Project Relationships
Legal forms of business
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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
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Owner-builder contract
Employee-employer contract
General contractor-subcontractor
Principal-agent
Principal- Independent
Sale of Goods (UCC governs)
Project Relationships
Employment contracts
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Typically at-will
Employer assumes liabilities
Employee has limited power (fiscal agency)
Project Relationships
Subcontracts
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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
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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
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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
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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
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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:
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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
offer
If changes are made, it becomes a
counteroffer
Consideration is value given to party in
return for performance
Whenever scope changes, consideration
changes
Bidding Mistakes
Legal capacity- 18 years, chartered, tax ID,
mental fitness, fiscal agent
Legal purpose- contract must be for a legal
act
Fraud- nondisclosure or misrepresentation
with intent to deceive (must be reliance and
damage)
Force- offer accepted under duress
Voidable contract can be rescinded
Bidding Mistakes
Mitakes
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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
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Federal- rescission or reformation
State rescission only (major error, before
start of construction)
Subcontract governed by states onlymajority 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 unethical
A few jurisdictions allow subcontracts bids to
be revoked prior to acceptance
California- bid is revocable unless contractor
makes a conditional acceptance
Telephone bids are valid offers accept for
material purchases over $500