Recently, I reviewed a contract for the
construction of a very expensive mansion for a wealthy businessman. I was
impressed by the number of instances in
which time or timing was a factor.
Although the precise wording of this
mansion contract—the terms and conditions, special conditions and other
“attachments”—had some uniqueness,
the types of time-related demands in the
contract were not that different from
the types in domestic commercial, civil
and industrial contracts. If a contractor ignored these provisions or, worse,
did not know about them or understand
their implications, there would be predictable financial consequences.
This article is not about scheduling.
It is about avoiding losses and protecting
your project, with a secondary emphasis
on the negative effects to the contractor/
owner relationship when a job runs late
and the owner is not told why.
You might think that the date for starting the work should be obvious. It is not.
A standard provision is that the date of
commencement of the work is the date
of the agreement, which does not necessarily mean the date the agreement
is signed. It regularly happens that the
signing date does not occur until after
the contractor has started work.
Where appropriate, you may want a
“reasonable time” or something like 10
days, to start after the date of the agree-
ment to allow for mobilization. You
should also ensure, in writing, that the
owner has obtained all rights of way and
lender approvals to permit the work to
start. Double-check the site to ensure
that it is in a state of readiness. In one
case I had, temporary power (provided
by others) had not been connected. In
another, the concrete contractor was
late in preparing the foundation. In both
instances, a time extension was needed
immediately upon signing the contract.
All of these preconditions to the actual
start of your work are critical because the
contract-completion time is usually measured from the date of commencement.
Progress payments by a third party
In some contracts, the lender is expressly
named and authorized to issue, even
approve, progress payments. You need
to clarify and confirm the time allowed
for the lender to make payment and
spell out what happens when that criterion is not met. Ensure that the lender’s
bases for making payment are the same
as those specified in your contract,
and whether those criteria involve the
architect’s approval or the achievement
of interim milestones. A bank or other
lender might have its own timing and
criteria for progress payments, which
may be at odds with your understanding.
Change order procedure
Typical change order language permits an
owner to order a change by formal, written
directive. Keep in mind that this kind of
directed change applies both to the physical installation itself as well as the timing
of the work. One such clause states, “All
such changes in the Work that affect
Contract Time or Contract Price shall be
formalized in a Change Order.” This provision means that you can, and must, have
a change order commemorating a change
even if it only affects time. Contractors
regularly miss this point.
Taking this clause literally, whenever
an owner orders all or part of the work
stopped or accelerated, a written change
order on contract time should follow,
regardless of any cost impact.
Not all contracts expressly contain a constructive change clause, but the American
Institute of Architects and the Consensus
Documents have this provision. A constructive change arises without a written
directive from the owner. It may be
caused by site conditions, interferences
by other contractors, verbal directions
by the owner’s representative, defective
technical data, etc.
The contractor has the burden of
detecting this kind of change and then
sending a written notice. The following is
an example of language in one contract:
“If the contractor has a ‘claim’ for
additional cost or time, he must give the
owner written notice within 14 days of
the occurrence of the event giving rise to
This question of what happens if the
contractor fails to give the 10- or 14-day
notice has often been litigated. Some
contracts are more precise and state that
a failure to give written notice within the
time specified waives the claim for both
time and money.
I have previously written about what constitutes a differing condition. When they
are encountered, the AIA standard form
contract requires a “prompt” notice to the
owner and the architect (not necessarily
in writing) before the conditions are dis- IST
LEGAL BY GERARD W. ITTIG
Funny How Time Slips Away
Losing time in contracts
ON A REGULAR BASIS, CONTRACTORS ASK ME to review their contracts
before they sign. In that process, I tend to divide the contract clauses into three
categories: 1) the clauses that the contractor needs to be aware of but can live
with, 2) the clauses that need modification or clarification, and 3) the clauses
that need to be deleted.