Richard Granados

FMGT 4760: Construction planning and management

Professor Humphrey
Homework 3: Stipulated sum contracts.
March 2019

Question 1: Describe the primary rights and the primary duties of both an owner and a
contractor in a stipulated-sum contract.

Few things are absolute. Diversity and the difference are the norms.
- Construction Contracts, Collier, Keith.

Such is construction, binding Man with all forms, moods, shapes of grief that have within which
passeth show, these but the trappings and suits of woe. Which means the construction-built
environment field is consistently inconsistent in its execution with what the design plans
specify. It is best to present a contrast to understand the risk a building presents as opposed to,
say, a coffee machine. A building by its nature involves a greater amount of time, investment,
labor, regulation, and paperwork. The quantitative components of a building are bigger than a
coffee machine by a factor of 10. Consequently, this is why stipulated or lump-sum contracts
exist. To grant an owner with a piece of paper that affords them a sense of security; a peace of
mind to console them in the valley of darkness. For, as it is written, those who sow in peace
reap a harvest of righteousness.
The risk and gain to be had in a building is so great and so life-changing and so final, with
pursuant generations often clashing over who gets what when their sire passes from nature to
eternity, that owners of the land (that the facility shall be built over) often want to retain as
much control and oversight that they can over the process of construction. Owners, especially
the overeducated ones, are not dumb. They know that contractors can drive up costs (and their
profits) considerably by using more expensive materials or a more roundabout drawn-out
method of construction, for example.
Before we continue any further, let’s examine what to stipulate means in the first place.
To stipulate means to make an expressed demand for some term in an agreement. This is why
owners go for this sort of deal, as it gives them a sense of autonomy and control over the
project. Regardless, this contract shall never (ever) benefit the owner if the owner does not
meet the requirements (duties and obligations) that it carries within itself. For it is written:

For naught so vile that on the earth doth live

But to the earth some special good doth give
Nor aught so good but, strained from that fair
Use
Revolts from true birth, stumbling on abuse
Virtue itself turns vice, being misapplied,
And vice sometime by action dignified.
- William Shakespeare, Romeo and Juliet
The provisions of a contract cannot be used as a pretext to misuse and abuse either of the
parties out of a fair deal. Even if the lump sum contract yields an advantage to the owner, it
does not exculpate them nor gives a free pass to be deplorable and invalidate the ability of the
contractor to make a decent living. The owner must provide information, access to the site, and
the complete design plan to the contractor. The owner usually relegates much of the
responsibility over the design to the, surprise surprise, designer. Moreover, the owner must but
give a financial background of the project and surveys to the contractor. Their representative
must also be provided and play an active role in all phases of the construction process.
As to owners’ rights, they can terminate the contract for breach of contract and finish the work
using another contractor. The contractor has to do the project as required by the deadline,
within budget. They have more duties than obligations and have less discretion as to their
methods and work methodology. If they fall behind schedule, they may have to pay liquidated
damages. Depending on the specific conditions of the contract, they make have less power to
make changes from the design plan. Nonetheless, their work is not fundamentally that distinct
from other sorts of contracts in regards to the fact that they have the discretion to do the job in
the way they best see fit, as long as they meet the budget, satisfy the design plan, and
complete the project on schedule. Whereas the mentality of the owner is akin to a wise man
writing a book, setting forth his arguments full and clearly; an enlightened ruler, when he
makes his laws, sees to it that every contingency is provided for in detail—the mentality of the
contractor is akin of a severe household having no fierce slaves but rather an affectionate
mother which makes them go on the straight and narrow and prevent private crookedness. The
ancient Chinese were once big into this philosophy, and still are if you see their invasive
governmental policies. They used to punish blindly and severely anyone who violated the law,
no matter how trivial it seemed. Legalism. Han Fei

Question 4: Describe the legal background and aspects of changes in the work in a lump sump
contract.

Common law, borne of precedents from previous cases, govern much of construction law and,
consequently, lump sum contracts. However, as common law is based on tradition or how
things have always been done from a historical and empirical standpoint, statutes are beginning
to invade the realm of common law. In other words, laws from legislative statutes now play a
greater role in the establishments of rules and practices in the construction industry. In
addition, new advances in the construction field has left common law inadequate in
determining the correct way of exceeding the mandate since there are often no precedents
when it comes to new technology. This applies more with projects that stray from the beaten
path and lay the burden more on the designer.
Regardless, at the end of the day the legal background of lump sum contracts gives an
advantage to the owner rather than the contract. However, if the owner fails to meet the
requirement (failing to provide site surveys, for example) then they are liable under the law.
Any party that breaches the contract, has to pay the price by common law or statutes, as is
increasingly the case.