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Page 1 © Copyright 2018, All Rights Reserved. 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.
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Page 1: Understanding Transnational Construction Contracts...Understanding Transnational Construction Contracts Seminar Topic: This material explains how transnational construction agreements

Page 1 © Copyright 2018, All Rights Reserved.

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: Understanding Transnational Construction Contracts...Understanding Transnational Construction Contracts Seminar Topic: This material explains how transnational construction agreements

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.

Page 3: Understanding Transnational Construction Contracts...Understanding Transnational Construction Contracts Seminar Topic: This material explains how transnational construction agreements

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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.

Page 4: Understanding Transnational Construction Contracts...Understanding Transnational Construction Contracts Seminar Topic: This material explains how transnational construction agreements

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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

Page 11: Understanding Transnational Construction Contracts...Understanding Transnational Construction Contracts Seminar Topic: This material explains how transnational construction agreements

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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

Page 13: Understanding Transnational Construction Contracts...Understanding Transnational Construction Contracts Seminar Topic: This material explains how transnational construction agreements

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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


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