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Engineering and Construction Law

and Contracts
Ch. 12 Forming Engineering and Construction
Contracts

Dr. Rafiq Muhammad Choudhry


BSc(Civil-Honor), MSc(CEM), PhD(CEM), Post-Doctorate (CEM)
PE, M.PEC, M.IEP, M.ASCE, Email: choudhry03@gmail.com

Professor of Construction Engineering & Management (CE&M)


Department of Civil and Environmental Engineering (CEE)
College of Engineering (CoE), King Faisal University (KFU)
Al-Hofuf, Al-Ahsa, KSA

INTRODUCTION

A contract is a formalized means of communication


between parties.

Is used very commonly by owner and the contractor


to control the delivery of their projects.

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

INTRODUCTION

In law a contract can be defined:


A valid contract is an agreement made between two
or more parties whereby legal rights and obligations
are created which the law will enforce.

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Definition of Contracts (CSI Definition):


A promise or a set of promises for the
breach of which the law gives a remedy
of the performance of which the law
recognizes a duty

CSI (Construction Specification Institute)

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Character of a Contract (CSI):

is determined by the nature of the


obligation imposed by the provisions of the
contract as a whole. The specifications are
part of the contract and along with all other
parts of the contract determine its character.
Each part must be read and interpreted
together (in context)

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Scope of Work

Defines the obligations and financial risks


and describes the undertaking prior to
bidding. The requirements of contacts are
constantly changing.
An imperfect expression of what owners
think they want for their projects
Contracts have to be written with the
flexibility to change as the scope of work for
projects is refined by owners.

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Project Baselines (Bidding


drawing/documents)

The original scope of work is used as the


baseline against which progress and changes
are measured during the monitoring of a
project

If a project changes by more than 10 percent it


is a cardinal change and a contractor is
entitled to compensation or a new contract

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Construction Industry Project Team


Members

Owners
Designers
Contractors
Construction managers
Sureties
The labor force

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Construction Project Development

Phases of a construction project


Preliminary planning and feasibility studies
Preliminary engineering and design
Engineering
Procurement
Construction
Operation
Demolition

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Project Contract Administration Models

Single prime
Separate prime
Construction management
Design/build

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

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CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Formation Principles of Contracts

Uniform Commercial Code

Applicable to construction contracts for the sale


of goods valued over $5,000

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

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CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Formation Principles of Contracts

Offer and Acceptance

Contract agreements - used to legally bind


parties to the terms of the contracts
(Appendix E provides a sample Agreement
between Owner and Contractor for
Construction Contract (Stipulated Price)
by EJCDC)

If signed, the agreement signifies that they


understand the terms of the contract

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

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CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Formation Principles of Contracts

Meeting of the minds

All parties to the contract have to understand the


terms of the contract and what they will be obligated
to perform

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

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CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Formation Principles of Contracts

Proper (Lawful) subject matter

For a contract to be legally valid the subject


matter has to be legal (e.g. cannot hires another
person to either harm or not allowed to
illegally dump hazardous wastes)

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

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CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Formation Principles of Contracts

Duress and undue influence

When someone is forced to sign a contract


because of excessive pressure or economic
circumstances

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

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CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Formation Principles of Contracts

Fraud

Intentional deception of someone used to form a


contract
The defrauded party is allowed to void the
contract and may also be able to recover some of
the funds that were paid to the party who
committed fraud based on compensation
principles

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

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CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Formation Principles of Contracts

Mutual mistake and unilateral mistake

If an unintentional mistake is made when a contract is


being formed both parties could agree to void the
contract
If a contractor makes a unilateral mistake they may still
be obligated to perform the contract
Some owners prefer not to obligate a contractor to
perform the work for an underbid amount because it
could compromise the quality of the project.

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

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CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS
Formation Principles of Contracts

Statute of frauds
Statute of frauds (law) requires that contracts be in
writing if they are for a purchase or product that cost
more than a certain amount of money that is set in each
state ($500 to $5000).

Contracts are required by law if they will not be


performed within one year
Contracts have to be in writing for the purchase of land
or development of a property

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

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CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Formation Principles of Contracts

Statute of frauds
Land contracts must have to be in writing and
registered with the Local Govt. / district /
county where the property is located.

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

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CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Forming Contracts for Engineering and


Construction Services

Requirements for contracts

Offer (written bid, clear, no phone offer)


Acceptance
Adequate consideration (something of value)
Could require that they be under seal - notary
public stamp (and fingerprinting is required).

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

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CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Forming Contracts for Engineering and


Construction Services

Privity

Privity refers to who is a party to a contract


It determines who is able to sue for breach of
contract when there is a default related to the
contract

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

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CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Engineering Contracts (Design Services) (A

sample of a Standard Form of Agreement b/w Owner and Engineer for


Professional Services Appendix F,
and Short Form of Agreement b/w Owner and Engineer for Professional
Services Appendix G)

Negotiated contracts

Payment by Man-hours

Paid for in installments (usually the following):

Preliminary investigation - 10%


Preliminary design - 33 %
Final design but unchecked - 65%
Final design and checked - 100%

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

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CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Construction Contracts

Federal and provincial levels are


competitively bid and awarded to the lowest
responsible bidder
Must also be responsive bidder

Must complete and submit everything required


in the bid documents

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

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CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS
Construction Contracts

Different forms of contracts

Unit price
Lump sum
Cost plus a percentage of the cost
Cost plus a fixed fee or a fixed sum
Broker
Unilateral and bilateral (In unilateral, one party has to deliver
such as construction contracts; Bilateral both parties have to
deliver such as marriage contract)
Express and implied
Joint and several (Every party has the obligation, not just their
pro rata basis, parties could be sued together or individually).
Void and voidable (not legal or against public policy; signed by
minor, incompetent, signed under duress)
Subcontracts

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

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CHAPTER TWELVE - FORMING ENGINEERING


AND CONSTRUCTION CONTRACTS

Reading

Read Chapter 3 The Nature of Contracts


Construction Contracts by Jimmie Hinze

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

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Thank You

Dr. Rafiq Muhammad Choudhry


Professor of Construction Engineering and Management, CEE, COE, KFU

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