Contract Change #5– Liquidated Damages (law note)

liquid damageToday, we are half-way through our series on the Top 10 Changes to the AIA A201.  (Here is yesterday’s post discussing financial notifications, Change #6, Part B]

Liquidated Damages can make or break a project.  They can either encourage efficient construction completion, or completely derail a project if there are multiple competing delays and delay claims.  They can also cost a contractor a lot of money if he doesn’t meet the timing requirements of the Project.

In the 2017 contract revision, a specific fill point has been included in all Owner-Contractor agreements (except A105) to prompt the parties to consider including a liquidated damages provision.

The details concerning calculation of the damages, and the limits (if any) to the damages are still left to the parties to negotiate.  The intent of the fill point is to bring the discussion to the forefront, rather than have the provision buried within the Contractor Time section of the contract.

There is also now a separate fill point for bonus or other incentive provisions.

Next up after the Easter break:  Change #4:  Commencement & Completion.  Stay tuned…

Photo (c) Peter Hopper via Creative Commons license.

Change #6, Part B: Financial Notice Changes in the A201 (law note)

Yesterday, we discussed Change #6, Notice Provisions, in the A201 Contract.  As promised, here is one more Notice Provision that has changed– that relating to Financial Arrangements of the Owner.

money on a bed of cash

Since 1976, the AIA Contract Documents have allowed the Contractor to require the Owner to provide evidence that the Owner has made financial arrangements to fulfill the Owner’s obligations under the Contract.  That is, the Contractor had the unfettered right to request evidence indiscriminately throughout the Project.  The Contractor also had the unilateral right to stop work if the Owner failed to provide evidence that he was financially sound when requested.  This process could lead to abuse where, for example, a contractor demanded financial evidence as a ploy to get more time and avoid liquidated damages.

In the last contract revision, in 2007, the documents were changed to only allow the Contractor the right to request evidence of adequate financing prior to the start of Construction, and thereafter only if certain conditions were met.  In the 2017 version, revisions were made for clarification, to establish deadlines for receipt of the information, and to restrict the right to stop work relating to a change in the Work.

Now, the Contractor can request financial information before construction (Section 2.2.1) and during construction (Section 2.2.2) ONLY IF (1) the Owner doesn’t make a payment when due; (2) the Contractor demonstrates a “reasonable concern” regarding the Owner’s ability to make payment when due; or (3) there is a change in the work that materially changes the Contract Sum.

If the request is made prior to start of Work, the Contractor has no duty to commence work until the evidence is provided.  If the request is made during construction, the Owner has 14 days to provide the information or the Contractor can stop the Work or, if the request is because of a change in Work, stop work on that portion of the Work affected by the change.  Of course, the Contract Time would need to be extended if the Work is delayed, and the Contract Sum would need to be increased by the amount of the Contractor’s reasonable costs of shutdown, and re-mobilization.

Since Architects are often asked to rule on whether or not a Shut Down is proper, the changes to this provision are important to keep in mind as you administer your construction contracts.

Tomorrow, we reach the half-way point of the series:  Change #5- Liquidated Damages.

Photo courtesy  401kcalculator.org.

 

 

Contract Change #6: Notice Provisions in the A201 (law note)

Today’s Contract Change is an important one having to do with Notice provisions in the AIA A201.  [For yesterday’s post discussing Change #7, click here].

handwritten Notice

Recognizing that we live and work in the electronic age, the A201 now allows written notice to be given electronically.

Written notices can be sent in person, by mail, by courier, or by electronic transmission.  (Section 1.6.1).  The default for establishing requirements for the giving of Notice (EXCEPT Notice of Claims, discussed below) is the use of AIA Document E203-2013, the Building Information Modeling and Digital Data Exhibit.  Alternatively, the parties can use a fill point in Article 12, special terms and conditions.

When establishing an Electronic notification procedure, you should make sure that there is a system in place to capture emails sent to departing employees or others that might otherwise go into the “electronic void”.

Notices of Claims (under Article 15) cannot be by electronic methods.  Instead, they need to be made by certified or registered mail, or by a courier that provides proof of delivery.  This makes sense, since Claims notices are the most important notices and can effect substantial rights, so proof of delivery is required.

There is one more Notice provision with changes, dealing with Financial Arrangements by the Owner.  Rather than write a book here, we’ll discuss those tomorrow, in Change #6, part B.  Stay tuned.

 

Photo courtesy Alpha Stock Images  via Creative Commons license.  Author: Nick Youngson.

 

Change #7- Contractor’s Means & Methods (law note)

construction workers variousCounting down the most important changes to the AIA A201 contract document  [for Change #8, click here], today we will discuss the Contractor’s Means & Methods, which is #7 in the countdown.

First, a little history:  as you know, means, methods, techniques, sequences, and procedures are all part of the Contractor’s responsibility on a construction site.  However, when the AIA A201 was last revised, in 2007, there was a provision put in for that rare time when the Contract Documents gave specific instructions concerning a particular construction method.  If the Contractor viewed such instructions as unsafe, he was to give notice to the Owner and Architect, and was not to proceed with that portion of the Work without further written instructions from the Architect.  If the Architect directed him to proceed, the Contractor was absolved from any risks with following that instruction.  Instead, the Owner assumed the responsibility for any loss or damage.

In the 2017 version (in Section 3.3.1) a slightly different approach was taken.  The Contractor still has the sole responsibility for construction means and methods.  However, if the Documents provide for a specific instruction which is unsafe, the Contractor is to give notice to the Owner and Architect, AND propose alternative means or methods.

The Architect then must evaluate the proposed alternative solely for conformance with the design intent for the completed construction.  Unless the Architect objects to the proposed alternative, the Contractor is to perform the Work using the alternative it proposed.

Take away tip here?  Make sure that you timely evaluate any such alternative proposal!

Up tomorrow: Change # 6:  Notice Provisions.  Until then, stay frosty!

 

 

Contract Change #8: Direct Communications between Owners and Contractors (law note)

talking headsContinuing our 10 part series on Changes to the General Conditions of the Contract (AIA 201) [for the previous post, click here], Change #8 has to do with direct communications between the Owner and the Contractor.

As the Engineer or Architect of Record, you probably have frequently experienced Owners and Contractors communicating directly, in direct contravention of the language of the contract that requires them to endeavor to route all communications through the design team.  With the latest version of the 201, direct communication is now authorized, to recognize both the reality of what was happening on the ground and to recognize that sometimes Owners and Contractors may need to communicate without waiting for the design team.

In the new Section 4.2.4, Owners & Contractors are only required to include the Architect in communications that relate to the professional services of the design team.  HOWEVER, the Owner is required to promptly notify the Architect of the substance of any such direct communication.  The Owner-Architect agreement has been changed as well, to make it consistent with this new AIA 201 procedure.

Is this a good change?  Honestly, the verdict is out on that one (pun intended).  It may prove very helpful in keeping a project on track when the Architect is not regularly on-site.  However, the parties run the risk that they may make decisions that do effect the design team, without design team input.  Be cautious, and make sure the Owner *does* keep you informed.

Up tomorrow, Change #7– Contractor’s Means & Methods.

Copyright © All Rights Reserved · Green Hope Theme by Sivan & schiy · Proudly powered by WordPress