Ch 9: Agency & Authority Flashcards
3 main people in a contract
Principal -> Owner
Agent -> Person authorized to Work on behalf of the Principal
Third Party -> Contractor performing the work
Principal can provide authority in 2 ways
Express Authority: Created by a contract, often referred to as an “actual Authority”.
Apparent Authority: Created by representation, often referred to as “ostensible authority” or “implied authority” Representations include
• Written
• Oral
• Conduct
Indemnity: If the agent doesn’t have actual or apparent authority, are they liable for the contracts they enter into on behalf of their principal?
They are liable and can potentially be sued by the principal.
Agents are not personally liable for the obligations they commit their principals to but
If an “agent” does not have actual or apparent authority, they will be personally liable for the contracts they enter into on behalf of their principal
Indemnities -> Risk allocation
Name one example
Owner: Indemnitee
Contractor Indemnitor
Car and car insurance. This ensures that the insurance company will indemnify or cover your damages.
Indemnity: Protecting the Owner/Agent
“The contractor shall indemnify and HOLD HARMLESS the Owner and the Consultant for claims, losses, demands, costs, damages, actions, suits or proceedings by third parties that arise out of or are attributed to the Contractors performance …”
What is an indemnity contract?
agreement to bear the financial loss of another party for a specified event
Insurance policies are contracts of indemnity
Change Order to a contract have extras and credits.
Contractors are entitled to contingency. Owner can contract a 5-10% contingency. Owners may have the right to recover costs of design changes from the negligent consultant. Often Minor and ignored.
Extra: addition to contract and price.
Credit: cost cutting and contract simplification
Construction agreement: Ex: when you finish a basement but forget plumbing and need to redo
Impact Costs:
When extra work is requested, it may impact the schedule, efficiency and financial cost of the rest of the work.
Should be in writing
Notice of performance under protest
Contractor not accepting the extra from the principal in the interest of moving the overall project along and coming to terms at a later date.
Subcontract issues: Hierarchy
Owner
Consultant
General Contractor
Subcontractor
Subcontract issues: Unless specified by principal contract, General contractor can hire a subcontractor
May be a contract b/t General and sub contractors such as
Paid-if-Paid
Paid-when-paid
Subcontract issues: Unless specified by principal contract, General contractor can hire any subcontractor
May be a contract b/t General and sub contractors such as
- Paid-if-Paid: Sub con gets paid if gen contractor is paid (not liked by the subcons and thus uncommon)
- Paid-when-paid: Determines the timing of payment
What if a sub-con or sub-sub-con aren’t paid?
They can put a Lien on the Property Title though this screws the Owner. To prevent this, the Owner can require the general contractor to have a payment bond so the subs & sub-subs go after the payment bond instead of making a lien.
Single tier bond only covers sub con
Multiple tier covers deeper levels of sub cons.
What if a sub-con or sub-sub-con aren’t paid?
They can put a Lien on the Property Title though this screws the Owner. To prevent this, the Owner can require the general contractor to have a payment bond so the subs & sub-subs go after the payment bond instead of making a lien.
Single tier bond only covers sub con
Multiple tier covers deeper levels of sub cons.
Unforseen Shit: ALWAYS GET IT IN WRITING
Contract should determine who is responsible for risk in certain cases.
Owner is responsible to transfer all knowledge through contract
