Construction Law Primer Construction Law Primer

October 9, 2003October 9, 2003

Tom gave up the brush with reluctanceTom gave up the brush with reluctance

in his face, but alacrity in his heart.in his face, but alacrity in his heart.

And while the late steamer Big And while the late steamer Big

Missouri worked and sweated in Missouri worked and sweated in

the sun, the retired artist sat on a barrelthe sun, the retired artist sat on a barrel

in the shade close by, dangled his legs in the shade close by, dangled his legs

munched his apple, and planned the munched his apple, and planned the

slaughter of more innocents. There was slaughter of more innocents. There was

no lack of material; boys happened along no lack of material; boys happened along

every little while; they came to jeer, every little while; they came to jeer,

but remained to whitewash. By the time but remained to whitewash. By the time

Ben was fagged out, Tom had traded the Ben was fagged out, Tom had traded the

next chance to Billy Fisher for a kite innext chance to Billy Fisher for a kite in

good repair; and when he played out, good repair; and when he played out,

Johnny Miller bought in for a dead rat Johnny Miller bought in for a dead rat

and a string to sing it with - and so on, and a string to sing it with - and so on,

hour after hour. And when the middle hour after hour. And when the middle

of the afternoon came, from being a poor of the afternoon came, from being a poor

poverty-stricken boy in the morning, poverty-stricken boy in the morning,

Tom was literally rolling wealth.Tom was literally rolling wealth.

The Definitive Good Bargain

Q: Q: Contracts,Contracts,CourtsCourts

&&LawyersLawyers

Who Needs Them?Who Needs Them?

A: A: You Do!You Do!

1. To record mutual promises

2. To enforce mutual promises

3. To predict outcomes

Q: Q: Does the law:Does the law:- enforce promises? enforce promises? - predict outcomes?predict outcomes?

““If the law supposes that”, said Mr. Bumble, If the law supposes that”, said Mr. Bumble, “the law is an ass - an idiot.” “the law is an ass - an idiot.” Oliver TwistOliver Twist

What is Justice?What is Justice?““A commodity which in more or A commodity which in more or

less adulterated condition the less adulterated condition the state sells to the citizen as a state sells to the citizen as a reward for his allegiance, reward for his allegiance, taxes and personal service. ”taxes and personal service. ”

Ambrose Bierce, The Devil’s DictionaryAmbrose Bierce, The Devil’s Dictionary

Q: Q: What is Lawful?What is Lawful?

A: A: “Compatible with the “Compatible with the will of a judge having will of a judge having jurisdiction”jurisdiction”

Ambrose Bierce, The Devil’s DictionaryAmbrose Bierce, The Devil’s Dictionary

Q:Q: What is a Lawyer?What is a Lawyer?

A: A: “One skilled in “One skilled in circumventing the lawcircumventing the law.”.”

Ambrose Bierce, The Devil’s DictionaryAmbrose Bierce, The Devil’s Dictionary

Conclusion?““Those people in the construction Those people in the construction

industry who look for certainty within industry who look for certainty within the four corners of the contract, the four corners of the contract, without focusing on the factual without focusing on the factual complexities of the construction complexities of the construction process . . . often have been sources process . . . often have been sources of, rather than solutions to, problems.”of, rather than solutions to, problems.”

Max Greenberg,Max Greenberg,Speech to engineers, 1954Speech to engineers, 1954

Q: Q: Good Contracting?Good Contracting?

Convergence of valuesConvergence of values, through tender or , through tender or negotiation;negotiation;

Achieve Achieve certaintycertainty of scope, price and time; of scope, price and time;

Raise Raise reasonable expectationsreasonable expectations of performance of performance on both sides;on both sides;

FlexibilityFlexibility in on both sides in satisfying those in on both sides in satisfying those expectations.expectations.

Q: Q: Bad Contracting?Bad Contracting?

Divergence of valuesDivergence of values through over- through over-reaching on both sides;reaching on both sides;

Dissociating risks and rewardsDissociating risks and rewards from the from the power to control them;power to control them;

Leaving “Wiggle roomLeaving “Wiggle room”: i.e. intentional lack ”: i.e. intentional lack of certainty over scope, price, time;of certainty over scope, price, time;

Unreasonable expectationsUnreasonable expectations; constant ; constant renegotiation, inevitable litigation.renegotiation, inevitable litigation.

Q: Q: How Bad Can How Bad Can It Get?It Get?

A: A: AllAll the lawyers the lawyers and consultants and consultants

win; win; allall the players the players lose!lose!

Litigation Economic 101 – Slide 1Litigation Economic 101 – Slide 1

-500K(Claim)

Net Gain

Net Loss

$500,000 Claim

$ Ø

Total Value Consumed: $500,000

Litigation Economic 101 – Slide 2Litigation Economic 101 – Slide 26-12 Months From Day # 16-12 Months From Day # 1

-650K(- 500K claim

-150K accrued costs)

Net Gain

Net Loss

A dozen or so letters; two case management conferences; some production; some discoveries

$ Ø

-150KLegal costs

Total Value Consumed: $800,000

Litigation Economic 101 – Slide 3 Litigation Economic 101 – Slide 3 12-18 Months From Day # 1 - $250,000 settlement12-18 Months From Day # 1 - $250,000 settlement

Net Gain

Net Loss

More discoveries; more motions; a successful mediation

$ Ø

-500K(-250K legal costs,

-250K to settle)

-500K(-500K claim

-250K legal costs +250K settlement)

Total Value Consumed: $1,000,000

Litigation Economic 101 – Slide 4 Litigation Economic 101 – Slide 4 18-24 Months From Day # 1 - $500,000 Judgment18-24 Months From Day # 1 - $500,000 Judgment

Net Gain

Net Loss

-500K claim-500K legal costs+500 judgment

Principal + interest + costs

$ Ø

-500K legal costs-500K judgment

Total Value Consumed: $1,500,000

Q:Q: How Bad Can It Get? How Bad Can It Get?

A:A: It can cost $1.5 It can cost $1.5 million to make $500,000 million to make $500,000

change hands! change hands!

A. Different Paths to a ContractA. Different Paths to a Contract

““All sensible people are selfish, and nature All sensible people are selfish, and nature is tugging at every contract to make the is tugging at every contract to make the terms of it fair.”terms of it fair.”

Ralph Waldo Emerson, 1860Ralph Waldo Emerson, 1860

B. Contracts in General – The B. Contracts in General – The Essential ElementsEssential Elements

““Necessity never made a good bargain.”Necessity never made a good bargain.”

Benjamin FranklinBenjamin Franklin

C. Self-Preservation:C. Self-Preservation:How to Read a Contract to SurviveHow to Read a Contract to Survive

What is a Lawyer?What is a Lawyer?

““One skilled in circumventing the One skilled in circumventing the law.”law.”

Ambrose Bierce, The Devil’s DictionaryAmbrose Bierce, The Devil’s Dictionary

How it Feels to be a Lawyer

Daumier, Don Quixote

How it Feels to be a Legal Researcher

Daumier, Don Quixote & Sancho Panza

D. The Unwritten ContractD. The Unwritten Contract

““A verbal contract isn’t worth the paper it’s A verbal contract isn’t worth the paper it’s written on.”written on.”

Samuel GoldwynSamuel Goldwyn

The The EndEnd

Daumier, The Solicitor