Something of Value 5

The "Happy Test" 5

"Can That Person Sign This Contract?" 5

Call in the Enforcer To Close the Breach 6

A Contract Example 7

Strange Words & Long Paragraphs 9

Contracting Myths 10

Contract Negotiations 11

Chapter 2 Types & Forms of Contracts 13

Fixed Price & Fixed Schedule Contracts 13

Reimbursable Type Contracts 14

Combined Fixed Price & Reimbursable Contracts 16

Cost Plus Fee Contracts 17

Guaranteed Maximum Price Contracts 18

Target Price Contracts 19

Contracts with Performance Incentives 19

Form of Contracts 20

Some Final Contract Housekeeping-Definitions 25

Chapter 3 Scope of Work 29

The Scope of Work Matrix 33

Scoping Drawings 34

Chapter 4 Terms of Payment & Cash Flow 37

Cash Flow 37

Interest Rates 40

Periodic Progress & Milestone Payments 40

Chapter 5 The Schedule 55

Float 56

Time Is of the Essence 57

Extra Time, but No Money 59

Chapter 6 Assurances of Performance 63

Guaranties & Bonds 63

What Does "Failure to Perform" Mean? 65

What Is a Bond? 66

Forms of Assurances of Performance 66

Surety Companies 73

Some Language Considerations on Guaranties & Bonds 75

Types of Performance Assurances 75

Chapter 7 Insurance 93

What Is Insurance? 94

Claims Made vs. Occurrence 95

Types of Insurance 95

Important Issues Associated with Insurance 101

Additional Insured Status 107

Additional Insurance Basics 109

A Typical Insurance Clause in a Construction Contract 119

Safety 124

Chapter 8 Indemnity 125

Insurance & Indemnity 125

Indemnity Definitions 126

Transferring the Owner's Risks to Contractors 127

Fairness Is Not a Consideration 127

Is an Indemnity Required in a Construction Contract? 127

Anti-Indemnity Legislation 128

Examples of Indemnification Clauses 131

Indemnification, Additional Insured Status, & Contractual Liability Insurance 137

Owners Love Claims! 140

Negotiating Indemnity Clauses 141

Knock-for-Knock Indemnities 144

Chapter 9 Changes 147

Some Ground Rules 148

Protecting the Project Manager 148

Owners' Directives 149

Constructive Changes 149

Payment for Changes 149

Sample Change Clauses 150

Major Contract Changes 155

Negotiating Change Clauses 156

Chapter 10 Disputes & Their Resolution 159

What's a Project Manager To Do? A Short Story To Start With 159

Disputes-The Construction Contract's Bad Actor 160

An Ounce of Prevention 161

Dispute Resolution Options 162

The Folks Who Negotiate, Mediate, Arbitrate, & Litigate 163

Dispute Resolution Clauses 164

Chapter 11 Damages 167

Breach of Contract/Failure To Perform 167

Contractors' Financial Exposure 168

Actual Damages-A Silent Risk? 168

Liquidated Damages 170

Consequential Damages 176

Chapter 12 Warranties 181

A Workable Definition of Warranty 181

Warranty Issues 182

The Uniform Commercial Code 187

When Is No Warranty Appropriate? 189

Extended Duration Warranties 191

Limiting Provisions in Warranties 193

Pass-Through Warranties 194

Latent Defects & Warranties 195

A Sample Warranty 195

Chapter 13 Termination & Suspension 197

Termination for Cause 197

Termination for Convenience 199

Suspension 202

Cancellation 205

Chapter 14 Force Majeure 207

Negotiating Clauses 207

Sample Contract Language 208

Chapter 15 Other Contract Clauses 213

Site Conditions 214

Use of Completed Portions of the Work 219

Patent Indemnity 220

Secrecy & Confidentiality Clauses & Agreements 220

Owner's Right To Inspect 222

Independent Contractors 224

Acceptance & the Punch List 226

Advance & Partial Waiver of Liens 229

Final Waiver of Liens 231

Audit Rights 233

Severability or Validity Clauses 235

Venue & Applicable Law 235

Some Interesting Clauses to Close 237

Chapter 16 International Contracting 239

International Contracts 240

The U.S. Foreign Corrupt Practices Act 241

Letters of Credit 242

Split Contracts: Onshore & Offshore Contracts 243

Political, Religious, & Economic Risks 244

Overseas Private Investment Corporation (OPIC) 245

Legal Systems in Foreign Countries 245

Local Employees, Partners, & Agents 246

Offshore Companies 247

Currency Risks 248

Applicable Law 251

Joint Ventures 253

Joint Operations 254

Import & Export Considerations 254

Understanding Incoterms 256

The Export-Import Bank of the United States 258

Where to Get Some Help-Ask the U.S. Government 259

Lastly, Use the Right Paper Size! 260

Chapter 17 Some Final Thoughts on Negotiating Contracts 261

Why Negotiate? 261

The Concept of Standard Terms & Conditions 262

Risk Transfer Item 1 Get Rid of the Indemnity Clause! 264

Risk Transfer Item 2 Don't Provide Additional Insured Status 264

Risk Transfer Clauses, Insurance, & Safety 265

How to Say No Without Aggravating the Owner 265

The Worst Contracting Word: "Reasonable" 266

The Best Contracting Word: "Notwithstanding" 266

Win-Win & Lose-Lose in Contract Negotiations-Fairy Tales? 267

Is There a Price for Bad Commercial Terms & Conditions? 268

Terms of Payment 268

Some Tips on Successful Negotiating 269

Three First (and Final) Suggestions 269.

Notes:

Includes index.

ISBN:

0876298226

9780876298220

OCLC:

122277875