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Understanding Transnational Construction
Contracts
Seminar Topic: This material explains how transnational construction agreements
may differ from contracts on local projects. Details differences in defining services
purchased, and service providers, provisions covering financial issues such as
foreign exchange, local purchase requirements, taxes, and customs duries;
performance issues including payment process, performance guarantees,
technology transfers, and worker training; and procedural issues including change
orders, work suspension, inspection and testing, acceptance, remedies, and dispute
resolution.
This material is intended to be a guide in general and is not legal advice. If you
have any specific question regarding the state of the law in any particular
jurisdiction, we recommend that you seek legal guidance relating to your particular
fact situation.
The course materials will provide the attendee with the knowledge and tools
necessary to identify the current legal trends with respect to these issues. The
course materials are designed to provide the attendee with current law, impending
issues and future trends that can be applied in practical situations.
Page 2 © Copyright 2018, All Rights Reserved.
Copyright © 2018
Printed in the United States of America. All rights reserved. No part of this monograph may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, except for citation within legal documents filed with a tribunal, without permission in writing from the publisher.
Disclaimer: The views expressed herein are not a legal opinion. Every fact situation is different and the reader is encouraged to seek legal advice for their particular situation.
The Apex Jurist, www.ApexJurst.com is Published by ApexCLE, Inc.
www.ApexCLE.com
119 South Emerson St., Suite 248
Mount Prospect, Illinois 60056
Ordering Information:
Copies of this monograph may be ordered direct from the publisher for $64.95 plus $4.25 shipping and handling. Please enclose your check or money order and shipping information. For educational, government or multiple copy pricing, please contact the publisher.
Library of Congress Cataloging-in-Publication Data
ApexCLE, Inc.
1. ApexCLE, Inc. 2. Law-United States – Guide-books.
3. Legal Guide 4. Legal Education.
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About the Author and Presenter
James G. McConnell
James G. McConnell concentrates in public and private construction contracting, arbitration and litigation. In his career of over 40 years, he has handled land acquisition, site remediation, zoning, contract drafting, financing, negotiations, arbitrations and lawsuits on major construction projects valued at more than $19.2 billion. During these years he has represented public and private owners, developers, lenders, contractors, suppliers, and title insurers. He has performed legal work on projects in Illinois, California, Nevada, New York and Texas.
He received his law degree from Northwestern University School of Law in Chicago in 1973. He was admitted to practice in state and federal courts in Illinois in 1973, and he has been a member of the Northern District of Illinois Trial Bar since it was created in 1982. He was admitted to practice before the United States Court of Appeals in Chicago in 1973, and the United States Supreme Court in 1977. He has tried many civil jury cases in state and federal courts in Illinois, and he has been specially admitted as trial counsel in courts in seven other jurisdictions. He has handled numerous appeals, in the Illinois Appellate Court, the Illinois Supreme Court, United States Court of Appeals for the Seventh Circuit, and the United States Supreme Court.
Across his career as a trial lawyer, Mr. McConnell has represented clients in hundreds of cases involving complex construction claims, and other international commercial, financial and insurance issues, including the British Overseas Trade Board, J. C. Decaux, the Consul General of Mexico, the Public Building Commission of Chicago, Blue Cross/Blue Shield, Exelon Corporation, Bethlehem Steel, American Bridge Company, United States Steel, Youngstown Sheet & Tube, and Zenith Radio. He has handled litigation concerning such familiar construction projects as Chicago's Millennium Park, the John Hancock building, and the Sears Tower. He has served as an attorney and as an arbitrator in international construction and insurance claims.
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Mr. McConnell is a national and international author and lecturer on public, private and international construction contracting. Most recently, he has been involved in construction negotiations and disputes concerning Millennium Park’s mixed public and private funded construction, Kennedy King Community College, Blue Cross/Blue Shield’s Vertical Completion, homeland security improvements at the Port of Chicago, the Mexican Consulate in Chicago, the Illinois International Port District, Chicago's Central Police Headquarters, Harborside International Golf Center, Soldier Field, the Midwest Center for Green Technology, the Chicago Center for Children’s Advocacy, Bronzeville Military Academy, and Chicago's Deep Tunnel storm runoff and flood control project. He has also handled litigation involving redevelopment of the former Glenview Naval Air Station property, the South Campus development of the University of Illinois at Chicago Circle, and the historic landmark Carson, Pirie, Scott & Company flagship store at State and Madison streets in Chicago.
Author: James G. McConnell
Author’s Email Address: [email protected]
Author’s Website: http://www.james-g-mcconnell.com/
Author’s Mailing Address: CONSTRUCTION LAW SERVICES, LLC
Suite 120
101 North Virginia Street
Crystal Lake, Illinois 60014-3439
Author’s Phone Number: (630) 748-8036
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Table of Contents
Contents
Table of Contents ............................................................................................ 5 Timed Agenda: ............................................................................................ 6
Understanding Transnational Construction Contracts .................................... 8 Transnational Construction Contracts .................................................... 8 Services Purchased ................................................................................. 8 Service Providers .................................................................................... 8 Project Approaches ................................................................................. 9 Transaction Issues ................................................................................... 9 Purchase Definition................................................................................. 9 Financial Issues ..................................................................................... 11 Performance Issues ............................................................................... 11 Performance Issues - Damages for Non-Performance ......................... 12 Performance Issues ............................................................................... 12 Performance Issues - Potential Losses and Protections ....................... 13 Procedural Issues - Contract Changes .................................................. 13 Procedural Issues - Work Suspension ................................................... 14 Procedural Issues - Excusability Provisions ........................................... 14 Procedural Issues - Inspection and Testing .......................................... 14 Procedural Issues - Completion and Acceptance ................................. 14 Procedural Issues - Dispute Resolution ................................................ 15 Procedural Issues - Transfer of Rights and Duties ................................ 15 Procedural Issues - Choice of Law ........................................................ 15
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Timed Agenda:
Time Description
00:00:00 Program Start
00:00:20 Introduction
00:01:45 Understanding Transnational Construction Contracts
00:02:46 Transnational Construction Contracts
00:05:10 Services Purchased
00:07:00 Service Providers
00:07:13 Design Services
00:09:54 Project Management
00:11:59 Construction Work
00:14:28 Material Fabrication
00:15:56 Facility Management
00:17:40 Production Technology
00:18:55 Project Approaches
00:23:58 Transaction Issues
00:28:14 Purchase Definition
00:28:34 Scope of Work
00:37:08 Equipment and Materials
00:43:46 Performance Guarantees
00:48:14 Insurance Coverages
00:56:46 Spare Parts and Repairs
00:59:48 Roles of Consultants
01:03:47 Technology Transfers
01:08:57 Scheduling
01:14:27 Subcontracting
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01:18:36 Financial Issues
01:24:36 Performance Issues
01:29:50 Performance Issues - Damages for Non-Performance
01:33:38 Risk Transfer Timing
01:36:10 Performance Issues - Potential Losses and Protections
01:39:27 Procedural Issues - Contract Changes
01:42:43 Procedural Issues - Work Suspension
01:45:27 Procedural Issues - Excusability Provisions
01:47:28 Procedural Issues - Inspection and Testing
01:51:30 Procedural Issues - Completion and Acceptance
01:53:37 Procedural Issues - Dispute Resolution
01:55:46 Procedural Issues - Transfer of Rights and Duties
01:58:57 Procedural Issues - Choice of Law
02:04:10 Program End
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Understanding Transnational Construction Contracts
• Approaches and Issues
Transnational Construction Contracts
o Services Purchased o Service Providers o Project Approaches o Transaction Issues
Services Purchased
o Design Services o Project Management o Construction Work o Material Fabrication and Supply o Facility Management o Production Technology
Service Providers
o Design Services ▪ Single Source ▪ Architect / Engineer
o Project Management ▪ Single Source ▪ Architect / Engineer ▪ Project Manager ▪ General Contractor
o Construction Work ▪ Single Source ▪ General Contractor ▪ Prime Contractors
o Material Fabrication ▪ Single Source ▪ General Contractor ▪ Direct Purchase
o Facility Management ▪ Single Source ▪ General Contractor ▪ Joint Venture
o Production Technology ▪ Single Source
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▪ General Contractor ▪ Joint Venture
Project Approaches
o Build to Specification o Design / Build o Build / Own / Operate o Build / Operate / Transfer o Design / Build / Own / Operate o Design / Build / Operate / Transfer
Transaction Issues
o Purchase Definition o Financial Issues o Performance Issues o Procedural Issues
Purchase Definition
o Scope of Work ▪ Site Acquisition ▪ Site Preparation ▪ Mobilization ▪ Laws & Permits ▪ Worker Documentation ▪ Specified Items & Quality ▪ Specified Output ▪ Coordination with Others ▪ Facility Operation ▪ Worker Training ▪ Production Technology
o Equipment and Materials ▪ Description ▪ Time of Delivery ▪ Place of Delivery ▪ Shipping Costs ▪ Customs Clearance ▪ Import Duties ▪ Local Purchase ▪ Quality Control ▪ Documentation
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▪ Storage Conditions o Performance Guarantees
▪ Definition ▪ Duration ▪ Extensions ▪ Excuses ▪ Transfer of Manufacturer Guarantees
o Insurance Coverages ▪ Builders all Risk ▪ Cargo Insurance ▪ Professional Liability ▪ Environmental Liability ▪ Valuable Papers ▪ Political Risk ▪ Business Interruption ▪ Property ▪ Casualty
o Technology Transfers ▪ Description ▪ Documentation ▪ Licensing ▪ Training ▪ Restricted Use ▪ Confidentiality ▪ Compensation ▪ Future Enhancements ▪ Third Party Claims
o Scheduling ▪ Timing of Permits ▪ Site Work Commencement ▪ Site Work Progress ▪ Site Work Completion ▪ Occupancy Approval ▪ Timing Technology Transfers ▪ Milestones ▪ Critical Path
o Subcontracting ▪ Conformance to Documents ▪ Restrictions and Requirements ▪ Purchaser Approval ▪ Coordination and Communication
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▪ Changes ▪ Liability Limitations ▪ Payment and Waivers
o Spare Parts and Repairs ▪ Maintenance Program ▪ Service Price Schedule ▪ Parts Price Schedule ▪ Delivery Terms ▪ Payment Terms ▪ Guarantees ▪ Overstock ▪ Documentation ▪ Breakdown Repairs
o Roles of Consultants ▪ Selection ▪ Replacement ▪ Authority
• Contract Interpretation
• Submittal Review
• Work Coordination
• Performance Monitoring
• Change Order Processing
• Payment Certification
• Dispute Resolution
Financial Issues
o Pricing Methods ▪ Lump Sum ▪ Cost Plus ▪ Unit Price ▪ Time Bonus ▪ Efficiency Bonus ▪ Local Purchase Bonus
o Foreign Exchange ▪ Currency of Payment ▪ Local Purchase Requirements ▪ Currency of Taxes and Duties ▪ Exchange Rates ▪ Unit of Account
Performance Issues
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o Payment Procedures ▪ Progress Payments ▪ Changes ▪ Alternates ▪ Retention ▪ Taxation ▪ Schedule of Values ▪ Pay Request Documents
o Securing Performance and Payment ▪ Bid Guarantee ▪ Performance Bond
• Acceptable Sureties
• Consent to Changes
• Penal Sum ▪ Banker’s Guarantee
• Absolute
• Conditional ▪ Irrevocable Documentary Letter of Credit ▪ Security in Works Property
Performance Issues - Damages for Non-Performance
o Purchaser’s Remedies ▪ Costs of Cure ▪ Price Reduction ▪ Incidental Damages ▪ Consequential Damages ▪ Suspension of Payments ▪ Liquidated Damages ▪ Penalties ▪ Termination
o Contractor’s Remedies ▪ Interest on Late Payments ▪ Suspension of Work ▪ Increased Material Price ▪ Incidental Damages ▪ Consequential Damages ▪ Liquidated Damages ▪ Penalties ▪ Termination
Performance Issues
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o Risk Transfer Timing ▪ Notice ▪ Inspection Opportunity ▪ Commercial Expectations
Performance Issues - Potential Losses and Protections
o Design Failure o Adjacent Property o Goods in Transit o Delivered Material o Tools and Equipment o Works Under Construction o Completed Project o Casualty Delays o Worker Injury o Builder Insolvency o Project Nationalization o Professional Liability o Builder’s CGL o Cargo Insurance o Builder’s All Risk o Builder’s All Risk o Builder’s All Risk o Property Insurance o Business Interruption o Employers Liability o Performance Guarantee o Foreclosure o Political Risk
Procedural Issues - Contract Changes
o Purchaser Initiated ▪ Purchaser’s Convenience ▪ New Legal Requirements ▪ Upgrading Technology
o Contractor Initiated ▪ Discovered Conditions ▪ Construction Efficiencies ▪ Design Improvements
o Procedures ▪ Change Proposal
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▪ Pricing and Timing ▪ Referral to Consultant ▪ Force Account
Procedural Issues - Work Suspension
o Justifications ▪ Purchaser Convenience ▪ Non Payment ▪ Purchaser Interference
o Procedures ▪ Notice ▪ Cure Period ▪ Time Extensions ▪ Delay Damages ▪ Expedited Dispute Resolution
Procedural Issues - Excusability Provisions
o Defined Impediments ▪ Natural Disaster ▪ War or Rebellion ▪ Labor Disputes ▪ Material Shortages
o Procedures ▪ Notice ▪ Change Proposal ▪ Cure Period ▪ Renegotiation
Procedural Issues - Inspection and Testing
o Testing Agencies o Notice of Readiness o Off Site Fabrications o On Site Installations o Split Samples o Reporting Results o Effect of Results o Purchaser Access o Costs of Testing o Cure of Defects
Procedural Issues - Completion and Acceptance
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o Notice of Readiness o Raw Material Supply o Power and Fuel Supply o Engineer’s Certificates o Preliminary Acceptance o Punch List o Site Clearance o Transfer of Possession o Final Acceptance o Technology Transfer o Worker Training
Procedural Issues - Dispute Resolution
o Negotiation o Conciliation o Referral o Mediation o Arbitration o Adjudication
Procedural Issues - Transfer of Rights and Duties
o Purchaser ▪ Ownership Change
o Contractor ▪ Assignment of Entire Contract ▪ Assignment of Subcontracts ▪ Assignment of Payments Due
o Procedure ▪ Survival of Corresponding Rights ▪ Notice of Transfer ▪ Objection Period ▪ Consent of Sureties ▪ Consequences of Violation
Procedural Issues - Choice of Law
o Jurisdiction’s Private International Law o Jurisdiction’s Local Legal Rules o Forum Restrictions o Mandatory Public Legal Rules