Overview

Understanding and Negotiating Construction Contracts The complexities of construction contracts are made easy with this thorough and readable guide Construction contracts can be complex for both owners and contractors. For contractors, negotiating fair and balanced commercial terms in contracts is just as important as properly managing projects; a properly negotiated contract can mitigate unnecessary risk and unnecessary risk transfer. This, in turn, reduces exposure to financial liability for the contractor and for avoidance of contract claims and disputes. Understanding and Negotiating Construction Contracts provides a comprehensive and readable introduction to the world of construction contracts. Providing, for example, coverage of the four most common types of contracts—lump sum/fixed-price, cost-plus, time-and-materials, and unit-pricing—it promises to reduce uncertainty and allow contractors to enter contractual negotiations with greater confidence to be able to achieve a fair and balanced contract. This updated new edition reflects the up-to-date best practices to understand how to better negotiate the commercial terms and conditions in construction contracts. Readers of the second edition of Understanding and Negotiating Construction Contracts will also find: Updated information on indemnity, insurance, and negotiation An all-new chapter with a contract analysis checklist Real-world examples drawn from small residential, retail, large commercial, and international projects Understanding and Negotiating Construction Contracts is essential for construction professionals and college students studying construction contracts and the liabilities arising out of them.

Full Product Details

Author:   Kit Werremeyer
Publisher:   John Wiley & Sons Inc
Imprint:   John Wiley & Sons Inc
Edition:   2nd edition
Dimensions:   Width: 21.30cm , Height: 2.30cm , Length: 27.20cm
Weight:   0.726kg
ISBN:  

9781394150205

ISBN 10:   1394150202
Pages:   384
Publication Date:   21 August 2023
Audience:   Professional and scholarly ,  Professional & Vocational
Format:   Paperback
Publisher's Status:   Active
Availability:   In stock  
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Table of Contents

Acknowledgments xiii About the Author xv Preface xvii Disclaimer xix Introduction xxi The Goals of This Book xxi What Are the Benefits of This Book? xxi Contractor & Owner Conventions xxii Private Contracts or Government Contracts? xxii Key Contracting Concepts xxii Two Types of Commercial Terms & Conditions xxiii The Most Important Commercial Terms & Conditions xxv The Contracting Process xxv Terms & Conditions xxv The Concept of Risk Transfer xxvi This Is a Book Developed Just for Contractors xxvii Three Final Suggestions xxvii Chapter 1: Contracts: Basic Training 1 What Is a Contract? 1 The Steps to a Contract 1 Coming to the Party? 2 The Starting Point 3 “Here’s My Proposal” 4 “Consideration,” or Something of Value 5 The “Happy Test” 5 “Can That Person Sign This Contract?” 6 Call in the Enforcer to Close the Breach! 6 A Contract Example 8 Strange Words & Long Paragraphs 10 Contracting Myths 11 Contract Negotiations 12 Chapter 2: Types & Forms of Contracts 15 Fixed Price & Fixed Schedule Contracts 16 Reimbursable Type Contracts 16 Combined Fixed Price & Reimbursable Contracts 18 Cost Plus Fee Contracts 20 Guaranteed Maximum Price Contracts 21 Target Price Contracts 21 Contracts with Performance Incentives 22 Form of Contracts 23 Some Final Contract Housekeeping— Definitions 30 Conclusion 32 Chapter 3: Scope of Work 33 The Scope of Work Matrix 37 Scoping Drawings 39 Conclusion 40 Chapter 4: Terms of Payment & Cash Flow 41 Cash Flow 42 Interest Rates 44 Periodic Progress & Milestone Payments 45 Conclusion 59 Chapter 5: The Schedule 61 Float 62 Time Is of the Essence 64 Extra Time, but No Money 66 Conclusion 68 Chapter 6: Assurances of Performance 69 Guaranties & Bonds 70 What Does “Failure to Perform” Mean? 72 What Is a Bond? 72 Forms of Assurances of Performance 73 Surety Companies 78 Some Language Considerations on Guaranties & Bonds 82 Types of Performance Assurances 82 Conclusion 101 Chapter 7: Insurance 103 What Is Insurance? 104 Claims Made vs. Occurrence 105 Types of Insurance 106 Important Issues Associated with Insurance 112 Additional Insured Status 120 Additional Insurance Basics 121 A Typical Insurance Clause in a Construction Contract 134 Safety 140 Chapter 8: Indemnity 141 Insurance & Indemnity 142 Indemnity Definitions 142 Transferring the Owner’s Risks to Contractors 143 Fairness Is Not a Consideration 143 Is an Indemnity Required in a Construction Contract? 144 Anti- Indemnity Legislation 144 Examples of Indemnification Clauses 150 Indemnification, Additional Insured Status, & Contractual Liability Insurance 157 Owners Love CLAIMS! 161 Negotiating Indemnity Clauses 162 Knock- for- Knock Indemnities 165 Conclusion 166 Chapter 9: Changes 169 Some Ground Rules 170 Protecting the Project Manager 170 Owners’ Directives 171 Constructive Changes 171 Payment for Changes 172 Sample Change Clauses 172 Major Contract Changes 178 Negotiating Change Clauses 179 Conclusion 180 Chapter 10: Disputes & Their Resolution 183 What’s a Project Manager to Do? A Short Story to Start With 183 Disputes— The Construction Contract’s Bad Actor 184 An Ounce of Prevention 186 Dispute Resolution Options 186 The Folks who Negotiate, Mediate, Arbitrate, & Litigate 188 Dispute Resolution Clauses 189 Conclusion 192 Chapter 11: Damages 193 Breach of Contract/Failure to Perform 194 Contractors’ Financial Exposure 194 Actual Damages— A Silent Risk? 194 Liquidated Damages 196 Consequential Damages 204 Conclusion 206 Chapter 12: Warranties 207 A Workable Definition of Warranty 207 Warranty Issues 208 The Uniform Commercial Code 214 When Is No Warranty Appropriate? 217 Extended Duration Warranties 219 Limiting Provisions in Warranties 221 Pass- Through Warranties 221 Latent Defects & Warranty 222 A Sample Warranty 224 Conclusion 224 Chapter 13: Termination & Suspension 227 Termination for Cause 228 Termination for Convenience 229 Suspension 232 Cancellation 236 Conclusion 236 Chapter 14: Force Majeure 239 Negotiating Clauses 239 Sample Contract Language 240 Conclusion 244 Chapter 15: Other Contract Clauses 245 Site Conditions 246 Use of Completed Portions of the Work 251 Patent Indemnity 252 Secrecy & Confidentiality Clauses & Agreements 253 Owner’s Right to Inspect 254 Independent Contractors 257 Assignment 258 Acceptance & the Punch List 260 Advance & Partial Waiver of Liens 262 Final Waiver of Liens 265 Audit Rights 268 Severability or Validity Clauses 269 Venue & Applicable Law 269 Florida Civil Code Chapter 47 Venue 270 Texas Business & Commercial Code Annotated §272.001 271 Venue and Choice of Law State Statutes 271 Contractual Rendition? 271 Changes in the Law 272 Some Interesting Clauses to Close 273 Chapter 16: A Construction Contractor’s Contract Checklist 275 Chapter 17: International Contracting 283 International Contracts 284 The U.S. Foreign Corrupt Practices Act 285 Letters of Credit 286 Split Contracts: Onshore & Offshore Contracts 288 Political, Religious, & Economic Risks 289 Overseas Private Investment Corporation (OPIC) 290 Legal Systems in Foreign Countries 290 Local Employees, Partners, & Agents 291 Offshore Companies 292 Currency Risks 293 Applicable Law 297 Joint Ventures 299 Joint Operations 299 Import & Export Considerations 300 Understanding INCOTERMS 302 The Export‐ Import Bank of the United States 305 Where to Get Some Help— Ask the U.S. Government 306 Lastly, Use the Right Paper Size! 307 Conclusion 307 Chapter 18: What’s It Take to Do Business in Southeast Asia? 309 Patience Is Golden 310 Walk the Talk 310 Time and Money 311 The US Foreign Corrupt Practices Act 312 Center for Strategic and International Studies 313 Trans Pacific Partnership (TPP) 314 Backdoor to China and India 314 SPECIAL Section— The Socialist Republic of Vietnam (Vietnam) 316 Resources for Business in Southeast Asia 317 Chapter 19: Some Final Thoughts on Negotiating Contracts 319 Why Negotiate? 320 The Concept of Standard Terms & Conditions 320 Risk Transfer Item 1: Get Rid of the Indemnity Clause! 322 Risk Transfer Item 2: Don’t Provide Additional Insured Status 323 Risk Transfer Clauses, Insurance, & Safety 323 How to Say No without Aggravating the Owner 324 The Worst Contracting Word: “Reasonable” 324 The Best Contracting Word: “Notwith- standing” 325 Win- Win & Lose- Lose in Contract Negotiations— Fairy Tales? 326 Is There a Price for Bad Commercial Terms & Conditions? 327 Terms of Payment 327 Some Tips on Successful Negotiating 328 Three First (and Final) Suggestions 328 Resources 329 Glossary 333 Index 349

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Author Information

Kit Werremeyer is owner and president of Southernstar Consultants LLC, Valrico, Florida, US, which provides training in construction contract negotiations and other professional services for engineering and construction companies both in the US and internationally. He has more than four decades’ experience in negotiating fair and balanced construction contracts, sales, major project development, and construction contract dispute resolution.

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