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Contractors: Please Respect Your Contract Documents. Don't Write Notations On Your Original Plans.
Posted by: Kenny Tan
September 15, 2010

Construction plans are a part of the construction contract. While you may prefer to wait until the plans are finally approved for issuance of building permit before you sign the construction contract, too often owners don't want to wait. They want to have a general contractor on board and ready to proceed the minute the plans are approved. In order to do so, owners will need to have the architects prepare what are known as bidding plans on which contractors would submit their bids. 

However, these bidding plans are not plans approved by the city for purposes of issuance of building permit. But since these are plans submitted for plan checks, architects often deem them sufficiently complete for bidding purposes. The setback is that should the plans be not approved after plan checks, the proposed construction costs estimated by the general contractor would not cover changes added to the bidding plans resulting in a change in the contract price. If no contract has been signed, this is not an issue.

More often than not contract prices are based on unapproved plans. Typically when owners and general contractors sign a construction contract based on unapproved plans, the contract itself will identify the set of plans on which the price is based by referencing the date on the bidding plans. This bidding plans therefore become a part of the construction contract and must be respected as such.

In a small project where architects are not involved in the construction, sometimes contractors make notations to indicate changes to the plans which may warrant change orders. But if you want to make notations on the plans, you should make a copy of the ?clean set? and make your notations on the copy. 

It?ll be a terrible mistake to write stuff on the original plans and later make your claim for change orders on altered plans, especially if they?re oral and never put in writing on a separate piece of paper. If you have to litigate the change order claims in the future, you?ll have no ?clean set? to prove how the plans looked at the time the construction contract was signed. Don?t count on the lenders or fund control companies to keep them for a long time. They often get discarded after a while. You have no idea how much extra work you?ve created for your attorney to prove your extra work if you did that. Not too mention the risk you put on yourself that the trier of fact may not believe your testimony since you can't produce the original bidding plans. 

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Documentation.. Documentation... And Documentation -- Key To Avoiding Litigation
Posted by: Kenny Tan
August 28, 2010

In some cultures, businesses are conducted with handshakes based on trust. In construction projects, disputes often arise as a result of lack of documentation. 

Sometimes the lack of documentation comes from the plans and specifications.  Architects don't always provide sufficient details on the plans. In small projects like single-family custom home constructions, owners rarely have specifications. Most consumers that hire general contractors to build their own homes lack the knowledge and experience to appreciate the problems.

Sometimes it comes from the owners changing their minds about designs or adding more features on their homes during construction. This seems to be a norm. An electrician once told me, "I've never had a job where I didn't issue change orders. The owners are going to add some electrical outlets here and there."

Sometimes it has to do with poorly drafted construction contract. The parties don't get an attorney involved in reviewing the contract document to make sure sufficient terms are contained in the contract to address the situations described above.

Sometimes the parties themselves don't want to sign change orders because this may slow down the project. Both parties have their own reasons to want to complete the project expeditiously; contractors may have another project waiting to start; owners may want the construction loans converted to take-out loans to reduce the interest.

When all three factors are present, disputes are bound to happen.  

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Read Your Subcontractor's Work Order At The Job Site Before You Sign
Posted by: Kenny Tan
July 08, 2010

You placed a call to your concrete supplier to have it dispatch truck loads of concrete to your job site. The driver brought a delivery ticket or work order for your representative's signatures. Not suspecting there's anything on the back of the work order that might cause any concerns, he signed it without looking.

After the house was built, the owner made a claim against you for defective slab. Believing that the slab was due to improper concrete mix, you then turned around and made a cross claim against your supplier. Your supplier pulled out the work order and brought your attention to the express indemnity clause in the work order. He argued that you couldn't sue him because he's protected by the express indemnity your superintendent agreed to even if the concrete he supplied was the cause of the defect in the slab. It seems unfair but you signed it. 

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Allowances In A Custom Home Construction Contract - A Possible Booby Trap For The Unwary
Posted by: Kenny Tan
May 06, 2010

If you are building your own custom home for the first time, you may not understand what allowances are in a lump sum or fixed price contract. Chances are your plans may not contain all the details a contractor need to adequately price out every item. When you ask the contractor to quote a fixed price for the construction of your brand new custom home and need a cost breakdown either for your own orthe lender's benefits, there are certain items that can't be priced out either because your architect has left out enough details on the plans (and you couldn't wait until the plans are fully complete before you give them to the contractors for bids) or you have not made up your mind the type of materials to be used. In this instance, the contractors will quote a fixed price contract but have to provide budgets for allowance items in the breakdown.

If the contract provides for allowances, the contract price may be adjusted up or down depending on whether you are over or under the budget on the allowance items. This creates a risk that you would end up with cost overruns if you don't get some professional help in reviewing the cost breakdown. Contractors may underbid the project by lowballing the allowance items and turn around and issue change orders in the middle of the project. As owners, you will be caught in a dilemma about whether to fire the contractor or bite the bullet and agree on the change orders. 

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