Contract Administration & Legal Issues Flashcards

The Spearin Doctrine holds that when an owner provides design specifications, the owner implicitly warrants that:

Answer: Following the specifications will produce a satisfactory result

The Spearin Doctrine (U.S. v. Spearin, 1918) establishes that owners impliedly warrant that if a contractor follows provided specifications, the result will be fit for its intended purpose.

In construction contract law, 'liquidated damages' are distinguished from penalties because they must be:

Answer: A reasonable pre-estimate of actual damages at the time of contracting

Liquidated damages are enforceable only when they represent a reasonable forecast of actual harm at contract formation, not a penalty for breach.

A subcontractor's 'pay-when-paid' clause differs from a 'pay-if-paid' clause in that pay-when-paid:

Answer: Creates only a timing mechanism, not a condition that eliminates the payment obligation

Pay-when-paid clauses delay payment timing but do not eliminate the GC's obligation to pay the sub; pay-if-paid clauses can eliminate the obligation entirely.

Which legal remedy allows a subcontractor to file a claim against the owner's property when the prime contractor fails to pay?

Answer: Mechanic's lien

Mechanic's liens (also called construction liens or materialmen's liens) give unpaid subcontractors and suppliers a security interest in the improved property.

During contract performance, the contractor discovers that following the owner-supplied design specifications will result in a code violation. The contractor's best course of action is to:

Answer: Notify the owner and architect in writing and request clarification before proceeding

Contractors must promptly notify the owner and architect of code conflicts in the specifications and seek written direction rather than proceeding or unilaterally substituting.

The concept of 'constructive acceleration' arises when an owner:

Answer: Denies a valid time extension request and demands on-time completion

Constructive acceleration occurs when the owner denies a legitimate time extension, forcing the contractor to speed up work to avoid liquidated damages.

Under the AIA A201, a contractor's right to stop work for nonpayment requires the owner to be in default for at least:

Answer: 14 days

AIA A201 Section 14.1.1 allows the contractor to stop work if the owner fails to pay certified amounts within 14 days of the date payment is due.