Understanding and Negotiating Construction Contracts: A Contractor's and Subcontractor's Guide to Protecting Company Assets

Cover
Title Page
Copyright Page
Contents
Acknowledgments
About the Author
Preface
Disclaimer
Introduction
The Goals of This Book
What Are the Benefits of This Book?
Contractor & Owner Conventions
Private Contracts or Government Contracts?
Key Contracting Concepts
Two Types of Commercial Terms & Conditions
The Most Important Commercial Terms & Conditions
The Contracting Process
Excuses for Not Negotiating Better Commercial Terms & Conditions
The Concept of Risk Transfer
This Is a Book Developed Just for Contractors
Three Final Suggestions
Chapter 1: Contracts: Basic Training
What Is a Contract?
The Steps to a Contract
Coming to the Party?
The Starting Point
“Here’s My Proposal”
“Consideration,” or Something of Value
The “Happy Test”
“Can That Person Sign This Contract?”
Call in the Enforcer to Close the Breach!
A Contract Example
Strange Words & Long Paragraphs
Contracting Myths
Contract Negotiations
Chapter 2: Types & Forms of Contracts
Fixed Price & Fixed Schedule Contracts
Reimbursable Type Contracts
Combined Fixed Price & Reimbursable Contracts
Cost Plus Fee Contracts
Guaranteed Maximum Price Contracts
Target Price Contracts
Contracts with Performance Incentives
Form of Contracts
Some Final Contract Housekeeping—Definitions
Conclusion
Chapter 3: Scope of Work
The Scope of Work Matrix
Scoping Drawings
Conclusion
Chapter 4: Terms of Payment & Cash Flow
Cash Flow
Interest Rates
Periodic Progress & Milestone Payments
Conclusion
Chapter 5: The Schedule
Float
Time Is of the Essence
Extra Time, but No Money
Conclusion
Chapter 6: Assurances of Performance
Guaranties & Bonds
What Does “Failure to Perform” Mean?
What Is a Bond?
Forms of Assurances of Performance
Surety Companies
Some Language Considerations on Guaranties & Bonds
Types of Performance Assurances
Conclusion
Chapter 7: Insurance
What Is Insurance?
Claims Made vs. Occurrence
Types of Insurance
Important Issues Associated with Insurance
Additional Insured Status
Additional Insurance Basics
A Typical Insurance Clause in a Construction Contract
Safety
Chapter 8: Indemnity
Insurance & Indemnity
Indemnity Definitions
Transferring the Owner’s Risks to Contractors
Fairness Is Not a Consideration
Is an Indemnity Required in a Construction Contract?
Anti-Indemnity Legislation
Examples of Indemnification Clauses
Indemnification, Additional Insured Status, & Contractual Liability Insurance
Owners Love CLAIMS!
Negotiating Indemnity Clauses
Knock-for-Knock Indemnities
Conclusion
Chapter 9: Changes
Some Ground Rules
Protecting the Project Manager
Owners’ Directives
Constructive Changes
Payment for Changes
Sample Change Clauses
Major Contract Changes
Negotiating Change Clauses
Conclusion
Chapter 10: Disputes & Their Resolution
What’s a Project Manager to Do? A Short Story to Start With
Disputes—The Construction Contract’s Bad Actor
An Ounce of Prevention
Dispute Resolution Options
The Folks who Negotiate, Mediate, Arbitrate, & Litigate
Dispute Resolution Clauses
Conclusion
Chapter 11: Damages
Breach of Contract/Failure to Perform
Contractors’ Financial Exposure
Actual Damages—A Silent Risk?
Liquidated Damages
Consequential Damages
Conclusion
Chapter 12: Warranties
A Workable Definition of Warranty
Warranty Issues
The Uniform Commercial Code
When Is No Warranty Appropriate?
Extended Duration Warranties
Limiting Provisions in Warranties
Pass-Through Warranties
Latent Defects & Warranty
A Sample Warranty
Conclusion
Chapter 13: Termination & Suspension
Termination for Cause
Termination for Convenience
Suspension
Cancellation
Conclusion
Chapter 14: Force Majeure
Negotiating Clauses
Sample Contract Language
Conclusion
Chapter 15: Other Contract Clauses
Site Conditions
Use of Completed Portions of the Work
Patent Indemnity
Secrecy & Confidentiality Clauses & Agreements
Owner's Right to Inspect
Independent Contractors
Assignment
Acceptance & the Punch List
Advance & Partial Waiver of Liens
Final Waiver of Liens
Audit Rights
Severability or Validity Clauses
Venue & Applicable Law
Florida Civil Code Chapter 47 Venue
Texas Business & Commercial Code Annotated 272.001
Venue and Choice of Law State Statutes
Contractual Rendition?
Changes in the Law
Some Interesting Clauses to Close
Chapter 16: A Construction Contractor's Contract Checklist
Chapter 17: International Contracting
International Contracts
The U.S. Foreign Corrupt Practices Act
Letters of Credit
Split Contracts: Onshore & Offshore Contracts
Political, Religious, & Economic Risks
Overseas Private Investment Corporation (OPIC)
Legal Systems in Foreign Countries
Local Employees, Partners, & Agents
Offshore Companies
Currency Risks
Applicable Law
Joint Ventures
Joint Operations
Import & Export Considerations
Understanding INCOTERMS
The Export-Import Bank of the United States
Where to Get Some Help—Ask the U.S. Government
Lastly, Use the Right Paper Size!
Conclusion
Chapter 18: What’s It Take to Do Business in Southeast Asia?
Patience Is Golden
Walk the Talk
Time and Money
The US Foreign Corrupt Practices Act
Center for Strategic and International Studies
Trans Pacific Partnership (TPP)
Backdoor to China and India
SPECIAL SECTION—The Socialist Republic of Vietnam (Vietnam)
Resources for Business in Southeast Asia
Chapter 19: Some Final Thoughts on Negotiating Contracts
Why Negotiate?
The Concept of Standard Terms & Conditions
Risk Transfer Item 1: Get Rid of the Indemnity Clause!
Risk Transfer Item 2: Don’t Provide Additional Insured Status
Risk Transfer Clauses, Insurance, & Safety
How to Say No without Aggravating the Owner
The Worst Contracting Word: “Reasonable”
The Best Contracting Word: “Notwith- standing”
Win-Win & Lose-Lose in Contract Negotiations—Fairy Tales?
Is There a Price for Bad Commercial Terms & Conditions?
Terms of Payment
Some Tips on Successful Negotiating
Three First (and Final) Suggestions
Resources
Glossary
Index
EULA