Contract Changes - Law of Contract - Lecture Slides, Slides of Contract Law

Download Contract Changes - Law of Contract - Lecture Slides and more Slides Contract Law in PDF only on Docsity! Legal Issues In Construction Contract Changes  Change – something that was not anticipated in the contract.  Does it matter who requests the change? – Either the owner or contractor may initiate a change. – If both parties agree that it is a change, the process defined in the change clause is followed. – If the owner does not agree that the issue is a change, then the contractor would likely file a claim to be reimbursed.  The change clause allows the owner to: alter, add to or deduct from the work.  The change clause allows the contractor to: adjust their price and schedule associated with the change.  Construction Change Directive – provide a mechanism to continue work while changes are negotiated. Docsity.com Legal Issues In Construction Chapter 6 – Contract Changes  Is there changed or extra work? – Basic rules of contract interpretation are used to evaluate the change (i.e. special provisions govern over plans).  The owner wants marble instead of tile.  The owner wants to increase the size of a room.  The owner wants to delete the landscaping.  The contractor proposes to use precast retaining wall sections instead of a cast in place retaining wall.  The owner directs the contractor to use epoxy coated steel. – When the contractor sends an RFI stating that the plans are conflicting about what diameter drain pipe should be used, the owner will respond to clarify the intent of the plans and a change may or may not be required. – When a contract has two reasonable interpretations, the conclusion would be in favor of the contractor or subcontractor. They did not author the contract. Docsity.com Legal Issues In Construction Chapter 6 – Contract Changes  When is written notice of a claim for additional compensation resulting from extra work required? – Providing written notice within a certain time frame protects the owner by allowing the owner to evaluate the situation before the costs are incurred. – The written notice requirement may be waived under similar conditions as the written change requirement (the owner has informally waived the requirement by ignoring it in similar situations). Don’t count on this defense, notify the owner in writing of your intent to be paid for what you consider extra work.  Choose your battles – don’t nickel and dime the owner. Your claim of extra work will be taken seriously and usually with fair and equitable results. Docsity.com Legal Issues In Construction Chapter 6 – Contract Changes  Plaintiff APAC-Georgia, Inc. ("APAC") was one of the prime contractors on a multiple prime project to construct Atlanta's "downtown connector." APAC brought various delay claims against the owner Department of Transportation ("DOT"). On summary judgment, the lower court held that APAC's claim was barred in part by reason of APAC's failure to comply with contractual notice provisions and that APAC could not recover damages from DOT for delays caused by design errors and omissions.  The Georgia Court of Appeals reversed and remanded. First, the court held that the lower court had misinterpreted a contractual clause which provided that APAC was precluded from claiming additional compensation for extra work unless it gave DOT notice and received written authorization before beginning the work. The appellate court held that this provision was intended to apply to compensation for unforeseen change orders, and did not preclude APAC's claim for delay damages based on DOT's alleged failure to coordinate the work.  The court noted that under the trial court's interpretation of the clause, APAC's failure to give the required notice would result in a forfeiture of its claim for damages caused by DOT's breach of its duty to coordinate the project. The court found that forfeitures are disfavored and that ambiguities in a contract should be resolved against creating a forfeiture provision. Accordingly, the court held that the proper construction of the clause was to limit it to claims for extra work, because such an "alternate legitimate construction" would prevent forfeiture in accordance with Georgia's public policy. Thus, the clause was held not to bar APAC's claims. Docsity.com Legal Issues In Construction Chapter 6 – Contract Changes  Second, the court agreed with the lower court that a different provision of the contract required APAC to give written notice of delays as a prerequisite to any extension of the time for completion. However, the court found that disputed issues of fact required reversal of the lower court's holding that APAC had failed to comply with this notice provision. The appellate court noted there was evidence that APAC had written numerous letters to the DOT giving notice of delays and the need for extensions. The court rejected the DOT's argument that the failure of these letters to make specific mention of 90 individual items of work precluded APAC from raising claims based on those items. The court pointed out that the letters had informed DOT that specified delays could have a domino effect and extend the final completion date, that APAC had written monthly updates showing delays and the amounts of delays, that APAC had received extensions of time beyond the completion date, and that no liquidated damages had been assessed against APAC.  Holding that only reasonable compliance with the notice provision was required and that the "key issue" was whether the DOT had actual notice of the delays, the court found that APAC had raised questions of fact on these issues, as well as the issue of whether strict compliance with the provision had been waived. Accordingly, the appellate court reversed the grant of summary judgment.  Third and finally, the court agreed with the lower court's holding that under the terms of the contract, DOT could not be held responsible for delays caused by design errors and omissions. However, the court noted that such delays were to be distinguished from delays caused by DOT's failure properly to coordinate the work of the various primes that was required in order to respond to a design change, for which DOT could be held responsible. Accordingly, the court remanded for a determination of whether the specific delays alleged by APAC were compensable or not under the contract. Docsity.com Legal Issues In Construction Chapter 6 – Contract Changes  Cardinal Changes – The change clause does not give the owner an unrestricted right to change the work. – Changes ordered by the owner that are beyond the scope of the original contract allow the contractor to refuse to perform the work due to breach of contract by the owner, or you may choose to perform the work at a reasonable value.  A change that is beyond the contemplation of the parties when they entered the contract.  Multiple changes that alter the scope of work so greatly that the changed job does not resemble the original contract.  The determination of a cardinal change is very subjective.  If the contractor opts to refuse to perform the work and it is not a cardinal change, the contractor is in breach of contract. Docsity.com Legal Issues In Construction Chapter 6 – Contract Changes  Impossibility/Impracticability – Common law principle says that a party must perform the contract or respond in damages, even though performance proved to be more expensive than anticipated. – The impossibility doctrine allows the contractor to walk away without penalty if performance is impossible or so impracticable that it is virtually impossible.  The contractor must prove that it is impossible for other contractors as well.  You may not get relief just because the contract cannot be performed under the most economical means. Docsity.com Legal Issues In Construction Chapter 6 – Contract Changes  The Department of Veterans Affairs (“VA”) awarded P.J. Dick, Inc. (“PJD”) a contract for the construction of a clinical addition to the Department of Veteran Affairs Medical Center in Ann Arbor, Michigan (the “Contract”). To complete its work under the Contract, PJD entered into a subcontract with Kent Electric Services (“KES”) pursuant to which KES agreed to perform all electrical work for the project for labor and material costs plus a $10,000 per month management fee.  Factoring in change orders, KES budgeted approximately 27,000 man hours to complete the branch circuit work for the project. Due to deficiencies in the electrical drawings and acceleration of the electrical work, KES expended over 70,000 man-hours installing and completing the branch circuit. Per the subcontract, PJD paid KES for the 70,000 plus hours.  In turn, PJD asserted a claim against the VA for damages resulting from labor inefficiencies and loss of productivity caused by – (1) the VA’s repeated revisions of electrical drawings during the installation of the branch circuits and – (2) the VA’s acceleration of the project by its refusal to grant extensions of time.  PJD argued the issuance of revised drawings during the installation precluded KES from scheduling its work ahead of time, resulted in “piece meal” installation and prevented KES from obtaining a rhythm in its work. Moreover, because the VA constructively accelerated the project, KES had to have several crews working at once. This caused more inefficiencies because KES’s supervisory personnel were spread throughout the project and KES’s labor personnel never enjoyed the benefit of their learning curve.  The VA argued that KES’s labor problems stemmed from, inter alia, too few foremen and the effects of winter weather.  The Board, however, found in favor of PJD and that the VA was liable for causing labor inefficiencies with respect to the branch-circuit installation. Docsity.com