Why “Time Is Of The Essence Clauses” Matter

Time is of the essence clauses are common in construction contracts and for good reason. This clause activates certain rights and remedies to various parties in a construction contract. Every contractor should be familiar with the importance of this clause. Watch to learn more.

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Don’t Treat Your Lump Sum Contract Like Its Cost Plus

If you have a fixed sum agreement more than likely, the owner/developer is most concerned about your PROGRESSION and you’re being paid based on how much you’ve progressed on the job.

So one has to wonder why so many contractors treat lump sum agreements,  like cost-plus agreements and inaccurately itemize what they’ve “spent” on labor and materials? When contractors do this and its not accurate (which…most of the time its not), it calls their entire bid into question.

If the project goes over budget, they look like they PURPOSEFULLY under bid the project and along the way, misrepresented what they spent, all in an effort to get more money. This is almost certain to earn fraud lawsuit. Learn more by watching.

 

2017 AIA CONTRACT UPDATES

If you work in construction you’re familiar with the American Institute of Architects more commonly known as the AIA. They create form contracts used by many construction companies in various types of construction projects. Many smaller contractors pull these contracts offline and present them for execution without much modification at all. Given the frequent use of these agreements, it’s no wonder that their 2017 updates are considered a big deal.

OWNER-CONTRACTOR AIA UPDATES

Project Timeline

The parties now have choices with regard to when the project will commence and when the project will be substantially completed. The parties can elect to have the project commence on the date the agreement is executed or a different date. The parties can elect a specific date for substantial completion or a certain number of calendar days.

Termination Fee

If a contractor is terminated for convenience under the AIA agreement, the AIA assumes the contractor will be paid a termination fee.

Payments

Here’s the big one. The AIA treats the A101 and the A102 differently, and for good reason. The A101 is a standard form agreement for a fixed fee. This is commonly known as a fixed fee agreement. The A102 is a cost-plus agreement with a maximum guaranteed price. This means that the owner will pay for the cost of labor and materials plus some additional percentage of the total cost of labor and materials as the contractor’s fee.

In the A101 because the contract is based on a fixed sum, less significance is given to the percentage of work completed. However, owners are still required to pay for only the contract amount able to be allocated to the work. Unlike A101, because A102 is a cost-plus agreement, emphasis on percentages remains high. The A102 also adds documentation requirements for the contractor on contingency cost items and cost-plus subcontracts.

As always, if you plan to use an AIA form take the extra step to have your counsel customize the form for your specific project. Counsel may also want to attempt to negotiate a better position for your company. If neither is feasible for you, please take the time to read and understand the form before presenting it for execution.

Nothing in this article is to be considered legal advice. If you have questions or need representation due to nonpayment on a construction project, please call 832-930-0529 or email us at info@stephenspllc.com

Construction Lien Tip: Get BOTH SPOUSE’S Signatures On Residential Jobs!!!

You have to be careful when doing residential projects. First, residential jobs generally come with a higher risk of litigation because a great deal of protection is given to homeowners and consumers under the Deceptive Trade Practices Act.

Secondly, in Texas, the Property Code requires that you jump through extra hoops to perfect a lien on a homestead. The first step is a written contract. This may seem like a “no brainer” but unfortunately, there are a number situations were contractors begin working without any written agreement only to be left holding the bag later.

The second step, and one that is often overlooked  is obtaining the signatures of both spouses on residential jobs. The Texas property code requires this to have been done before any lien can be perfected on a residential homestead. Unfortunately, many contractors don’t know this and file invalid liens. I discuss this a bit more below.