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« Energy Star Homes Grabs Increasing Share of Market for Single-Family Residences | Main | Rules for Success in Cost Estimating Outlined During WPL Publishing Webinar »

09/30/2011

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What happen if the owner (on this case Corps of Engineer)cancel a part of a contract after the General contractor commits to a supply, fabricate and install contract. As a sub the engineering and submittals were completed but not approved. GC states that the corps will build another facility (parking garage) (two to five years)and then continues with the contract. Also states that the corps will not pay for loss revenue

Terminating a contract is never a convenient option, but lets face it, the government is the biggest abuser of using contracts, not for the spirit of its intent, but for a tool for unfair advantage. As long as the law says it's okay, it's okay...

Bruce, while parties can abuse any contractual provision (at risk of later being sued for improper actions and/or bad faith) this boils down to a low denominator issue.

When negotiating contracts both parties can determine their relative risks and rewards. That includes a contractor evaluating what might happen if it is terminated for cause. The contractor can negotiate for terms that encompass all provable costs associated with the termination. If the contractor believes (pre-contract) that it can be potentially hung out to dry if the Owner exercises the rights provided for, the contractor can simply not agree to those terms. Arguing after the fact that the terms were unfair is a non-starter - unless the contractor can demonstrate fraud by the other party in enticing the contractor to enter the contract in the first place.

Such after-the-fact claims by contractors are more often sour grapes. There is usually underlying poor performance that triggers the termination. Owners understand that terminating a contractor will inevitably involve significant project impact - so is not a 'good choice', whether for cause or convenience, and not undertaken lightly.

See sterling millwrights v USA

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