Section 1 Study Set D

Acceleration Cost

Cost incurred by a contractor when the project is interfered with by the owner in such a way that the contractor must employ more manpower or work more hours. If the contractor contributes to the cause of its own delays, acceleration cost may not be granted.

Acceptance

Act of a person to whom a thing is offered by another and they receive it with the intention of retaining it (e.g. the acceptance of a contract).

Active Interference

Action by a party to a contract that causes the other party of the contract to not complete the work of the project on time or in the manner established by the contract writing.

Actual Damages (Actual Loss)

Damages resulting from a real and substantial loss, as opposed to those which are merely theoretical, estimated, or anticipated.

Addenda

Modifications to the contract documents issued during the bid period which become official parts of the contract documents.

Agent

A person authorized to act for a client who is employed to represent the client in business and legal dealings with third persons. There are 3 parties involved: a principal (client), an agent, and a third party. An agency relationship is established in writing with all 3 parties acknowledging the relationship. The agent cannot be self-serving or profit at the principal's expense. Examples of agents include attorneys, brokers, auctioneers, and real estate agents.

Agency Agreement

Similar to contracts in that they must contain the same basic elements. The agent is authorized to do only what the principal wants. They can be placed in a position to exercise discretion, and can even enter into contracts that are binding on behalf of the principal. There are no limits on who can be an agent (e.g. an employee can be an agent - construction worker can be granted the authority to purchase tools and materials needed in the performance of work).

Agency Agreements, Exceptions

The agent can be empowered to do anything the principal can lawfully do, however, they can not perform acts that are personal in nature or must be personally performed, acts that are illegal, acts that are immoral, or acts that are opposed to public policy.

Agency Agreements, The Contractors part in

The Contractor should not be an agent in most cases as this would make the Principal liable for their actions, as such contractors should be made (through contract) independent. However, this also means that the Principal (owner) cannot take control away from the contractor and only specify the final result (i.e. can't interfere with the methods and personnel hiring practices of the contractor). Also of note, the owner's agents must focus on product quality and not methods when dealing with the contractors.

Agency Agreements, The Principals part in

The principal is liable for all contracts made by the agent while the agent is acting within the scope of the stated authority. A 3rd party who makes an agreement with the agent is held liable to the Principal and not the agent. If an act of the agent is unauthorized the Principal is not bound by it, however, if the Principal ratifies it then it will become binding.

Agency Agreements, Termination of

Agency agreements can be terminated at the expiration of the time period for the agreement, death of the principal or agent, destruction of the subject matter for which the agency was formed, fulfillment of the purpose of the agency, termination by the principal, termination by the agent, mutual consent between principal and agent to terminate, bankruptcy of either party, and a development which makes the subject matter illegal.

Agreement

The subject matter of the contract, the parties to the contract, the nature of the transaction, the time during which it will be performed, the fees to be charged, the manner of billing and the specification and deals where relevant.

Allowance

A sum of money set aside by the owner to remove a particular portion of work from competitive bidding. Typical of government subsidized institutions with work that is proprietary and must not be competitively bid on.

ALTA Survey

A land survey performed by a professionally licensed surveyor and conforms to the standards set by the American Land Title Association (ALTA).

Alternate

A material or method used in place of the base material or method specified for the project with equal cost or value.

Ambiguity

Doubtfulness of meaning of an expression used in a written instrument.

Anticipatory Breach (Anticipatory Repudiation)

When a contractor states that they will not or cannot perform the contract, the owner may terminate the contract immediately or after a waiting period to determine the contractor's performance according to the contract writing. The owner MUST establish that the contractor's statement is certain and unequivocal. If they terminate and the statement is found to be ambiguous, the owner will have wrongfully defaulted them.

Antitrust Laws

Federal and State statutes to protect trade and commerce from unlawful restraints and monopolies. Bid Rigging is considered a violation of antitrust laws.

Apparent Agency

An agency relationship created by an act of the parties.

Arbitration

Avenue of resolving conflicts that arise in practice with disputes being settled by an impartial board of experts or a disinterested 3rd party. Typically the parties must agree that by submitting to arbitration, they will accept the decision of the arbitrator and they waive their rights to report to a court of law if the arbitration decision is unfavorable.

Arbitration, Submission of

When a dispute arises in a contract containing an arbitration agreement, both parties must submit a written and signed dispute which should contain a definition of the scope or arbitration, definition of the award period, and a definition of the rules of procedure to be followed.

Arbitration Agreement

This may be included in the contract, written as a supplement to the contract to cover all future disputes, or to address a specific controversy. The agreement should always be written and signed by both parties.

Arbitrator

Person or group of experts who have no stake in the matter who listen to all parties equally and make a decision outside of a court of law.

Architect's Supplemental Instruction Form

This form can be used to correct errors or inconsistencies in a contract between the owner/client and the contractor after said contract has been signed. It can also be used to make minor alterations to other aspects of the contract and to make minor changes to the scope of work described in the contract provided that these changes do not alter the contract's cost or project timeline.

Assignment

A legal action which allows a person who is not party to a contract to obtain the contract rights of a party who is. E.g. the LA can assign portions of the design of the project to its consulting engineers.

Attachment

A legal process by which a court of law designates a specific property owned by the debtor to be transferred to the creditor or sold for the benefit of the creditor.

Betterment

An improvement brought upon a property which enhances its value more than just repairing. It may be temporary or permanent. This also applies to public improvement such as widening of a street.

Bid

An offer to perform a contract for work and labor or for supplying materials at a specified price. In the construction industry, a bid is considered an offer by the contractor to the owner. A bid, as an offer, becomes a contract once the owner accepts the bidder's offer with all other contractual requirements in order.

Bid, Public Works Project (Advertisements for)

This process is governed by law and must be followed a specific way (depending on municipality rules). Generally it follows the following procedure: 1. Notice must be given to interested and qualified members of the construction community in advance of the bidding. This notice must be placed in a publicly accessible place (newspaper, magazine, government website, trade publication, etc.) This is typically called the 'Notice to Bidders' and contains the following: Type of project, Location, Type of Contract, Bonding requirements, Dates to perform work, Terms of payment, Estimated construction cost (some may exclude this), time/manner/place to submit bids, location to obtain bid documents, deposit required on bid docs, Owner's right to reject any and all bids, req's regarding wage rates.

Invitation for bids

Must be posted in public places and distributed to the local construction community.

Bidders must be treated alike

All bidders must be afforded an opportunity to bid under the same terms and conditions.

Prequalification

Allows for a select list of bidders (or short list) to be available for various projects, averting construction problems by limiting bidding to contractors with experience and financial stability.

Regular bid

Typically anything that would lead to bid rejection, such as bids without a bid security, bids that fail to acknowledge addendum, late bids, not dated or missing minor info.

Accuracy of bidding

The owner is typically responsible for any errors in the bid documents, but statements often place direct responsibility for the information on the contractor.

The Award of bidding

Contract award is given to the lowest bidder, but stipulations may apply, such as 'lowest responsible bidder submitting a regular bid'.

The Award Phase of bidding

Proceeds generally as follows: 1. Bids are opened; 2. Owner evaluates the bids; 3. Notice of Award is issued; 4. Contractor acquires required bonds and insurance; 5. Owner conducts pre-construction conference; 6. Owner awards the construction contract; 7. Notice to proceed is issued/Contractor signs the contract; 8. First day of construction is counted.

The Bid Form

The form used by all bidders to submit their bids, typically including price, time of completion, bid surety, agreement to provide contract surety, acknowledgment of reviewed addenda, list of subs, experience record, plant & equipment inventory, declaration regarding fraud and collusion, statement regarding site examination, and signature.

Notice to Proceed

Issued by the owner stating the contract start date, obligating the owner to the contract once notice is provided to the contractor, regardless of whether the contract is signed.

Process of bidding

After the design phase: 1. Advertisement for bidders; 2. Contractors acquire bid docs; 3. Contractor conducts quantity takeoff; 4. Addenda issued; 5. Contractor determines prices for all quantities; 6. Contractor finalizes bid; 7. Contractor submits bid; 8. Bids are opened.

Instructions to bidders

The rules for bidding include instructions for writing and submitting the bid, contractor experience record requirements, listing of bid documents, construction time period, responsibility for subsoil data, bid guarantee requirements, insurance, bonding requirements, handling bid irregularities, delivery of bids, and prebid conference descriptions.

Responsible bidders

This involves post qualification, allowing the owner to review contractors' work history, financial status, and experience, with endorsement by a surety often deemed sufficient.

Bidders, Responsive

One who has submitted a bid under a competitive sealed bid which conformed in all respects to the invitation for bids so that all bidders may stand on equal footing. One is responsive if one replies to the specific questions set forth.

Bid (Design-Bid-Build Process)

Design completed before Bid, Bid completed before build. Advantages of this process include: 1. Owner benefits from competitive marketplace; 2. owner has the appearance of being impartial; 3. process fully embraces free market system; 4. may be the only viable method available for some gov. agencies. Disadvantages include: 1. Accurate costs cannot be known until the design is completed; 2. bids that exceed the owner's budget cannot be constructed without jeopardizing the project; 3. various parties tend to be adversarial under this process; 4. Errors or Omissions in the design may lead to costly change orders.

Bid Depository

A local for subcontractors to submit their bids for a particular project.

Bid Rejection

The act of not allowing a bid to be included because of an impropriety in the process of submission or as a result of the owner's arbitrary decision to reject the bid (which they reserve the right to do in a typical contract). However, in rejecting a bid, they run the risk of interfering with the bidder's right to do work or of defamation of character.

Bid Rigging

Scheme in which businesses collude so that a competing business can secure a contact for good or services at a pre-determined price.

Board of Contract Appeals

An independent administration to decide all public (not private) contract disputes used to help relieve the courts from the backlog of cases related to public contracts.

Boiler Plate

A term used to represent standard legal conditions inserted at the 'front end' of a construction contract and are usually titles 'General Conditions', 'Supplemental Conditions', and/or 'Special Conditions'. The benefits include the fact that many or all parties will likely already be familiar with the language used, because it is less expansive than having such language be drafted by an attorney and because this language has been properly vetted through the court system (i.e. all parties understand the legal ramifications of the language contained).

Bond

A legal instrument through which one party guarantees the capabilities of another party. It describes a legal relationship that is termed a 'suretyship'.

Bond vs. Insurance, difference between

An insurance policy is a 2 party instrument between the insurance company and the insured that protects the insured against a specified type of loss. In a surety agreement, the contractor is not providing the guarantee for him/herself, but for the owner (a 3rd party).; Insurance premiums are based on actuarial rates while Surety premiums are structured on a set fee (they assume that no losses will occur).; By assuming no losses, the Surety is more like a bank than an insurance company in that if the principal defaults, the surety can go after them to recoup the money. As such they can also go after anyone that caused the default (i.e. subs, owners, suppliers, etc.); Insurance covers specific losses, while a surety bond is for losses of any kind under the type of bond provided; Insurance transfers risk while a surety agreement does not; The underwriter of an insurance policy often has the ability to cancel the policy during the policy period, however, a bond can not be cancelled once issued… even if the premium has not been paid.

Bond, Bid

Guarantees that a bid has been made in good faith and that the bidder will enter the contract if the bid is accepted. If the contractor chooses to withdraw from a project after being awarded a contract, the most typical outcome is forfeiture of money in the amount of the difference between their bid and that of the next lowest bidder, up to the face value of the bid bond. In some instances, the contractor may have to forfeit the face value of the bid bond outright. Generally 5% of the contract amount, but could range from 5%-20%.

Bond, Maintenance

This guarantees that the contractor will rectify defects in workmanship or materials for a specified time after project completion (i.e. a Warranty).

Maintenance Bond

A 1-year maintenance bond is normally included in the performance bond without any additional charge.

Payment Bond

Guarantees that all bills and obligations incurred by the contractor will be paid ($ to subs and material suppliers). In private projects this prevents liens, in public projects this prevents stop notices from being filed.

Performance Bond

Guarantees that the contract will be performed in accordance with the terms. It is valid for the life of the contract. This protection period extends through to final acceptance by the owner, and generally extends through the one-year warranty period.

Surety

If the contractor defaults on the project, the Surety can (at its discretion) take over the management of the project. They can provide financial support to the contractor to help them finish the job or take more direct involvement in project completion.

Bonding Capacity

This is the maximum value of work a contractor can take on. It is based on the '3 c's' of underwriting: Character, Capacity, and Capital.

Brokerage

The general contractor subcontracts all work on a project. This is generally not beneficial to the owner since the GC's bid includes profit for both the sub's work and the GC's work.

Builder

Synonymous with 'Contractor', or a person whose occupation is the construction of structures, the controlling and direction of construction, or the remodeling of building and other structures.

Building Code

Regulations that govern the manner of construction, height and material specified in a project. These codes are intended to provide a minimum standard that protect the public health and safety.

Building Codes, Form Standard Codes

Codes that specify a result, and are the common type that dictate the manner of construction materials, etc.

Building Codes, Performance Standards

Codes that specify the manner in which a design must work.

Capacity

The ability of a person or an organization to do something, necessary for parties entering into a contract.

Case Law

Law established by following judicial decisions given in earlier cases.

Caveat

A caution or a warning to an individual or entity to use care before proceeding.

Certificate

A written and signed document establishing that a fact is true.

Certificate of Occupancy

Document issued by the building inspector certifying that the project conforms to all relevant code sections and is safe for use.

Certificate of Payment

Document issued by the LA in which they certify that the contractor has adequately performed. This is given to the owner for payment to the contractor.

Certificate of Substantial Completion

Document issued by the LA when the project, or a portion thereof, is complete to the degree that the owner can use it.

Cardinal Change

A change that is not within the scope of services defined in the contract. It is usually contingent on 2 factors: 1) a cardinal change is assumed if the essential identity of the project is altered; 2) the method or manner of the anticipated performance is so drastically changed that essentially a new agreement is made.

Change Clauses

Items in contracts that refer to how changes will be handled usually include elements like: The owner has the right to make changes within the general scope of the contract; The contractor is obligated to perform the work necessitated by the change; The change must be in written form and must be signed; An adjustment to the contact price and/or contract duration will be assessed by some means, or can be predetermined.

Change Order

Document issued directing the contractor to erect some portion of the project in a manner different than described in the original plans and specifications.

Field Order

This change MUST have an effect on the price and/or time of the contract, otherwise is considered a field order or minor change.

Charrette

A meeting/workshop devoted to solve a problem or plan the design of something. This could take place over several days.

Bar Chart (Gantt Chart)

Consists of a list of tasks along the left side of a page. Horizontal bars along the right side indicate the scheduled start and finish dates for each task. Drawbacks include that they do not show the interrelationship among tasks nor do they indicate which activities are most crucial for completing the entire project on schedule.

Critical Path Method (CPM)

A highly mathematical system in which task interrelationships are defined and task schedules analyzed. It is frequently used by contractors to schedule construction sequences and projects. It shows which parts must be started first (critical activities), which parts can't be started till others are done, and which can be done in parallel (noncritical activities).

Milestone Chart

A simple scheduling method that consists of identifying the target completion date for each activity, and may include the name of the person responsible for the task and later can have the actual completion dates. Drawbacks include that it only shows completion dates which may result in uncertainty about when activities should begin to be completed on time.

Civil vs. Criminal suits

Civil suits relate to disputes concerning contract matters and torts while Criminal suits relate to violations of the law.

Claim

A written action initiated by one of the parties of a contract against the other party.

Collusion

An agreement between 2 or more persons to defraud another.

Competitive Bidding

A process whereby sealed proposals are submitted to the owner for consideration. This is mandatory on public works projects. A private owner may use competitive bidding but is not legally bound by the process.

Completion Phase (End of Project)

Once major construction work items are completed, the Punch List is prepared and the project is considered to be substantially complete (i.e. the owner may begin to occupy the premises and warranties begin). Next Punch list items are addressed, Final inspection is conducted, Final completion is defined and the Project is accepted. Only then can the Release of retainage be requested and final payment made to the contractor.

Consideration

An agreement that one party will provide compensation for another party's performance (an essential element for the formation of a contract).

Constitution

Written document agreed upon by the people of the US or of a particular state as the absolute rule of action.

Construction Management

A process of professional management applied to a construction program from conception to completion for the purpose of controlling time, cost and quality.

Construction Specification Institute Format (CSI)

ASLA's adopted construction specification format. It provides for a system for organizing the specs. CSI has also developed a Uniform System that provides a data filing system and a cost accounting system that is based on the CSI format. There are 16 divisions of the CSI Uniform System: 1. General Requirements 2. Site Work 3. Concrete 4. Masonry 5. Metals 6. Wood & Plastics 7. Thermal & Moisture Protection 8. Doors & Windows 9. Finishes 10. Specialties 11. Equipment 12. Furnishings 13. Special Construction 14. Conveying Systems 15. Mechanical 16. Electrical.

Constructive

Possession or knowledge of something which gives ownership to the object or deed. Examples: A person possesses a key to a safe-deposit box which gives them power and control of the contents; a burglar gains constructive breaking into a house when they gain admittance through threat, fraud or conspiracy; Constructive fraud is a contract or act though not intended to be evil in design but as it is misleading or deceiving it is prohibited by law.

Consultancy (Consultant)

An individual or group of individuals may advise design professionals or land owners in a more specialized form of LA service (e.g. urban design, environmental impact, research, etc.)

Contingent Liability

A contingent liability is a liability or a potential loss that may occur in the future depending on the outcome of a specific event.

Continuous Treatment

An uninterrupted, unbroken series of activities or events. E.g. the statute of limitation starts at completion of the project, however, the contractor is required to repair defects in the work and renders continuous treatment to the work, thus can extend the start of the statute of limitation period.

Contract

An agreement enforceable by law which is binding upon only those individual who are party to it (can be oral or implied). It is always best to be in writing stating scope of services, consideration that will be given for performance and the time in which performance is to take place.

Contract (Adversarial Relationship)

Typically contracts have an adversarial relationship between the 2 parties (i.e. your risk vs. my risk).

Contract, Assignment

Assignment = to transfer; Refers to the transfer of rights or obligations to another party unless expressly prohibited by the terms of the agreement.

Contract, Breach of

An action arising due to a failure on the part of one or more parties of the contract to perform to the terms of the contract.

Contract, Consideration

Consideration is something of value and the primary reason or main cause for a person to enter a contract. It is NOT regarded as consideration unless it is accepted by BOTH parties.

Contract, Competent Parties

Competent parties are those persons legally and mentally capable of entering into agreements that are enforceable by law.

Contract, Estoppel or Promissory Estoppel

Estoppel = prevented; A legal principle that a promise is binding in spite of the fact that no formal agreement was made between parties.

Contract, Executed or Executory

A contract that has been 'executed' has been fully completed. A contract that is executory has some portion that remains to be done.

Contract, Intent

A vague concept, but it is the presumption of what one party wanted to have done when entering the contract.

Contract, Lawful Subject Matter

The Subject must be definite and clearly defined, conform to the common law, cannot be contrary to public policy (any act that tends to promote breach of the law), and state or federal statues.