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Construction Law
Seton Hall Unversity School of Law
McLellan, Harry E.




Ø Owner- O; owner of the project
Ø GENERAL CONTRACTOR – A contractor responsible for all facets of construction of a building or renovation.
Ø Construction managers- salaried or self-employed managers who oversee construction supervisors and workers
Ø SUB CONTRACTOR – A contractor who specializes in a particular trade such as waterproofing
Ø ARCHITECT – A tradesman who designs and produces plans for buildings, often overseeing the building process.
Ø SPECIFICATION – Detailed written instructions which, when clear and concise, explain each phase of work to be done
Ø BUILDING PERMIT – Written authorization from the city, county or other governing regulatory body giving permission to construct or renovate a building. A building permit is specific to the building project described in the application
Ø BID BOND – Security posted by a bidder to ensure performance in accordance with a bid.
Ø BIDDING – Getting prices from various contractors and/or subcontractors
Ø BID DOCUMENTS – Drawings, details, and specifications for a particular project
Ø LIQUIDATED DAMAGES – A monetary amount agreed upon by two parties to a contract prior to performance under the contract that specifies what either party owes the other if that party defaults under the contract
Ø CERTIFICATE OF OCCUPANCY – A document stating that a building is approved for occupancy. The building authority issues the Certificate of Occupancy
Ø CONSTRUCTION LOAN – A loan provided by a lending institution specifically to construct or renovate a building
Ø PERFORMANCE AND PAYMENT BOND – Guaranty by a surety company that if a contractor fails to perform under a contract, the surety company will complete the work
Ø surety- person (or company) who agrees to be responsible for the debt or obligation of another. Furthermore, a surety is also a “security against loss or damage or for the fulfillment of an obligation, the payment of a debt, etc.; a pledge, guaranty, or bond
Ø surety bond- issued by an entity on behalf of a second party, guaranteeing that the second party will fulfill an obligation or series of obligations to a third party. In the event that the obligations are not met, the third party will recover its losses via the bond
Ø Addenda- revisions prior to contract award and pre-bid
Ø change order- an agreement to change the contracted scope of work


A) Subs, Cons and Os

1) Kravco-P sub contracted with sub that contracted with D con; sub sued Con after con terminated contract with 1st sub H: a person benefitting from a contract between other parties does not give that person the right to collect

2) Therefore, a sub in such a case should file a lien claim

B) Flow Down of Payment

1) Construction contracts are generally financed by private lenders through construction loans.

2) Under this financing scheme, the stream of funds flow down to the general contractor and subcontractors through draws on the loan amount by the owner.

3) This stream concept is important to the consideration of progress payments. Upon receipt of payment from the owner, the contractor should promptly pay each subcontractor no later than seven days after receipt of payment from the owner the amount to which the subcontractor is entitled.

4) The subcontractor, in turn, is required to make payments to its suppliers and subcontractors in a similar manner

5) Because subcontractors and general contract

property then he must pay the Con or else that would be unjust enrichment

4) requisition process identifies how parties are paid

E) Liquidated Damages

1) The O has the burden to demonstrate that the con delayed

2) If the courts view this as a penalty then it will not be enforceable

3) In case of a delay caused by a subcontractor, the prime contractor may not only have to pay the owner liquidated damages for delay but also pay additional costs for its own damages, such as extended overhead and field indirect costs and delay claims of other subcontractors affected by the delay. Because these liquidated damages and other damages are separate and distinct, the prime/subcontractor agreement should be clear as to the prime contractor’s entitlement to collect both types of damages

4) Often, if a party collects on liquidated damages then there is no collection of actual damages

5) Lien waiver- blanket lien that con or sub agrees to waive putting on a lien is unenforceable as against public policy but limited waivers are allowed

6) No damage for delay provision- the gen con agrees that if there is a delay not caused by the con, the con cannot seek damages from the O for its extra costs extending beyond the completion- not enforceable by act of interference or negligence etc. Insulates the O from delay damages if project extends past completion date
Ø E.g. bad weather