Construction Contracts Flashcards

Question

Real Property / Real estate

Answer 1

Consists of land and any attachments | Chapter 4

Answer 2

1. Legal claim placed on a property 2. Gives the party filing the lien the right to retain possession of the property until a debt payable is satisfied (Chapter 4)

Answer 3

1. Right of the government to retain possession of property until the tax on it has been paid 2. If tax is not paid when land is sold, the lien will transfer with the land title to new owner (Chapter 4)

Answer 4

1. Right of the government/state/public agency to take possession of private property for public use 2. Private citizens/landowners have some safeguards * Due process of law (proper notice) * Fair compensation 3. Condemnation - the exercise of eminent domain (Chapter 4)

Answer 5

1. Direct purchase 2. Eminent Domain 3. Prescription (hostile acquisition) 4. Dedication (mutual agreement) (Chapter 4)

Answer 6

1. Tract of land usually consisting of a series of connected parcels of property that is used for operation of highway or public utility 2. Owned by public or private firms 3. Easement - Grants a specific right of use to non owners (ex: sewer lines, water lines, etc.) (Chapter 4)

Answer 7

1. Division of real property into classifications of use | 2. Used to ensure an orderly development of the community and maintain health and welfare Chapter 4

Answer 8

1. Right created by law that permits workers and materials suppliers who provide improvements to place a claim on that land if they are not paid 2. Attachment to the land (like a mortgage) 3. Includes general contractors and subs 4. If debt is not paid, the lien can be discharged through foreclosure (Chapter 4)

Answer 9

Official document that puts the owner on notice that a lien can be filed if a party is not paid (Chapter 4)

Answer 10

Stop notice - Permits a worker, materials supplier, or sub to notify owner when general contractor has failed to may payments (Chapter 4)

Answer 11

1. Lien laws are complex 2. Lien laws are inconsistent between states 3. Liens are no guarantee of payment and often worthless 4. Filing a lien is a severe means of collection if the debt is small 5. Payment may be made twice (Chapter 4)

Answer 12

1. Owners can post a notice of non responsibility within a specified time 2. A no lien contract 3. Owner can require the contractor furnish an affidavit that all the bills related to a project have been paid 4. Owner can demand to see receipts or statements from workers/suppliers/subs 5. Owner can require the GC to pay the subs and material suppliers before owner makes payments 6. Owner can write joint checks to GC and subs 7. Owner can delay making final payment to GC until time of filing mechanic lien passes 8. Owner can keep reasonable retainage out of contractor’s payments 9. Owner can require a payment bond from GC 10. Owner obtain the services of trustworthy GC (Chapter 4)

Answer 13

1. Means by which a person or persons can let someone else do something for them 2. Agency Agreement consists of a Principal and an Agent * (Principal) authorizes another party (agent) to represent the principal in specified business dealings with third parties (Fiduciary relationship) 3. Agency - Consensual relationship (Chapter 5)

Answer 14

Liable for all contracts made by agent | Chapter 5

Answer 15

1. Must display loyalty and good faith, obey instructions to the letter, and not attempt to exceed authority 2. Obligated to make full disclosure of agency-related transactions to principal 3. If agent acts outside of scope of authority, the principal is not generally liable for those actions (Chapter 5)

Answer 16

1. Agency is created by an express contract (can be implied) 2. Owner’s Agent on a Construction Site 3. Role of the Contractor 4. Termination of an Agency 5. Contingent Liability 6. Day Labor Agencies 7. Independent Contractors 8. Statutory Employees (Chapter 5)

Answer 17

Express contract (can be implied) * By law or contract * By ratification * By estoppel (Chapter 5)

Answer 18

Owner’s agent could be architectural design firm, professional construction manager, or member of engineering firm (Chapter 5)

Answer 19

1. Owners are careful to ensure their contractors are not in positions of being agents, but are independent * Agency - Principal controls and directs the methods and acts of the agent 2. Independent contractor - principal specifies only the results to be obtained from the firm but has not control or directive role of methods * Owner is not obligated by acts of contractor (Chapter 5)

Answer 20

1. Easy to terminate agency agreement 2. Termination can occur by following means: *Death of principal or agent *Destructions of subject matter *Bankruptcy *Expiration of time * Development in which makes subject matter illegal * Unilateral termination (can lead to damages if not justifiable) (Chapter 5)

Answer 21

1. Injured third party (not employee or worker) is not or should not be affected by a contract between two other parties 2. General or prime contractor may be responsible to the owner and third parties for the torts (civil crimes) of a subcontractor (Chapter 5)

Answer 22

1. Agencies that provide workers for all types of tasks 2. Used by general contractors and specialty contractors to fulfill short-term labor needs 3. Once agreement is established, contractor has a line of credit with agency (Chapter 5)

Answer 23

1. Held solely accountable for actions | 2. Typical for a GC to be independent Chapter 5

Answer 24

1. Designation of employees that places them somewhere between regular employees and independent contractors 2. The 4 typical occupations * Full time life insurance salesperson * Agent drivers and commission drivers * Traveling or city salesperson * Homeworkers 3. Employer must withhold FICA taxes on income, not required to withhold income taxes 4. To avoid statutory employee, there should be a clear contract that establishes the nature of the relationship between various parties *Should clearly identify party that is responsible for safety and health compliance (Chapter 5)

Answer 25

1. Proprietorships 2. Partnerships 3. Corporations (Chapter 6)

Answer 26

1. Firms owned by an individual 2. No formal documents are required 3. Owner receives profits as if firm and individual were same 4. Owner pays income tax on company profits as personal income 5. All tax and other liabilities incurred by company are responsibility of owner (Chapter 6)

Answer 27

1. Association of two or more persons to carry on a business * Profits are divided among partners * Pays no income tax (burden falls on partners to pay income tax) 2. Formation of a Partnership * Oral or written agreement okay * Each partner is an agent of other partners 3. Role of Each Partner *Each partner is a general agent *Limitations of power can be established (Chapter 6)

Answer 28

1. Generally contributes cash or property to the business and shares in profits and losses 2. Provides no services and no vote in matters (Chapter 6)

Answer 29

1. Partner in the firm but remains unknown to public | 2. Not active in management Chapter 6

Answer 30

Several Reasons to be Dissolved: * Death of partner * Bankruptcy * Person judged to be insane * Court decree * Mutual agreement Priority of Debts: *Outside creditors paid first *Repayment of loans or advances *Return on each partner's capital investment *If anything left, profits are distributed to partners according to agreement (Chapter 6)

Answer 31

1. Special form of temporary partnership | 2. Combined efforts of two or more construction firms Chapter 6

Answer 32

1. Legal entity created to act as an individual while protecting the owners or stockholders in the firm 2. Owned by one or more individuals who form an independent body under a corporate name Owners pay income tax on only the profits paid to them 3. Formation of Corporation - Formal process formed by a person or group of people (Chapter 6)

Answer 33

1. Owners are not agents of the corporation 2. Actions are limited to voting at meetings 3. Common stock 4. Preferred stock 5. Bonds (Chapter 6)

Answer 34

Taxed by government | Chapter 6

Answer 35

Controlled by Board of Directors | Chapter 6

Answer 36

Corporate contracts that go beyond the scope of corporation’s implied or expressed powers (Chapter 6)

Answer 37

1. Supercorporation that is created to hold such a dominant interest in one or more companies that it can prescribe 2. Gained through stock purchases (Chapter 6)

Answer 38

Like a typical corporation in that there is limited liability for shareholders but it generally does not pay income taxes as a separate legal entity (Chapter 6)

Answer 39

Critical - relate to violations of the law Civil - relates to disputes concerning contract matters and torts (Chapter 7)

Answer 40

1. Typical concerns - Changes, differing site conditions, delays, payments 2. Court Approaches: * Decide on intent * Exculpatory Provision - One party (typically contractor) is asked to assume liability that would not otherwise be assumed 3. Strict Interpretation *Court tries to interpret provision against the party that seeks protection under the provision or against the party which drafted the provision (Chapter 7)

Answer 41

1. Disputes that relate to matters not addressed by statutory law or contract obligations 2. Wrongs committed against others that do not involve contracts 3. Common-law interpretation often required 4. Can result from a specific action or failure to act (Chapter 7)

Answer 42

1. One party owes a duty to another 2. That party does not conform to the standard 3. The second party is harmed by the act or failure to act 4. There is a clear causal relationship between the act and then harm that results (Chapter 7)

Answer 43

Conduct that is expected of someone acting in a given capacity (Chapter 7)

Answer 44

When a legally protected interest is overly invaded or violated in some way (Chapter 7)

Answer 45

1. Trespass violations 2. Unauthorized use of patents, trademarks, copyrights 3. Defamation of character through libel/slander 4. Failure to exercise care of one's duty to another (Chapter 7)

Answer 46

1. When the party controlling a piece of property should know that children are likely to trespass 2. The party should realize that there is an unreasonable risk of death or injury on the site 3. The children will likely not recognize the risk involved 4. The party could reduce the risk with a small effort (Chapter 7)

Answer 47

Defense offered to avoid liability for an injury | Chapter 7

Answer 48

Guarantee provided by a firm that states that the contractor will fulfill the terms of the contract **Analogy: Surety is like a minor who must have an elder sign a contract to purchase an item on credit (Chapter 8)

Answer 49

1. Surety / bond company * Obligated to perform or to pay a specified amount of money if the principle does not perform * Guarantor on the bond 2. Principal / the GC * The party whose performance is promised or guaranteed 3. Obligee (owner) * The party to whom the promise of the principal’s performance is made * Beneficiary of the bond (Chapter 8)

Answer 50

1. GC can be placed in risk if there are considerable amounts of work being done by subs 2. GC may require each sub to provide a surety bond to minimize risk * Principal = sub * Obligee = GC * Surety = bonding company 3. Principal (applies for bond) is responsible for obtaining bond from surety (signed) and then deliver to obligee 4. Surety guarantees the performance of the principal’s obligations under the contract with the owner/obligee (Chapter 8)

Answer 51

Assure owner that the contractor is backed up by someone who is financially responsible (it is NOT insurance) (Chapter 8)

Answer 52

1. “Presupposes no losses” and is structured on a set fee (similar to lending transaction at bank) 2. Premium is a fee for the extension of credit (like interest on loans) (Chapter 8)

Answer 53

Principal is obligated to the surety for any debts it incurs as a result of a default by the principal (Chapter 8)

Answer 54

1. Insurance covers specific losses, Surety Bond is for losses of any kind, for those guarantees given (ex: performance and payment) 2. Insurance transfer risk, Surety agreement does not 3. Underwriter of insurance policy often has ability to cancel policy during policy period, Once surety bond is issues, the bond is irrevocable (Chapter 8)

Answer 55

1. Underwriting = rating the acceptability of risks being solicited 2. Performed by a surety agent 3. Surety companies assume tremendous risk (must do due diligence when analyzing contractors) 4. Process involves determining the liabilities of the contractor and investigating background, capabilities, financial responsibility, etc. 5. Contractor will deal directly with surety agent concerning bid bonds, payment bonds, and performance bonds 6. When determining to issue a bond, surety agents look out for over expansion, bids that are too low, subcontractor failures, unforeseen labor problems, unknown soil conditions, loss of key personnel, harsh contract provisions, and extra high wages 7. Surety Companies are used for weeding out unworthy and irresponsible bidders 8. Sureties can join together to issue a large bond (Chapter 8)

Answer 56

1. Size, type and nature of project being bid 2. Owner of the project and ability to pay 3. Incomplete work of contractor 4. Adequacy of working capital and available credit 5. Volume of work permitted to be undertaken by contractor 6. Money “left on the table” 7. Experience of contractor 8. Contract terms: bonds required, how payments will be made, retainage, time of completion, liquidated damages, amount subcontracted, and qualification (Chapter 8)

Answer 57

Cannot assume a single obligation that exceeds 10% of surety’s equity or surplus *Limits exposure of the surety and serves as a further guarantee to the owner that the surety and contractor is sound (Chapter 8)

Answer 58

1. prices can increase 2. labor difficulties 3. subsurface conditions 4. government policy change (Chapter 8)

Answer 59

1. Surety bonds are required of construction contractors on all federal and federally assisted projects * Offer projected to the awarding agencies, laborers, subs, and materials suppliers * $100,000 + projects (Chapter 8)

Answer 60

1. Issued to give assurances that the contractor will enter into a binding construction contract and will provide the required payment and performance bonds if the contract is awarded to him/her 2. If contractor fails (to sign contract or furnish required bonds), bond stipulates that responsible party (surety) will pay damages 3. Face value of bond (penalty) is typically 5-20% of contract amount 4. Cash deposit, certified check, or cashiers check may be used instead of bid bond on some jobs (Chapter 8)

Answer 61

1. Can be a liquidation of damages (limitation of liability) 2. Security device 3. Unenforceable penalty (Chapter 8)

Answer 62

1. Provision for accepted lowest bid and contract transfer “The contract shall be executed by the bidder, and the contract bond shall be executed by the principal and surety, and both shall be presented to the Owner within 15 days after the date of the notice of award of the contract” 2. Bid bond of low bidder becomes null and void when construction contract is signed and payment and performance bonds are posted 3. Fee for issuing bond * Often times there is no fee * If a fee is charged, it is not usually based on value of bid bond (Chapter 8)

Answer 63

1. Assures that a financially responsible party will stand behind the prime contractor if he/she does not perform properly 2. Usually state a specified dollar amount as a limit to the liability of surety (referred to bond’s penalty) 3. Not a guarantee that the project will be built for contract price 4. Typically have a face value to 100% of the contract price 5. Premiums are typically 1% for projects $1 million +, and 1.5-2% for project under $1 million 6. Considered valid for the life of a contract 7. Usually contain provisions that permit the surety to remedy the default and complete the construction contract itself, or to pay the owner to complete it, up to the limit of the bond 8. Provides protection from virtually all types of losses (Chapter 8)

Answer 64

1. Gives protection to the owner if the subs and suppliers are not paid by the prime contractor 2. Payment bonds prevent liens * Subs are paid by the surety if the contractor fails to pay them * Subs are more inclined to bid lower 3. Payment bond guarantees payment to parties involved in construction of a project (Chapter 8)

Answer 65

Bonding capacity: *Sureties generally stipulate a max value of uncompleted work that a contractor can undertake at one time * Based on surety’s appraisal of the contractor’s abilities and resources * Character, capacity, capital (Chapter 8)

Answer 66

Once contractor has been declared bankrupt, the contractor has no further obligation to continue work under original contract * Surety is not released * Performance bond is required by owners (Chapter 8)

Answer 67

1. Surety provides financial support to defaulting contractor in order to expedite the completion of the project (surety reimbursed later) * Most common* 2. Surety solicits bids or quotes from other contractors to complete the project 3. Surety informs the owner to finish the project *Not common* (Chapter 8)

Answer 68

1. Owner not making payment 2. Unjustified interference by own in contractor’s work 3. Delayed approval of shop drawings 4. Discovery of unforeseen subsurface conditions (Chapter 8)

Answer 69

1. Recover from the contractor 2. Sue the owner for any claims that the contractor could reasonably allege 3. Try to get the retainage held by the owner **If Surety takes the responsibility of completing the project, the actual cost to the surety may be greater than face value of the bond (Chapter 8)

Answer 70

1. GC can get protection from liability of subs by having subs provide GC with payment and performance bonds (contractor is obligee) 2. If not, GC can obtain performance bond coverage on behalf of particular sub and deduct cost of bond from the payments made to sub (Chapter 8)

Answer 71

1. Payment and performance bonds are generally considered to be used on GC projects 2. Could assume surety is tied to design part too (need to be careful to explicitly write out) (Chapter 8)

Answer 72

1. After design is complete, owner must obtain services of a construction firm to construct the project 2. Public works is a strictly outlined ‘bidding procedure’ while private process is varied (Chapter 9)

Answer 73

1. Notice is given to interested and qualified members of the construction community in advance *Notice of bids (advertisements) must be placed in newspapers, magazines, trade publications, etc. *Known as “notice to bidders”(Nature/type of project, Location , Type of contract for construction, Bonding requirements, Dates in which to perform work, Terms of payment, Estimated construction cost (some exclude) Time, manner, and place to submit bids, Location to obtain bid documents, Deposit required on bid docs, Owner’s right to reject any and all bids, Requirements regarding wage rates) 2. Invitation for bids must be posted in public places and distributed to the local community Usually includes agency’s/owner’s bid list of potentially interested contractors 3. All bidders must be treated alike and be afforded an opportunity to bid under same terms/conditions 4. Pre Qualifications may be required (Chapter 9)

Answer 74

*No well-defined rules* Typical Process Summary: 1. Owner may select contractor by any means 2. Public advertising is frequently used to obtain advantages of open and free competition 3. Owner may elect to negotiate a contract with a particular contractor 4. Select Bidders List - Owner to select a few prime contractors *most common* (Invitational Bidding) (Chapter 9)

Answer 75

Public bid process - often referred to as design-bid-build process Advantages of Public Bid: 1. Owner benefits from competitive marketplace 2. Owner has appearance of being impartial 3. Process fully embraces fundamentals of free market system 4. May be the only viable method available for some governmental agencies Disadvantages of Public Bid: 1. Accurate costs unknown until design is completed 2. Bids that exceed owner’s budget cannot be accommodated without jeopardizing project 3. Various parties tend to be adversarial under this process 4. Errors or omissions in design may lead to costly change orders / opportunity for constructor to bolster profits Note: negotiated contracts eliminate many of these disadvantages (Chapter 9)

Answer 76

1. Owners may have bidding restricted to firms that have been prequalified on some projects 2. Not common - okay on public and private 3. Typically results in select bidders list and firms to provide info on successful project work, current workload, and personnel employed at firm, experience of personnel, financial stability 4. May be requested via a list of specific questions (such as AIA Document A350 Contractor’s Qual Statement) 5. It is the responsibility of the owner to show that a contractor is not qualified 6. Definition of lowest responsible bidder is more complex than being the lowest bidder * Owner has discretion to determine lowest responsible bidder as long as it’s in good faith (Chapter 9)

Answer 77

1. Plan service centers are a source of bidding information 2. Publish and distribute bulletins that describe all projects to be bid on in the near future 3. Also provide services during the bidding stage * Typically used for detailed estimating by subs and materials suppliers * GC typically obtain own sets of plans by paying deposit to architect/engineer (would not be feasible for GC to obtain all information in small timeframe window by going through service center) * Public knowledge of who is bidding/involved 4. Subs and suppliers are able to prepare estimates in ‘electronic plan rooms’ - reduces time and cost of preparing estimates (Chapter 9)

Answer 78

1. Procedure carried out to critically analyze the various aspects of contract documents in relation to owner’s objectives, to determine if alternative methods or materials might be more appropriate 2. VE review may result in a variety of changes in contract docs that may reduce cost, improve or maintain project quality, and/or decrease duration of construction (Chapter 9)

Answer 79

1. Design Phase - * Independent review from third party may prove beneficial (perspective of others) * Consultant employed on fee basis 2. Construction Phase - * Conducted by contractor who has been awarded the construction contract * Contractor generally compensated by sharing savings with owner * May be biased - may have already given consideration to cost of specific methods (Chapter 9)

Answer 80

1. Assessment of contact document, prior to bidding phase, to identify problem areas and suggest improvements 2. Examples * Skill level / availability of workforce * Cost or availability of specified materials * Limitations of equipment 3. Should be conducted by design team, or sometimes independent firm (Chapter 9)

Answer 81

1. Significant cost involved in preparing an estimate (0.2 - 0.3% of total bid amount) ``` 2. Factors to be considered: Bonding capacity Location of project Owner Owner’s financial status Architect/Engineer Nature and size of project Probable competitors Labor conditions and supply Availability of in-house staff Company’s need for work ``` (Chapter 9)

Answer 82

1. Contractor must pay a deposit to architect/engineer or contracting authority 2. Electronic methods are reducing needs for fees (Chapter 9)

Answer 83

1. Bidding period does not begin until plans and specifications are complete 2. Contractors include large markup to offset costly errors when bidding time is short or limited 3. For owners, more time = lower prices since contractors will be more accurate (Chapter 9)

Answer 84

1. Information about subsurface is frequently a source of conflict 2. Owner is responsible for any errors in the bid documents (unless otherwise stated) * Statements are typically included which place direct responsibility for info on the contractor * Site visit is typically a requirement in instructions to bidders (Chapter 9)

Answer 85

1. Typical instructions relative to procedure for writing and submitting the bid include following issues: (Bids must be submitted on the forms furnished, Erasures must be initialed by signed of bid proposal , All items in bid schedule must be priced, Alternatives are not considered unless called for, Discrepancies between unit price and extended amount are discussed, Are mailed bids accepted and considered?, Can bid modifications be made?, Submission policy is specified) 2. Contractor may be required to submit experience record to demonstrate capability 3. Instructions clearer list all docs that are part of bid docs 4. Construction time period 5. Who is responsible for subsoil data 6. Requirements of bid guarantee 7. Insurance to be provided 8. Bonding requirements 9. Conditions for handling bid irregularities 10. Where and when to deliver bids 11. Closed or public opening of bids 12. Prebid conference (Chapter 9)

Answer 86

More efficient, faster, and more effective | Chapter 9

Answer 87

1. Definition: formal changes or clarifications issued by the owner or owner’s representative to all identified bidders during the bidding period 2. Changes may occur after design drawings have been submitted * Owner discovers something, designer may have a better solution, contractor may notice an error, etc. (Chapter 9)

Answer 88

Definitions: Modifications to the base bid 1. May consist of changes in the structure of a project, changes in the quality of the material to be furnished, inclusion of additional items of work, deletion of specified work items, etc. 2. Typically bidders submit a base bid without regard to alternates 3. Advantage for owner, disadvantage for contractor 4. Owner should try to stipulate priority of alternates (Chapter 9)

Answer 89

1. Form will facilitate analysis and comparison of the bids so that irregularities can be detected quickly 2. Ensures accuracy for contractors in providing necessary info 3. Common requirements: * Price (lump sum or unit) * Time of Completion * Bid surety * Agreement to provide contract surety * Acknowledgement of having reviewed addenda * List of subs * Experience record, financial statement, plant *and equipment inventory * Declaration regarding fraud and collusion * Statement regarding site examination * Signature (Chapter 9)

Answer 90

1. Errors can be common in communication 2. Any major issues that are unresolved at bid finalization must be dealt with a contingent items 3. Common to permit bidders to withdraw or modify bids 4. Frequently necessary for estimator to make assumptions * Request interpretation from designer by creating an addendum for the designer 5. Escrow Estimate - disputes have been minimized by some owners requiring the low-bidding contractor to submit a sealed copy of the estimate shortly after bid opening (Not common) (Chapter 9)

Answer 91

Public Works Projects - 1. Stipulations are clear and more inclusive 2. Lowest responsible bidder submitting a regular bid Bids are opened and owner reviews > Contractor acquires the required bonds and insurance > owner awards construction contract > constructor signed the contract and begins to develop project organization (Notice to Proceed issued from owner) > First day of construction is counted > work begins Contractor may prove error and withdraw (Chapter 9)

Answer 92

1. Often considered as grounds for nullifying a bid, since there is no meeting of the minds 2. General rule is that mistakes of fact are grounds for relieving the bidder of any further obligations, while mistakes in judgement provide no basis for relief (Chapter 9)

Answer 93

1. New variation of bidding was devised in mid 1990s that was initially employed on some public works construction projects 2. Internet-based bidding process - * Contractors are required to use a prescribed website to submit bids * Allows all bidders to see competitor’s total bid prices 3. Criticism - * Described as unethical, method of bid shopping, commodity shopping 4. A commodity product can be purchased via this process because an owner can expect a degree of similarity between bidding options (concrete, aggregate, lumber) (Chapter 9)

Answer 94

1. It is common for project to be awarded a single prime or general contractor that subcontract all or major portions of the work to specialty contractors 2. Size of a project may preclude smaller, local contractors from the opportunity of participating in the project *Work could be organized or repackaged so that many smaller firms can assist (Multiple prime contractors - construction manager (Chapter 9)

Answer 95

1. Purpose of licensing is to ensure that the public is protected from unscrupulous contractors 2. Most licensing laws stipulate that an unlicensed contractor cannot use the court system as a means of redress for any construction related disputes (Chapter 9)

Answer 96

1. Provide bridge between owner’s conceptual image of a project and the actual construction of the physical facility * Provided by architects, engineers or both 2. Design ownership * Public - design belongs to owner * Private - design ownership established by contract between owner and designer (Owner can retain ownership if design was made for hire) 3. Components: * Drawings, Project Manual, General Conditions, Supplementary Conditions, Specifications) (Chapter 10)

Answer 97

1. Primary vehicle by which the physical, quantitative, or visual description is conveyed ``` 2. General categories: General information and site work Structural Architectural Plumbing HVAC Electrical ``` (Chapter 10)

Answer 98

Consists of bidding documents, general conditions, supplementary provisions, and technical specifications (Chapter 10)

Answer 99

1. Augment construction contract and outline rules under which project will be built 2. Establish rights, authority, and obligations of contracting parties 3. AIA Document A201 (Chapter 10)

Answer 100

1. Serve the function of amending and augmenting the general conditions (tend to be more specific) 2. Topics addressed include: * Number of copies of contract documents to be received * Type of survey info to be received * Which materials owner will provide * Info on materials substitutions (Chapter 10)

Answer 101

1. Invitation to bid 2. Instructions to bidders 3. General Conditions 4. Supplementary Conditions 5. Bid Proposal form 6. Bid bond form 7. Contract bond form 8. List of prevailing wages 9. No collusion affidavit 10. Technical Specs (Chapter 10)

Answer 102

1. Technical Specs 2. Design Specs 3. Performance Specs 4. Closed Specs 5. Proprietary Specs 6. Multiple Proprietary Specs 7. Open Specs 8. Or Equal Specs 9. Or Approved Equal Specifications 10. All-Inclusive Specs 11. Reference Specs 12. Standard Specs (Chapter 10)

Answer 103

Specs are used to modify or clarify what is shown in drawings (Chapter 10)

Answer 104

1. General - stipulates ground rules for the work to be performed and defines the scope of work to be done 2. Product(s) - describes the product(s) and development and manufacturing process to be used 3. Execution - the preparation, workmanship, installation, erection, and application procedures to be employed along with quality requirements and performance criteria (Chapter 10)

Answer 105

1. Technical accuracy and adequacy 2. Definite and clear stipulations 3. Fair and equitable requirements 4. Format that is easy to use during bidding/construction 5. Legal enforceability (Chapter 10)

Answer 106

1. Specifications will govern AIA Document A201-1997 2. Conflict will be resolved by architect (Chapter 10)

Answer 107

``` Division 1: General Requirements Division 2: Sitework Division 3: Concrete Division 4: Masonry Division 5: Metals Division 6: Wood + Plastics Division 7: Thermal + Moisture Protection Division 8: Doors + Windows Division 9: Finishes Division 10: Specialties Division 11: Equipment Division 12: Furnishings Division 13: Special Construction Division 14: Conveying Systems Division 15: Mechanical Division 16: Electrical (Chapter 10) ```

Answer 108

Contractor wants to obtain a quick clarification on info | Chapter 10

Answer 109

1. Particular type of material is to be used, dimension required, installation instructions given 2. Desired result may not occur even though contractor complied with spec 3. Owner warrants by implication that the specs will produce desired results if followed by contractor (contractor not liable) (Chapter 10)

Answer 110

1. Results or performance of the finished product are specified (rather than specific methods and materials) 2. Focuses on end product 3. Contractor is responsible for design and for selecting methods and materials (Chapter 10)

Answer 111

Contractor is instructed how to do a task and then told to warrant that results will be satisfactory **Use of this type of spec to be avoided (Chapter 10)

Answer 112

1. Refers to specific item or system 2. Purpose is to ensure that only products of a particular type are used 3. Eliminates chance for competition 4. Advantage to manufacturers who have their products specified 5. Result of this spec drives up cost **Can be a design or performance spec (Chapter 10)

Answer 113

States what is to be provided without and allowance for alternatives **Closed Design spec (Chapter 10)

Answer 114

Models of more than one manufacturer specified **Design spec - may be open or closed (Chapter 10)

Answer 115

1. Nonrestrictive - permit a variety of choices 2. Can help owners attain lower prices from contractors 3. Public projects - spec at least three options (Chapter 10)

Answer 116

1. Modification of proprietary spec * Proprietary spec followed by “or equal” 2. How to reduce conflicts * Name acceptable brands and model numbers and delete “or equal” (would be closed spec) * Name many acceptable brands and models * Let contractor name an alternate * Request substitutions up to a given time before bid date (Chapter 10)

Answer 117

1. Open specs - give all acceptable products an opportunity to be considered 2. Lists the brands and model numbers of various manufacturers followed by “or approved equal” 3. Places determination of acceptability of a substitution with owner/architect (Chapter 10)

Answer 118

1. Contractor reads a spec that results in questions 2. Items may or may not be required per owner’s rep 3. “To architect’s satisfaction” or “as directed by engineer” 4. Confusing spec writing (Chapter 10)

Answer 119

1. Found in technical specs and make items, established tests, or formal procedures a part of the contract docs by reference 2. Common to have a spec that will establish the performance of a product as measured by a standard or accepted test procedure 3. Can be part of a design or performance spec 4. Used to ensure that a product conforms to industry-accepted test criteria 5. Specify quality and set up a standard procedure by which acceptability of finished product can be determined (Chapter 10)

Answer 120

Entire set of technical specs that have been developed by an owner Will use as general/repeat specs (Chapter 10)

Answer 121

1. Difficult words: * Any * Either * And/or * Etc. * Use * As shown * Reasonable time 2. “Murder, weasel or escape” clauses: * To the satisfaction of architect * Where directed by architect * From an approved source (Chapter 10)

Answer 122

1. Specs will outline the quality standards to be attained on the project 2. Quality of work will be evaluated though on-site inspections 3. Submission of relevant info for owner approval 4. May include cut sheets, working drawings, shop drawings, descriptive data, certificates, methods, calcs, materials samples, test data, schedules, progress photos, procedural descriptions, manufacturer instructions 5. Submittals, including shop drawings are necessary to control the final construction of facility of components (Chapter 10)

Answer 123

1. Projects that include mechanical equipment usually include a contractual requirement for for the contractors to provide operating and maintenance manuals for equipment 2. For owner’s benefit during actual occupancy and use of facility 3. Manuals typically include: * Name and location of manufacturer, manufacturer’s local rep, nearest supplier, spare parts warehouse * Applicable accepted submittals info * Recommendations for install, adjustment, startup, calibrations, and troubleshooting * Recommendation for lubricants, etc (Chapter 10)

Answer 124

To avoid issues in construction, owners often require contractor to maintain an updated set of drawings that that show the exact locations of all in-place items (Chapter 10)

Answer 125

1. Unit Price 2. Cost-Plus 3. Lump Sum (Chapter 11)

Answer 126

1. Construction contract should identify the contractor, the owner, and the designer, and scope of work 2. Failure to complete project in specified timeline results in liquidated damages (Chapter 11)

Answer 127

1. Pricing for various units of work is determined before start of construction 2. Used when project is fairly well defined, but actual quantities may be difficult to estimate with accuracy until after construction has started 3. Balanced bid - anticipated costs for various bid items are accurately reflected in unit prices that are submitted 4. Unbalancing a bid - unit price of various bid items are altered so they do not reflect true costs of items * May give contractor an advantage on some aspect of the project * Does not alter total amount bid * Essentially, the contractor is redistributing funds so that increased payment happens early on * Owner can issue change order to eliminate unbalanced values 5. Changes to a design will allow modifications through a change order 6. Disadvantages: Owner is not certain of the actual cost of project until completion (Chapter 11)

Answer 128

1. Contractor is reimbursed for most of direct expenditures associated with a particular project plus allowance for overhead and profit 2. Best cases for application: * Plans are incomplete * Project cannot be accurately portrayed * Short time period for construction 3. Does not lend self well to competitive bidding 4. Appropriate if many changes are anticipated 5. Disadvantage: * Owner has little idea of what cost will be * Must maintain staff as oversight 6. Reimbursable costs: * Labor * Materials and Equipment * Subcontractor Costs (Chapter 11)

Answer 129

1. Most common - contractor will produce the project as designated for a stated specific sum 2. Contractor paid on monthly basis 3. Unbalancing can occur 4. Plans must be fully complete 5. Disadvantage: * Construction of project is delayed while drawings are being completed * Errors in plans become costly (Chapter 11)

Answer 130

1. Initially developed for government agencies for renovation, repair, and construction projects 2. Offers advantages when a facility owner has extensive facilities that require routine and unscheduled maintenance (Contractor is “on-call”) 3. Contracting parties will agree on prices to be charged for specific items or the hourly rates for personnel 4. Ensures the owner a quick contractor response to needs that arise without notice 5. Ideally suited for small projects 6. Good if you do not know performance or are skeptical of a contractor (Chapter 11)

Answer 131

1. Changes are made in estimations phase in the form of addenda * Changes made through addenda become part of the bids that are received and automatically included 2. Owner does NOT have inherent or implied right to make unilateral changes to the contract - right must be obtained contractually 3. Changes tend to increase the amount of compensation but do not generally include an extension of time (Chapter 12)

Answer 132

Common to include the following: 1. Owner has right to make changes within general scope of contract 2. Contractor is obligated to perform the work necessitated by the change 3. Change much be in written form and be signed 4. An adjustment to the contract price and/or contract duration will be assessed by some means (Chapter 12)

Answer 133

1. When a change is issued by the owner (Mini contract to perform a specific item of work) 2. Field change - when change has no impact on the contracts duration or amount (Do not require owner approval) 3. Establishing agreed amount that the contractor is to be paid for changes work can be resolved in several ways: * An agreed lump sum * An agreed unit price * Actual field cost plus the outlined percentage of lump sum work 4. In some instances, changes might be made without formal change orders being issued (Contracting parties agreed to a change with an understanding that this would be formalized later) (Chapter 12)

Answer 134

1. Changes that are not within the general scope (Not covered in typical changes clauses) 2. Considered a breach of the contract 3. Not a problem on private projects if owner and contractor agree to terms 4. Contractor issues with CC: * May not have expertise to perform work * May use up or exceed the firm’s bonding limits * May not have financial or other resources (Chapter 12)

Answer 135

1. Most owners consider that payment will be made only when changes are ordered by the owner in writing 2. Extra work - worked that is outside and independent of the contract 3. Additional work - work that must be undertaken to meet contract requirements and without which the work requested in the original contract could not be completed: * Change should not have been anticipated * Change was not open to observation * Change could not be readily discovered until work under the contract was undertaken 4. In emergency conditions, courts state that written requirements can be waived (Chapter 12)

Answer 136

Most contracts are specific about the particular parties who are empowered to issue change orders (Chapter 12)

Answer 137

1. Most contracts for construction will stipulate that changes be initiated by written change order 2. If change is directed orally, another interpretation may give contractor relief: a. Owner verbally order work, Contractor performs work, Contractor asks for payment, owner refuses since changes clause state that all change orders be in writing b. Constructor sues owner, but does not base claim on technicalities of change order * Instead, contractor claims verbal directive was simply an offer and that performance by the contractor consummated unilateral contract * Considered to be a new and separate contract (Chapter 12)

Answer 138

1. Whenever a contractor interprets a directive as a change order, it should be made clear to the owner that compensation is expected 2. For larger changes, constructor should review with surety (greater than 10% change) (Chapter 12)

Answer 139

Subsurface conditions are most encountered as surprises: 1. High water table 2. Unstable foundation materials 3. Rock 4. Undisclosed utilities (Chapter 13)

Answer 140

Contractor should make independent site visit and investigation (Chapter 13)

Answer 141

1. Applies to subsurface conditions 2. Evaluate - backhoe and dig test pits or conduct additional borings on site 3. Differing Site Conditions a. Actual site conditions differ materially or at variance with conditions indicated in contract documents b. Actual conditions are of an unusual nature and differ materially or are at variance with what contractor should have reasonably anticipated 4. ConsensusDOCS 5. Contractor must provide proof of due diligence to receive compensation 6. Inclusion and wording of differing site provisions are important in determining the allocation of risk 7. Risk is typically reflected in bids to account for potential increases in construction cost (Chapter 13)

Answer 142

To help owners obtain their projects when needed, most contracts specifically include provisions about the time schedule (Chapter 14)

Answer 143

1. Working day schedule - may be most appropriate when site conditions are subject to delays caused by weather, differing site conditions, etc. 2. Fixed completion date - may be specified when owner needs project completed by certain date 3. Calendar Day Schedule Typical Examples: * Federal agencies - Calendar day schedules * State Highway - Working day schedules * Private owners - calendar day or fixed completion date (Chapter 14)

Answer 144

1. Location of project 2. Time of year 3. Complexity of work 4. Cold weather conditions 5. Winter exclusion periods 6. Working day schedules typically extend construction durations for severe weather delays 7. Provide reduced risks to contractors (Chapter 14)

Answer 145

1. Owners typically want proof from contractor that project can be constructed and completed within desired timeline 2. Contractor may be required to submit a schedule showing the sequence of activities for performing work (Progress schedule / critical path schedule) 3. Owner may take initiative in developing a schedule 4. Preconstruction conference: * Contract administration, planning, and interaction details are fine-tuned * Schedule should be submitted to owner prior to meeting * When nuances are discussed between owner and contractor * Risk of misunderstandings is typically reduced (Chapter 14)

Answer 146

1. Critical activity - one that must start as soon as it’s preceding activity has been completed and must be completed on time 2. Activities that have flexibility will have “total float” of x amount of time (Chapter 14)

Answer 147

If ownership of float is not addressed in contract: 1. Contractor will assume float belongs to contractor 2. Owner may regard float to be at the disposal of the owner or joint ownership 3. Joint ownership - float essentially belong to first party who utilizes float (Chapter 14)

Answer 148

According to AIA A201Document, it is not likely any added compensation be granted for the time extension - contract duration is fixed and schedule is merely informational (Chapter 14)

Answer 149

Represents every day that takes place (including weekends and holidays) (Chapter 14)

Answer 150

1. Fixed completion date - owner would like to occupy and utilize a completed facility at certain point in time 2. Does not establish a starting date (Chapter 14)

Answer 151

1. Considerable interest of contracting parties 2. Contract provisions should clearly definite wording days and indicate how time will be charged 3. Any day except Sat/Sun and holidays 4. Owner will typically monitor the number of days worked and provide periodic reports to contractor (Issued typically on weekly basis) 5. Weekly report to be submitted to contractor with allowance of one week for contractor to take exception (Chapter 14)

Answer 152

1. Owner can prohibit work on certain days (Sunday/Holidays) 2. Saturdays typically permitted as makeup days 3. Causes additional risks for contractors because they can’t work without owner permissions 4. Notice to Proceed / Letter of Intent - directive from owner that contractor can begin construction work (Chapter 14)

Answer 153

1. ConsensusDOCS: “Time Limits stated (in Contract to perform Work] are of the essence of this Agreement” 2. If contractor fails to perform work within contract time, owner is entitled to damages 3. Can be avoided with inclusion of liquidated damages provision in the contract (May determine a daily penalty fee for each day late to avoid legal entanglements) 4. Liquidated damages provide compensation to the owner for financial and other losses resulting from delayed completion - predetermined sum (Chapter 14)

Answer 154

1. Strikes 2. Adverse weather 3. Late decisions by owner 4. Delays caused by other contractors 5. Unavoidable casualties 6. Restraint by government 7. Unsuspected subsurface conditions **Owner loses revenue and contractor experiences increased construction cost/overhead cost, loss in productivity, and demoralization of workforce (Chapter 14)

Answer 155

1. Delays caused by contractor or contractor’s agents * Owner has just cause to terminate contract 2. Delays caused by owner or owner’s agents Contracts typically include provision for owner-caused delays *Contractors can submit a Formal Claims Procedure to owner 3. Delays caused by force maneuvers or acts of God *Neither party can claim damages typically *When delays occur, contractor may make a claim for a time extension, monetary settlement, or both (Chapter 14)

Answer 156

1. Owners may include a contract provision intended to bar a contractor from claiming for delays 2. Exculpatory and typical of an adhesion agreement 3. Protect owners from liability (Chapter 14)

Answer 157

Reasonable Delays / Ordinary Delays - courts will interpret in a very narrow manner against party seeking release from liability (Chapter 14)

Answer 158

1. Do not exempt owner from liability 2. Denial of Access to the job site to the contractor * Example: Protestors outside of building (Chapter 14)

Answer 159

1. Acts or omissions of owner which actively interfere with work progress are often beyond protection of no-damage-for-delay clause 2. Interference - performance problems that result in increased costs, whether or not completion date changes (Chapter 14)

Answer 160

When contractor has to wait a severe amount of time before proceeding to complete work (Chapter 14)

Answer 161

Delay caused by party’s intentionally false statements or acts (Chapter 14)

Answer 162

1. When contractor is delayed for a reason that is not his/her fault, contractor should consider requesting an extension to contract time 2. Force majeure - unforeseeable causes beyond control and without fault or negligence of the contractor and to which the contractor is unable to prevent (Acts of God, Expropriation of facilities, Changes in applicable law, War, Change of government, Civil disturbances) 3. Most owners will grant more time, but likely not more money (Chapter 14)

Answer 163

1. Failure to perform by a specified date or within a reasonable time is often excused because defaulting party may be contractually excused for delays - extension of time granted ``` 2. Typically includes: Acts of God Labor strikes Flooding Epidemics National emergencies Severe weather ``` 4. Typical for time extensions for weather delays to be granted in working day contracts (Chapter 14)

Answer 164

1. Actual Acceleration - direct order by owner to hire additional workers, work overtime, or work extra shifts 2. Constructive Acceleration - construed as acceleration because of owner’s refusal to permit or grant time extensions for an excusable delay Example: owner issues a change order on a project but does not permit the contract time to be extended and now contractor has to accelerate (Chapter 14)

Answer 165

1. Contractual equivalent of a breach of contract action for delays 2. Seldom included in private contracts 3. If prompt notice of suspension is not given, the suspension claim will not be valid 4. Owner or contractor can make action 5. If suspension does not permit contractor to recover damages caused by owner, contract contingencies will increase **Examples where no additional costs can be recovered: Failure of public body to issue permit, Labor strikes, Shortages of supplies/materials, Climatic conditions, Failure of owner to provide ROW parcels (Chapter 14)

Answer 166

1. Termination for default of contractor: a. Owner lists conditions under which the owner will terminate contract and make claim against contractor for damages * *Legitimate grounds for termination must be demonstrated b. Serious consequences for contractor c. Contractor still has opportunity to remedy the default after being notified 2. Termination for convenience of owner a. Owner may reserve right to terminate the contract at any time b. Typically will allow contractor to recover costs incurred for completed work (Chapter 14)

Answer 167

1. Something less than absolute or final completion 2. A project is substantially complete when owner can occupy it 3. Owner occupancy is a milestone in a project and generally established by a certificate of occupancy 4. Contractor retainage is released upon final completion (commonly 5-10%) 5. Punch List - Minor deficiencies of project that contractor must address (Chapter 14)

Answer 168

Most contracts provide additional contract time when owner-caused delays occur (Chapter 14)

Answer 169

1. Includes the costs of operating and maintaining the home office: * Salaries of company officers, estimators, accounting personnel secretarial personnel * Other expenses: rent, lease, mortgage payment, utility expenses, supplies, company vehicles 2. Eichleay formula - controversial * *Not always accepted (Chapter 14)

Answer 170

1. Periodic payments are typical (usually on monthly basis) 2. Cost of Construction is high 3. Periodic payment is not inherent or implied right- must be in contract (Chapter 15)

Answer 171

1. Unit Price Contracts 2. Cost Plus Contracts 3. Lump Sum Contracts (Chapter 15)

Answer 172

Payment based on unit prices as bid and the precise measurements of in-place field quantities (Chapter 15)

Answer 173

Payments based on actual expenditures, plus an allowance for profit and overhead (Chapter 15)

Answer 174

1. Do not need to measure all in-place quantities 2. Contractor will typically submit a schedule of values or cost breakdown (Chapter 15)

Answer 175

List of items that must be corrected before project is complete (Chapter 15)

Answer 176

1. Owner must verify the adequacy of the work performed 2. Certificate of Substantial Completion (Chapter 15)

Answer 177

Timing requirements on payments | Chapter 15

Answer 178

1. Owner typically holds back a portion of money earned by contractor as an incentive to complete the project properly 2. Surety can also claim retainage (Chapter 15)

Answer 179

“Pay when paid” - contractors typically pay subs when owner pays contractor (Chapter 15)

Answer 180

DEF: Certification that an aspect of the contract is as it was promised to be 1. Owner wants assurance that everything should function as intended 2. Contractor to maintain some responsibility after completion (Chapter 16)

Answer 181

Guarantees that the contractor will rectify defects in workmanship or materials for a specified time after completion (Chapter 16)

Answer 182

1. Deficiencies that are clearly able to be observed or can be detected with a reasonably thorough inspection 2. Generally no recourse once patent defects have been accepted and final payment made (Chapter 16)

Answer 183

1. More problematic concerns for contractors 2. Defects that cannot be readily observed, even through intensive inspection procedures 3. Often discovered through destructive testing 4. Continue to be responsibility of contractor after owner has begun occupancy (Chapter 16)

Answer 184

Typical contract requires the GC to warranty workmanship and materials (Chapter 16)

Answer 185

1. If contract contains no express warranty provision of compliance with drawings/specs, then warranty is automatically inferred or implied 2. Does not mean contractor guarantees that the completed project will be suited for intended purpose (Chapter 16)

Answer 186

1. Quality of work to be provided is to be detailed on contract documents 2. Complications arise when there is compliance that is close to contract documents, but not full compliance (Chapter 16)

Answer 187

1. Private works contracts often state that the owner’s inspection and acceptance of the work does not waive any claims that result from contractor’s defective performance 2. Private works projects - owner assumes a considerable risk if facility is accepted > contractor is paid > Lien releases are not obtained from those who have contributed to the effort (Without lien releases, it is possible that unpaid sub or supplier may still place a lien on the property) (Chapter 16)

Answer 188

1. Complex subject that entrails protection for or coverage of various parties and types of injury or damage 2. Cost typ. ranges from 1.5% - 15% of total cost of construction (Chapter 17)

Answer 189

1. Insurance company can seek recovery from third party that was responsible for causing the loss 2. Substitution of one person for another in claiming a lawful right or debt (Chapter 17)

Answer 190

Payment or consideration for an insurance contract | Chapter 17

Answer 191

Insurance companies measure their success by comparing premiums with actual expenditures - if company has a good year it should have a surplus of cash > companies frequently return portions of surplus to clients with relatively low losses (Chapter 17)

Answer 192

1. Quotient that represents the level of success that the insured has had in minimizing losses 2. Ratio is insurance company’s costs for handling a company’s claims divided by total premium paid (Chapter 17)

Answer 193

More visible or readily identified as being related to insurance (outflow or inflow of cash) (Chapter 17)

Answer 194

Often invisible to management (insurance premiums) Ex: Payments are routine and not seen as a place to improve chances of profit (Chapter 17)

Answer 195

1. When a firm acts as its own insurance company 2. Reasons to be self-insured: A. Provides a direct and immediate incentive for contractor to reduce cost of claims B. Company is in a better position to conduct a detailed follow up study on claims C. Interest is earned on company reserves set aside to meet possible claims in the future D. Company can process claims at a lower cost (Chapter 17)

Answer 196

1. Insurance coverage that is provided by one insurance company 2. Owner obtains insurance (Chapter 17)

Answer 197

Compensation is granted for disability and medical treatment for injuries resulting from accidents occurring as a result of employment (Chapter 17)

Answer 198

1. All States Endorsements 2. Special maritime Endorsement 3. Dock workers and harbor workers 4. Extralegal or additional medical 5. Voluntary compensation (Chapter 17)

Answer 199

Based on payroll | Chapter 17

Answer 200

Rating that directly affects the insurance premiums paid by contractor (Chapter 17)

Answer 201

When a case or claim may extend into the future with unknown cost impacts, insurance companies set aside an estimated amount of money (Chapter 17)

Answer 202

Takes into account the insured’s loss record and adjusts the premiums to reflect results (Chapter 17)

Answer 203

When injury occurs, form must be filled out in a timely manner (Chapter 17)

Answer 204

1. Associated with worker’s comp insurance 2. Coverage that protects employer against any obligations the employer may have under worker’s compensation law (Chapter 17)

Answer 205

1. Insurance obtained on company’s principals 2. Insures a company against the heavy losses that can result from the untimely death of a principal (Chapter 17)

Answer 206

1. Liability insurance provides protection from third-party lawsuits (including property damage and bodily injury) A. Injury to nonworkers on site B. Contingent or indirect liability C. Damage caused after a project is completed/accepted D. Damage caused by contractor’s mobile equipment E. Injury to employees 2. Liability policies do not provide protection for damage on the contractor’s own property 3. Most contracts necessitate that liability coverage be obtained because the owner often shifts additional risk to contractor (done through indemnification clauses) (Chapter 17)

Answer 207

1. Occurrence-based - Provides coverage for claims that arise during the policy period, regardless of when claim is filed - Party might be exposed to a health hazard and suffer as a result of that exposure after policy period has ended and still get compensation 2. Claims-made - Protections only for claims that are filed during the policy period (Chapter 17)

Answer 208

Limits in terms of “combined single limit” for bodily injury and property damage combined (Chapter 17)

Answer 209

1. Premises/Operations Liability 2. Contractor’s Protective Liability and Owner’s Protective Liability 3. Completed Operations + Product Liability 4. Contractual Liability 5. Exclusions + Limitations 6. Umbrella Excess Liability (Chapter 17)

Answer 210

1. Operations - Provides liability protection from injuries or property damage arising from business operations in progress 2. Premises - covers personal injury or property damage resulting from buildings or premises (Chapter 17)

Answer 211

Covers incidents caused by operations performed for insured by an independent contractor (Chapter 17)

Answer 212

Covers incidents arising from completed or abandoned operations caused by an occurrence away from premises (Chapter 17)

Answer 213

1. Liability assumed by contract 2. Three basic types of hold harmless agreements: A. Limited Form Indemnification - owner held harmless for claims caused by operations or negligence of contractor/sub B. Intermediate Form Indemnification - Owner held harmless when both parties are negligent C. Broad Form Indemnification - Owner held harmless against all losses caused by or contributed by the owner, architect, or others (Chapter 17)

Answer 214

Advisable that contractor obtain all policies from on insurance company (Chapter 17)

Answer 215

1. Extends the limits of liability coverage 2. Separate insurance policy that used the limits of the basic liability policy as the deductible amount (Chapter 17)

Answer 216

Covers the structure during construction (ex: fire) | Chapter 17

Answer 217

2 ways in which premiums are assessed: A. Reporting form - open-ended policy that covers all the contractor’s work B. Completed Value form - rates are adjusted on individual projects to suit the degree of coverage provided (Chapter 17)

Answer 218

Basic plan that protects projects only against direct losses caused by fire and lightning (Chapter 17)

Answer 219

1. Type of insurance that covers materials, apparatus, and supplies pertaining to project before delivery, while in transit, after delivery at the job site, and after installation 2. Exclusions do apply (Chapter 17)

Answer 220

1. Best used for projects with low fire hazard 2. Cheaper (Chapter 17)

Answer 221

Covers equipment that is not licensed | Chapter 17

Answer 222

Similar to traditional insurance coverage | Chapter 17

Answer 223

General liability, umbrella Liability, workers comp, and builder’s risk exposures of all subs are covered under one policy (Chapter 17)

Answer 224

Means by which a contractor can demonstrate to the owner that specific forms of insurance have been obtained (Chapter 17)

Answer 225

Some owners will require prior notification for cancellation of insurance (Chapter 17)

Answer 226

Incidents can include multiple types of insurance | Chapter 17

Answer 227

Subs bring unique skills and talents that GC does not possess (Chapter 18)

Answer 228

1. Subs have agreements with GC 2. Owner has right to reject a sub (uncommon) (Chapter 18)

Answer 229

Sub enters contract with GC (does not include owner) | Chapter 18

Answer 230

1. Means of reducing risk 2. Do not have in-house capabilities (Chapter 18)

Answer 231

Public Works - 1. Typical for GC to receive bids from a variety of special contractors 2. Surety underwriters and bankers can provide valuable insight into a sub (Chapter 18)

Answer 232

1. Prebid shopping can occur where employee of GC give insight to sub’s bid ahead of time to drive prices 2. In order to alleviate chance of prebid shopping, bid depositories hold submitted bids until day of 3. Postbid Bid Shopping - GC will try to get another sub to lower price (Chapter 18)

Answer 233

1. Typically lowest responsible bidder with a conforming bid will be awarded 2. “Buying out” the contract - phase of entering into firm agreements with subs and suppliers (Chapter 18)

Answer 234

GC typically requires subs to provide insurance coverage | Chapter 18

Answer 235

GC wants assurance that each sub fully understands the nature of work Bering contracted (Chapter 18)

Answer 236

Adequate advanced scheduling is strongly advised so sub can plan well ahead for each project (Chapter 18)

Answer 237

Subs must wait for GC to get paid by Owner | Chapter 18

Answer 238

Sub is bound to terms of General Contract in addition to terms in subcontract agreement (Chapter 18)

Answer 239

Contractor’s may include provisions that protect property against deficient work and have the ability to charge the subs for these misses (Chapter 18)

Answer 240

1. GC can ass provision that sub much conform to any additional work under their direction 2. Can be harsh for the sub (Chapter 18)

Answer 241

GC may delay the sub but such a delay may not result in an extension of time for the work of the sub unless owner grant similar extension to GC (Chapter 18)

Answer 242

1. GC is not liable for any payments without being first compensated by owner 2. GC could make a mistake that results in subs paying for it (Chapter 18)

Answer 243

Sub is expected to perform required work within timeframe | Chapter 18

Answer 244

GC’s have control in the sub employees | Chapter 18

Answer 245

Dispute resolution typically addressed in subcontracts | Chapter 18

Answer 246

1. In many states subcontractor may have to waive protection under workers comp 2. Makes the subcontractor responsible for the safety conditions on an entire work site (Chapter 18)

Answer 247

Sub should make scope of work being covered very clear in the bid (Chapter 18)

Answer 248

Typical to include in subcontracts a provision that states the sub has an obligation to visit the site when preparing the estimate (Chapter 18)

Answer 249

GC can take over work of sub with minimal notice | Chapter 18

Answer 250

Terms of a subcontract form the legal document by which the relationship between the GC and the sub is defined (Chapter 18)

Answer 251

1. Because conflicts are common place potential disputing parties are well advised to outline the appropriate procedures to follow during disputes 2. A claims clause permits the contractor to present disputes to the owner without having to resort to litigation as a first step 3. Once disputed work is complete the contractor is generally given a stated period of time in which to present the amount of the claim to the owner 4. Primary aspect of claims clause is that it establishes a mechanism by which the contractor can request additional compensation (Chapter 20)

Answer 252

Important that the point of disagreement be communicated to opposing party or parties as soon as the matter has been identified as a topic that needs to be resolved (Chapter 20)

Answer 253

1. With negotiations fail to resolve a dispute and there’s no contractual guidance for dispute resolution the parties will generally find themselves in a lawsuit 2. Process for filing claims is often specifically addressed in the contract documents 3. Two Court Systems (Federal + State) 4. Objective of interrogatories and depositions is to assess the strength of the opposing parties case (Chapter 20)

Answer 254

Use of the court system to resolve disputes is often extremely inefficient Alternative methods of dispute resolution have been brought into focus (Chapter 20)

Answer 255

1. An attempt to change the mindsets of the parties involved in the construction effort 2. Voluntary approach to establishing teamwork among the contracting parties (Chapter 20)

Answer 256

1. Non-binding method of dispute resolution that contains elements of negotiation and arbitration 2. A mediator might be regarded as a third-party who tries to force or persuade the disputing parties to agree on an appropriate settlement of an issue (Chapter 20)

Answer 257

1. Disputing parties will agree to adhere to the decision reached 2. Arbitration differs from litigation and that the rules of evidence are eased in the discovery proceedings are not formally defined 3. When the arbitration panel rules on a particular dispute the decision is binding or final 4. Less time consuming and less expensive than litigation (Chapter 20)

Answer 258

1. Type of board generally consist of three individuals who meet whenever one of the contracting parties on a project desire to hearing an issue of conflict 2. Board is assembled early on And typically shortly after the contract award 3. Board prepares a set of recommendations for each dispute it reviews (Chapter 20)

Answer 259

1. A.k.a. private litigation 2. The parties to dispute are free to draft their own procedures 3. Often time limits are imposed (Chapter 20)

Answer 260

1. Conflicts and problems are invariably encountered on a construction project dealing with drawings and specifications 2. It is important that all communications be documented (typically reduces disputes) 3. Typical documentation methods - Logs of incoming correspondence - logs of all letter sent - logs of photos - records of conversations and meetings - records of safety meetings - daily job diaries (Chapter 20)

Answer 261

1. Most societies rely on laws to control or guide behavior 2. These laws consist of common law practices in statutes A. Common law - does not need to be written, it is defined through traditional usage and custom B. Statute law - established by legislative action 2. If two laws are in conflict the law enacted by the higher governing body will control or dominate (Chapter 21)

Answer 262

1. Morals - Tend to relate to norms in a society (rules of conduct with reference to standards of right and wrong) 2. Ethics - Often relate to practices within a profession (rules or standards governing the conduct of members of a profession) **Individuals often make their own interpretations of proper moral and ethical behavior** (Chapter 21)

Answer 263

1. Does any does it do any harm to anyone 2. Does it take advantage of anyone? 3. Does it give one party an unfair advantage? (Chapter 21)

Answer 264

1. Professional groups will draft a formal document to defined the desired behavior of the profession 2. Organizations with Code of Ethics - American Institute of constructors (AIC) - Construction management association of - America (CMAA) - Associated builders and contractors Inc. (ABC) - ASLA - ASCE (Chapter 21)

Answer 265

1. Does one party have an advantage not enjoyed by others? 2. Does another party incur an unfair disadvantage as a result of an action? 3. Is the action dishonest or deceptive? 4. Is someone harmed or damaged as a result of the action? 5. Is someone’s judgment likely to be altered by an action when that party should remain impartial? (Chapter 21)

Answer 266

1. Occupational Safety and Health Act 2. OSHA Inspections (fines and Penalties for unsafe conditions) 3. Record keeping Requirements 4. Typical Safety Standards 5. Common for construction contracts to be drafted whereby additional emphasis is placed on need for performing work in a safe manner (Chapter 22)

Answer 267

1. Managers in the construction community should have some knowledge of labor relations 2. Labor Relations Terms 3. Labor Agreement Provisions - Whenever workers are represented by a Labor union on a construction site, the primary source of guidance for the relationship between the workers in the employers the labor agreement 4. Federal laws related to construction - Many federal laws dictate or define appropriate behavior for construction managers and crafts people (Chapter 23)

Construction Contracts Flashcards

(291 cards)