Project Relationships

Legal forms of business Sole proprietorship General Partnership/Joint Venture Limited partnership Corporations (incl S-Corp and closely

held) Government organizations Non-governmental organizations (NGO)

Project Relationships

Many relationships on a project Owner-builder contract Employee-employer contract General contractor-subcontractor Principal-agent Principal- Independent Sale of Goods (UCC governs)

Project Relationships

Employment contracts Typically at-will Employer assumes liabilities Employee has limited power (fiscal

agency)

Project Relationships

Subcontracts Written legal agreement for

performance of a segment of the work

NOT considered at will Can have furnish only, furnish and

install, install only, or design, furnish and install subcontract

Project Relationships

Principal-Agent Owner-architect/engineer Owner- construction manager Architect, engineer, construction

manager, are agents of the owner (principal)

Must act in the best interest of the owner

Agents have a fiduciary responsibility

Project Relationships

Principal-Independent More arm’s length than agent contract Sole responsibility clauses Principal not responsible for actions of

the independent Principal cannot specify means and

methods Independent need not act in best

interest of the principal

Project Relationships

Uniform Commercial Code Stipulates the rights and

responsibilities for buyers and sellers of goods

Doesn’t apply to services contracts Codifies shipping, title, insurance,

transit risk, etc.

Project Relationships

Project delivery systems Traditional: owner- architect (agency)

provides oversight on owner-contractor (independent). Owner assumes risk

Construction Management- Owner- CM (agent) coordinates with Owner-architect (agency) and Owner-Contractor (independent) CM assumes risk for a fee

Design-Build- Owner- DB Company (agent or independent) DB assumes risk for fee- fast and economical, 70-90% of jobs in Europe and Japan

Bidding Mistakes

Contract formation is: Offer-Acceptance-Consideration (payment) Offer to perform is accepted, offer to pay is

accepted Must have legal capacity and be for a legal

purpose, entered into without fraud or force Bid is an offer- can be withdrawn prior to

acceptance. Once accepted verbally or in writing, it becomes binding

Bidding Mistakes

Acceptance must reflect terms of the offerIf changes are made, it becomes a counterofferConsideration is value given to party in return for performanceWhenever scope changes, consideration changes

Bidding Mistakes

Legal capacity- 18 years, chartered, tax ID, mental fitness, fiscal agentLegal purpose- contract must be for a legal actFraud- nondisclosure or misrepresentation with intent to deceive (must be reliance and damage)Force- offer accepted under duressVoidable contract can be rescinded

Bidding Mistakes

Mitakes Unilateral- one party mistake, won’t

alter the contract unless patent Mutual- both parties mistake,

voidable by either party Transcription error- oral agreement

not accurately reflected in written version- can be reformed, but there is a high burden of proof.

Bidding Mistakes

Mistakes in the bid Federal- rescission or reformation State rescission only (major error,

before start of construction) Subcontract governed by states only-

majority make bids irrevocable for a reasonable time if used by the contractor in their bid (promissory estoppel)

Bidding Mistakes

Promissory estoppel allows for bud shopping, which is technically legal but very unethicalA few jurisdictions allow subcontracts bids to be revoked prior to acceptanceCalifornia- bid is revocable unless contractor makes a conditional acceptanceTelephone bids are valid offers accept for material purchases over $500