Three Selected Clauses

three viable substitutions for the termination for owner convenience, delays and extension of time, and change orders clauses that have been stricken from the original contract. In this letter I will provide a comprehensive report over the three recommended clauses and discuss the reasoning behind my selections. The criteria utilized to determine the priority of the selected clauses focused on mitigating potential damages and limiting assumed liabilities. The recommended clauses are selected from general conditions section of the ConsensusDOCs 200 series referenced in ‘A Matrix of Selected Clauses In Three Standard Contracts’, per your request.
Termination for owner’s convenience conditions are unbeneficial to the interest of a subcontractor
and create a burden of added liability passed down from the owner. Within an owner contract termination cause, both the contractor and subcontractor are subject to a voidance of the initial contract which is contingent upon the owner’s discretion. The nature of contract termination in this situation ultimately places the contractor and subcontractors at risk of job displacement and a loss in project revenue. To protect the legal interest of the company I recommend incorporating a termination by contractor for cause condition into the contract. This statute will enable the contractor to assume the authority to terminate the contract provided there is a legal reason to do so. Unlike the initial owner terminiation contingency, the conditions for contractor termination are explicitly given in the conditions of the clause. The ability to terminate the contract as a condition subsequent to delinquent owner payments is beneficial to both the contractor and subsidiaries reliant upon owner compensation for the work performed. Furthermore, the subcontractor is protected from potential damages under the recovery conditions of the clause which stipulate full reimbursement from the owner for the work completed and estimated financial loss suffered as a result of the termination. The two alternative termination clauses, termination for owner’s convenience and contractor default, favor the owner’s legal interest by shifting liability towards the subsidiaries. Through my evaluation of industry standard termination clauses, I have deduced that a contractor termination for cause condition provides the most comprehensive legal protection for a subcontractor against contract termination.
The conditions stated in a delays and extension of time condition are oriented towards the interest of a general contractor. As a result, additional liability and financial burden is pushed onto the owner and subsidiaries. To mitigate financial risk associated with delays, I recommend supplementing this condition with an application for progress payments clause. The owner and contractor assume the financial liability of coordinating monthly payments with a specified deadline. The security of monthly progress payments will ensure that the work performed on a project is justly compensated and limits the liability of payment defaults. Alternate standardized payment application clauses included conditions for owner adjustments and compensation for storing materials. These conditions benefit the interest of the owner and general contractor who assume legal authority in financial matter which leaves a subcontractor exposed. Legal representation in the payment application aspect of a project is essential for a subcontractor who is subjected to changes in the scope of work of a project. I recommend for that reason that an application for progress payments clause be added to the contract to provide necessary legal security and leverage to ensure compensation for work performed on the project.
A subcontractor throughout the stages of a construction projects will inevitably be subjected to changes in the contract price and additional work requirements requested by the owner or general contractor.
The liability of completing additional work requirements resulting from change order directives is shifted toward the subcontractor through the inclusion of a change order clause. This is applicable to the conditions stipulated within the change order clause stricken from the contract. The owner under this clause is given authority to freely issue work order directives with the consideration of the contractor. These changes potentially leave the subcontractor subjected to any actual damages suffered from persistent changes to contractual work obligations. The assumed work liability of the subcontractor is further enhanced by the ambiguous language used to outline the owner and contractor’s responsibilities when determining the acceptance of an issued change order directive. This can lead to an increase in vulnerability for a subcontractor who is bound to the changes made in an arbitrary decision making process. To mitigate the risk of change order directives, I recommend replacing the existing change order clause with a condition defining the parameters for substantial completion of work. The term substantial completion is often used to defend against claims made by the owner against a contractor accused of a breach in the contract. This term can also be utilized to defend
a subcontractor against similar claims made by the contractor. Providing a clear definition of what is to be determined as substantial completion of work will protect a subcontractor from such claims by establishing a defense against change order directives which add to the initial scope of work. In construction the value of time and money is critical during the completion of a project and are the contingencies most often disputed in courtroom litigation. In my research I reviewed an alternate change order clause which covered owner directed changes in more detail. Although the conditions incorporated into the alternate clause offer a more comprehensive guideline over change order directives, I speculate that the stipulations for determining owner payment obligations are unfavorable for a subcontractor tasked with performing the additional work. The potential for costly litigation disputes to occur over change order payments is a critical liability which deviates from the criteria I have utilized for determining the optimal legal coverage for our company.
In conclusion, the recommendations I present to you are the product of extensive research and consideration for protecting the company’s interest within the binding conditions of a contract.
I will be available to discuss any questions you may have concerning these suggestions at your earliest
convenience.