Construction Disputes - Representing the Contractor (Chapter 1 - [?] Flashcards Preview

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Flashcards in Construction Disputes - Representing the Contractor (Chapter 1 - [?] Deck (40)
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1
Q

What are two (2) marco-dynamics which cause the construction industry’s volitility and slender profits?

A

(1) Fierce competition; but
(2) Complexity and uncertainty of work.

2
Q

Construction represents what percentage of yearly American gross national product?

A

10%

(approx USD$180 billion in 2018)

3
Q

One thing has pre-eminance in predicting a succesful project - what is it?

A

The extent to which construction risk is:

identified; and

managed.

4
Q

What are the four traditional construction cycle phases?

A

(1) Planning or feasibility (2) Design (3) Construction; and (4) Close-out.

5
Q

Why - economically - is being a contractor not for the faint hearted?

A

Highly skewed dollars-at-risk against dollars-for-profit

(10:1).

6
Q

Why is construction so time-sensitive?

A

Prolongation or acceleration both increase cost.

7
Q

How does a cyclical business have higher risk?

A

Capital costs cannot be avoided when quiet.

8
Q

What is the only major construction risk that cannot be controlled, merely allocated.

A

Weather.

9
Q

Performance bonds are rare in the economy, but common in construction. Why?

A

Inherent risks make performance uncertain.

10
Q

What is a major source of legislated risk for contractors?

A

Laws which impose strict liability, but little means of control.

(i.e. inadvertant disturbance of hazardous material)

11
Q

How does factual density lead to construction disputes?

A

Uncertainty about “what happened”, leading to disputes.

12
Q

How can the time/cost versus quality trade off lead to disputes between a principal and contractor?

A

Differing expectations.

13
Q

What is “the Abrahamson principle” of risk allocation?

A

Allocate risk by ability to control.

14
Q

What is the danger of seeking to transfer away too much risk?

A

Squeezing” other party makes litigation more likely.

15
Q

What is the temptation for Contractors in low economic times?

A

Assume excess risk, at slender margin, in non-core area, to keep people “busy”.

16
Q

What can happen when you group construction risks by category?

A

Collective (often presumptive) allocation trumps individual consideration.

17
Q

Delay damages are the obverse of what?

A

Liquidated damages.

18
Q

What are prolongation costs?

A

Costs payable because the contractor is onsite longer.

(head office staff, hire costs etc)

19
Q

What is a “hot” construction market?

A

Lots of projects.

20
Q

What are a Principal’s concerns during a “hot” (busy) market?

A

Busy contractors will stretch themselves thin.

(resources, senior experienced people)

21
Q

Why aren DRB and DABs not appropriate for all projects?

A

Expensive personnel.

22
Q

Anecdotally, what are the two most common cause of construction disputes?

A

(1) Unprofessional contract management not respecting contract; and
(2) Unexpected risks.

23
Q

What is a viable alternative to ordering an extension of time?

A

Ordering acceleration.

24
Q

Why must a principal ensure liquidated damages are more than acceleration costs?

A

Otherwise contractor will accept liquidated damages instead of accelerating to finish, placing delivery date at risk.

25
Q

Why you would assume a lack of records counts against that party, what in reality can happen?

A

The chaos disadvantages both sides.

26
Q

Does common law normally favour a prospective or retrospective analysis of damage?

A

Retrospective

(Why guess when you know damage?)

27
Q

Who carries the risk of latent conditions at common law?

A

Contractor.

28
Q

According to the old proverb:

“Agree, for the law is ________ “?

A

Costly.

Herbert, Jacula Prudentum (1651)

29
Q

Should the decision to litigate be subjected to the same cost benefit analysis as other business decisions?

A

Yes.

The decision to litigate should be economic, not on principle.

30
Q

What is the first hidden cost of litigation?

A

Time value of money while dispute resolves.

31
Q

What is the second hidden cost of litigation?

A

Time and rescources diverted from profit making work.

32
Q

What should not be ignored when contracting with a government?

A

Soverign immunity

(esp. for ex-contractual claims).

33
Q

What is the US Spearin doctrine?

A

Owner implicitly warrants design is reasonably free from defects.

34
Q

What is a “wasting” professional indemnity policy?

A

Legel defense fees deducted from limit.

35
Q
  • “No construction project is risk free.*
  • Risk can be managed, minimised, shared, transferred, or accepted*
  • It cannot be ________.”*
A

Ignored.

  • Risk management - The commercial imperative*
  • Sir Michael Latham (1994)*
36
Q

What happens to risk through the construction cyclye?

A

Risk level changes, and controls need to match.

37
Q

In relation to subcontractors, what is the owner relying on the head contractor for?

A

Timely and proper performance of the contract.

(Single point of accountability)

38
Q

A construction manager is usually the head contractor, but can actually be what?

A

A pure professional co-ordinator, who does no construction.

A superintendant who manages subcontractors only.

39
Q

Aside from solvency issues, why else should general contractors not allow the owner to fall too far behind on progress payments?

A

Threatening suspension is ineffectual close to completion.

40
Q
A