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Law Final
| Term | Definition |
|---|---|
| Compensatory Damages | Put the nonbreaching party in the position they would have been in had the contract been fully executed |
| Incidental Damages | Extra costs that were foreseeable and incurred directly related to the breach |
| Mitigation of Damages | Legal requirement that a plaintiff do whatever is reasonable to minimize the damages caused by the defendant's breach of contract |
| Compensatory Damages for Sale of Goods | Difference between the contract price and the market price |
| Consequential Damages | indirect losses that result form the breach and were reasonably foreseeable at the time of contracting (lost profits) |
| ripple effect losses | indirect damages that happen as a consequence of the breach |
| Incidental damages | immediate responses costs, expenses paid right away because of the breach (extra shipping fees, storage costs) |
| liquidated damages | predetermined amount of money specified in a contract that one party agrees to pay the other in the event of a breach, intended to reflect a reasonable estimate of actual damages rather than act as a penatly |
| Reasonably tied to estimates and not designed to act as a punishment | courts will enforce the provisions as long as they are |
| punitive damages | damages that are designed to punish the breaching part, very rare in breach of contract cases |
| nominal damages | a small monetary award granted to a plaintiff when no actual damage was suffered, usually a dollar |
| specific performance | equitable remedy in which a court orders the parties to perform as promised under the contract |
| owner | legal right to improve property, has a vision or goal, provides the site, acquires financing |
| design professional | design for the intended improvement, licesnsed professional |
| contractor | implementation of the design |
| American Institute of Arichitects | AIA |
| design contract | between the owner -> design professional |
| prime contract | between the owner -> general contractor |
| subcontracts | between the general contractor -> construction subs or design professional -> design subs |
| Deisgn - Bid - Build | Owner enters two seperate contracts, contract with architect and a contract with general contractor |
| Design - Build | Owners enters one contract with a firm that includes design and construction under one roof |
| general contractor | responsible for performance of the entire project, even when work is delegated to subcontractors |
| Traditional Rule / Acceptance Doctrine | Once the owner accepts the work, the contractor is generally no longer liable for injuries to third parties, responsibility shifts to the owner |
| Modern Rule | contractors may still be liable for defects after completion, courts now apply general negligence(tort) principles instead of strictly applying the acceptance |
| Limits on Modern Rule | Statutes of limitations and statutes of repose |
| statues of limitations | limits time plaintiff has to bring a claim after the injury occurs |
| statutes of repose | puts an absolute time limit after project completion for when the contractor can be sued |
| lenders | provide financing for the project, primary concern is repayment of the loan |
| insurers | insurance allocates and manages risk amont project participants |
| Commercial General Liability | Covers bodily injury and property damage caused during construction |
| builders risk insurance | covers damage to the project itself |
| workers compensation | covers injuries to employees on the job |
| professional liability | covers design errors by architects/engineers |
| performance and payment bonds | guarantee contractor performance and payment to subcontractors |
| Privity of Contract | legal principle that only the parties to a contract can enforce its terms or be held liable under it |
| Flow through clause | ensures that subcontractors are bound by the same obligations and requirements as the general contractor under the prime contract, the sub is bound to perform its work consistently with the GCs obligations |
| why is the flow through clause important | ensures consistency, protects the GC, prevents sub disputes, limits subs rights |
| strategies for subs to avoid liability | quotations, requests for general to make offers, revocable quotation which is in no way an offer the general can reasonably rely on |
| bid - shopping | after being awarded the prime contract, a GC may shop around for even lower bids or may demand that sub brings price down from original offer |
| Bid - peddling | after the GC is awarded the contract, subs approach GC and offer lower prices than the original offers |
| progress payments/schedule of values | entitles the subs to receive payment once their portion of the work is complete |
| payment conditions | puts a condition on the general contractor's obligation to pay the subs |
| paid when paid | timing mechanism, sub gets paid after GC is paid |
| paid if paid | condition precedent, shifts the risk of owner nonpayment to the subcontractor, if enforcable under state law. GC does not have to pay if the owner doesnt pay |
| mechanics liens | legal claim placed on a property by a contractor, sub, or supplier who has not been paid for labor or materials, ensuring they have a right to seek payment by forcing a sale of the property if necessary |
| statutory lien | created by state statute and can usually be filed without first obtaining a court judgement |
| payment bonds | guarantees the general contractors obligation to pay subs |
| surety | entity that issues a bond to back-up the contractor in case of default on contract obligations |
| federal Miller act | on government projects exceeding $100,000 the GC MUST secure both performance and payment bonds |
| trust | financial arrangement under which one person holds money or property for the benefit of another person |
| trustee | subject to fiduciary duty in favor of beneficiary |
| pass through claims | allows a subcontractors claim against the owner to be asserted through the general contractor, despite the lack of privity between the contractor and owner, sub waives any right to sue the general |
| federal, state, and local government | public contracts refer to contracts to do construction for... |
| they need to protect tax payer money | how are public contracts different from normal contracts |
| design contracts | contract is based on qualifications, no price. price is negotiated after selection, applies to arichitects, engineers, surveyors |
| Qualification Based Selection | QBS, procurement process that prioritizes a firm's competence, experience, and technical expertise over lowest bid |
| QBS process | public entity issues RFQ, firms submit qualifications, agency ranks firms, top firm selected, price negotiated, if firm fails->move to the next firm |
| why to not pick the lowest bidder | design errors can cause huge downstream costs, priority is on competence rather than cost savings, protect public safety |
| Construction Contracts | awarded to the lowest responsive and responsible bidder. looking for cheapest qualified contractor |
| government | must evaluate bids as submitted and cant neogitates price with bidders |
| contractor | generally bound to the submitted bid, limited to exceptions |
| improper award, unfair process, misapplication of "responsible" | ways that contractors can protect the contract award |
| bid bond | ensures bidder will honor bid, a guarantee to the project owner that the bidder will complete the work if selected |
| performance bond | ensures project completion |
| payment bond | ensures subcontractors/suppliers get paid, mechanics liens ae generally not available on public property |
| whats included in an invitation for bid | description of the project, drawings, specifications, basic contract terms, any other documents that will be part of the contract |
| request for information | RFI, subbmitted if bid documents are unclear or incomplete |
| twice, first publication must occur at least 10 days before bid opening or the deadline for the submission of proposals | how many times must the SD government provide public notice of the invitation for bids |
| the government can reject the bid for not being responsive | what happens is the bidder does not follow the instructions |
| what's included in a bid | lump sum price, completed bid form, acknowledgment of addenda, bid bond, required certifications and contractor information, unit/line item pricing |
| bid responsiveness and bidder responsibility | in awarding the contract, the governement evaluates bids based on 2 key criteria |
| self dealing | governement officials involved in awarding contracts cannot receive the contract themselves |
| conflicts of interest are prohibited | a person cannot participate in decisions where you have a personal or financial interest |
| contract terms, negligence principles, and statutory law | how is liability determined |
| the design professional, unless the contractor knew the materials were defective, liability falls on the contractor if they improperly installed the material | who does liability fall on for defective materials |
| good faith and fair dealing | in every contract, there is an implied duty that both parties will act honestly and fairly toward each other and not undermine the contract's benefits |
| good faith and fair dealing and duty to warn | part of the good faith and fair dealing includes that contractor's obligation to warn the owner if they know the project is headed toward failure, especially due to a flawed design |
| suggests changes that unfairly harm a subcontractor, acts with bad motive | breach of implied duty can occur if a contractor... |
| factors that can increase the cost of a project | materials, equipment, supplies, utilities, labor, transportation |
| fixed price agreement | agreed upon fixed price for the project that includes the contractors profit, risk in an unforeseen increase in the cost of contruction is on the general contractor |
| cost plus agreement | contractor is reimbursed for actual construction costs - amount contractor owes the subs pluse any overhead costs |
| Guaranteed Maximum Price | GMP, contractors total costs will not exceed a stipulated prices, contractor bears the risk that costs will exceed stipulated price and is responsible for bearing those costs, preferred for large and complex projects |
| force majeure clause | contract provision that excuses parties from performing contractual obligations when extraordinary events occur that are beyond their control, acts of God |
| warranty | promise that a specific outcome will be achieved which the other party relies on, assures the owner that the contractor's work will meet certain standards |
| Contractor Express Warranty (AIA) | work will conform to contract documents, work will be free from defects, materials and equipment will be of good quality and new |
| one year correction periof | contractor must fix defects covered by warranties that arise within one year of substantial completion, no need to prove fault, contractor must correct issue if reuested |
| after the one year period | warranty obligations still exist but owner must now prove fault showing that the contractor breached a warranty |
| implied warranty of workmanship | ensures that construction or repair work is performed in a skillful "workmanlike" manner, meeting industry standards or quality and being free of major defects |
| implied warranty of habitability | inherent part of every residential contruction contract, requires good and workmanlike performance by the contractor resulting in habitability in the residence, safe, sanitary, and fit for humans |
| progress payments | contractor is paid in increments commensurate with the percentage of work that has been completed |
| retainage | a portion of each progress payment that is withheld, creates a financial reserve that the owner can use if the need arises - contractor fails to do part of the project |
| 7 days, 37 days | after how long with no payment can the contract stop work, how long can the contract terminate the contract |
| substantial completion | point at which project may be occupied and used for its intended purpose, still a punch list of things that need to be done |
| final completion | contractor finishes final punch list of things to do, if satisfactory the contractor is entitled to full payment and retainage |
Created by:
Grace.Jensen