CON 2001 & CVE 4070

Construction EngineeringLaw for EngineersClaims & Disputes

Prof. Ralph V. Locurcio, PE

Overview…

Introduction to Contract Law Types of Contracts in Construction Most common problems Resolution of disputes Government vs. Private contracts Construction contract claims & disputes

Intro to Contract Law

What is a contract Offer and acceptance Mutual assent Authority & capacity to issue Key elements of a contract Format & standard clauses Standards of care Are construction contracts different

Contracts used in Construction

What are pitfalls of each…or where do claims & disputes arise… Fixed price Unit price Cost plus Fixed Fee Cost plus Incentive Fee Design-Build w/Guaranteed Max Price

Govt vs. Private Contracts

Level of detail Use of commercial specs & products Equal opportunity Social content Recordkeeping

Law for Engineers…

Legal vs. Engineering training Introduction to Law & Contract Law Most common problems Types of Contracts in Construction Resolution of disputes Government vs.. Private contracts

Lawyers vs.. Engineers

Legal training vs.. engineering Subjects studied & method Rules of evidence Use of facts vs.. judgments Professional values… what’s important

What is project success to a lawyer What’s wrong with engineers

What causes most claims or lawsuits

Law School Curriculum: 1st year

1. Civil Procedure (4 sem. hrs.) 2. Constitutional Law (4 sem. hrs.) 3. Contracts (4 sem. hrs.) 4. Criminal Law (3 sem. hrs.) 5. Lawyering Skills I, II, III, and IV (2 sem. hrs.each) 6. Property (4 sem. hrs.) 7. Professional Responsibility (2 sem. hrs.) 8. Torts (4 sem. hrs.) Total: 33 sem. hrs

Law School Curriculum: 2 & 3 yrsUpper-Level Elective Courses Select one of the following areas of concentration to see a

listing of the courses offered in each category: 1. Administrative Law and Government Regulation 2. Commercial Law 3. Constitutional Law/Civil Rights 4. Corporate Law 5. Criminal Law 6. Environmental Law and Real Property 7. Family Law and Estates 8. Intellectual Property 9. International and Comparative Law 10. Legal Theory, History and Interdisciplinary Studies 11. Taxation 12. Trial and Appellate Practice

Engineering logic vs. Legal logic

One solution vs. many possibilities Assumptions vs. hard facts Science vs. art Correct vs. acceptable Finite answer vs. vague solution Professional duty vs. social context Result vs. process

Basics of Law Private vs.. Public law Torts & Contracts Consent Privilege Immunity Standard of Care & Negligence Strict & Corporate Liability Causation Civil Litigation

Private vs.. Public Law

Private Law Rights & duties of private citizens to each other Contract Law Tort Law Family Law Property Law

Public Law Rights & duties of private citizens to all citizens Government represents all citizens Citizen’s right to live in peace and safety Government protects the “general welfare”

The Law of Contracts-1 A contract is an agreement creating obligations

enforceable by law.

The basic elements of a contract are mutual assent, consideration, capacity, and legality.

The Law of Contracts-2 Deal between two parties

Agreement between two individuals Meeting of the minds Voluntary Compensation Formalities: e.g. signing or handshake May not be contrary to Public Policy Freedom of Contract

Voluntary nature Ethical to bargain for own interests Basis of “free markets”

The Law of Contracts-3 Enforceable by law

Breach or Default Default or Breach causes damages Damages require compensation or relief No punitive damages or punishment Violation not considered “morally” wrong Violation is not a “crime”

Law of Torts-1 Torts = injury to a personCivil wrongs recognized by law as grounds for a lawsuit. These

wrongs result in an injury or harm constituting the basis for a claim by the injured party.

Law of Duties People have “interests” or “rights” protected by laws Others obligated to respect Social obligation - not an “agreement” Much more diverse & changing than contract law Governed by “case law”

Remedies Violation causes “damage” to one party Remedies judged to compensate for damages

Law of Torts-2 Types of torts

Assault & battery Wrongful death False imprisonment Libel, slander & defamation Trespass Nuisance

Newer torts Privacy Emotional distress Product liability

Law of Torts-3

Duty of Fiduciary Responsibility Duty to protect the interest of another May not act in “self-interest” Examples: doctors, lawyers, engineers Responsibility is not “negotiable” Violation considered “morally” wrong

Law of Torts-4 Exceptions

Consent – express or implied, but “informed” Doctor discusses medical procedures Financial advisor discusses risk

Privilege Intrusions acceptable in pursuit of higher social goals Fireman or social worker may invade privacy Must be carefully applied

Immunity Family, charitable & sovereign immunity Torts law waived

Law of Torts-5 Standard of Care

Defines the “limits” of the duty relationship Doctor exercises “due care” Engineer uses “appropriate” safety precautions

Concept of the Reasonable Man/Person How would/should a “reasonable” person act in the

same circumstances Failure = negligence implies “fault” Negligence most common form of tort liability

Fault is basis for tort liability

Liability for Torts

Liability requires negligence or intent Personal liability to individual actions

UPS truck driver causes accident Corporate liability relates to policies

UPS does not have “safe driving” policy Engineering without “standards”

Need proof of causation & proximate cause

Crimes vs. Torts CRIMES: A crime is a wrongful act that the

state or federal government has identified as a crime… e.g. state of federal law… such as theft

Charges are brought by the state. If the defendant loses he/she may go to prison.

TORTS: A tort is a wrongful act that injures or interferes with another's person or property. It is a civil court proceeding.

The charges are brought by the plaintiff. If the defendant loses, the defendant pays damages.

Construction Contract Claims

Claims & disputes Causes of claims Resolution of claims

Claims & disputes defined…

A claim or dispute results when one party to a contract fails to comply with the terms of the original agreement

And the second party has suffered a material loss.

Most common problems Negligence Breach of contract Verbal changes Constructive changes Unclear scope of work, drawings, specs Inaccurate contract documents Differing site conditions Poor/inaccurate shop drawings &

submittals

More causes for Claims Lack of common understanding

Expectations: general vs. specific Standards to be followed; specifications Outcomes and quality

Clear roles of parties Mistake in bid Basis for payment – hourly vs. lump sum Basis for changes – agreement on scope, cost & time Lack of documentation Dispute resolution process; failure to act promptly Read & understand the contract Failure to manage risk

Five rules of dispute resolution…

1. The contract must be read as a whole… Each part has meaning; parts interact with each other

2. The contract is judged against the drafter The author has an advantage or duty to be clear/accurate

3. Signed document supersedes all previous A signed article is considered final; the document speaks for itself…

4. Specific terms govern over general terms… Specific terms are precise; general terms are misleading

5. Read in the context of the trade… Accepted industry terms prevail

Contract problems… Protests – a notice from the contractor that

he disagrees with a change or action taken by the owner. Must be expressed in writing by the contractor, generally within a specified time.

Claim – a formal statement of injury with a request for just compensation. Must be in writing within a specified time. Usually when a protest is not solved.

Response actions by owner…

1. Discuss the protest or claim with the contractor.

2. Attempt to resolve the problem.

3. Respond in writing with result.

Response actions by contractor…

1. Alert the owner as to potential claim2. Follow procedures in contract 3. Give owner opportunity to correct4. Perform disputed work under protest5. Exhaust all administrative remedies

prior to litigation

Claims involving time…

Compensable… when the owner fails to meet a contract obligation stated or implied in the contract. Such as approval of shop drawings, RFI, submittals, etc. Impact on critical path and float governs

Noncompensable… delays caused by the contractor’s actions or those which do not cause additional cost to the contractor. Examples include poor management, late procurement, etc. No impact to contract costs

Severe weather claims…

Weather must prevent project work Must be “abnormal” Contractor should allow for normal or

expected weather delays Contract documents govern

Acceleration of the work…

May be directed or constructive… Compensable if owner benefits from

the acceleration… and not in original contract.

Not compensable if contractor is behind schedule… and contractor has no viable plan to recover the original schedule completion date…

Termination of the contract…

Convenience of the owner… i.e. project is no longer needed Must notify contractor asap Compensate contractor for all reasonable costs & materials

Termination for cause… i.e. contractor’s repeated failure to follow contract provisions Must have adequate proof and documentation Very rare No compensation to contractor

Resolution of disputes

ADR & informal resolution Dispute resolution clauses Conduct of DRB Board of Contract Appeals Litigation

Preferred resolution:

1. Negotiation… like a change order

2. Dispute Resolution Board… panel of experts

3. Alternate disputes procedures… facilitator,

mediator, mock court, or any non-legal method

4. Arbitration… binding or non-binding; requires signed

agreement

5. Litigation… most time consuming; most expensive; court

proceeding in special contracts court

Ed Kinberg’s Top 10 List

Today’s topic is…“The top 10 ways that engineers foul up construction contracts resulting in claims, disputes and more money for lawyers…”

Kinberg’s Top 10 List

#10 – Engineers forget to put dates on their contract drawings & documents which fails to establish a point of reference for contract performance.

#9 – Engineers are overly precise; they worry about the small details and often miss the big picture.

Kinberg’s Top 10 List

#8 – Engineers overlook flaws in procedure that later can become legally binding.

#7 – They fail to settle both time & money issues on change orders resulting in later claims.

Kinberg’s Top 10 List

#6 – Engineers neglect to document what they observe & hear on the job site; resulting in poor memory when claims are adjudicated.

#5 – Engineers stand on principle and forget that the judge & jury will do what sounds right to them… based on the evidence as presented.

Kinberg’s Top 10 List

#4 – Engineers forget that the engineer of record can be held “personally” liable for negligent work.

#3 – Engineers also forget that they can be sued for up to 15 years for a “latent defect” that no one knew was present.

Kinberg’s Top 10 List

#2 – Engineers are not very good communicators; so they fail to establish good solid working relationships, based on frequent communications, with their contractors… which results in misunderstandings and claims.

Kinberg’s Top 10 List

And the #1 reason that engineers foul up construction contracts resulting in more money for lawyers is…

#1 - They fail to read the most important part of the contract documents… which is…

the scope of work!!!!

Court is adjourned for today!