Construction Law Survival Manual. Credit Management Contract Terms.

Transcription

1 1 Credit Management Contract Terms Presented by James D. Fullerton James D. Fullerton Fullerton & Knowles, P.C Chapel Rd. Clifton, VA (703) , Ext. # Construction Law Survival Manual By James D. Fullerton 3

2 4 Construction Law Survival Manual Credit Management Fair Credit Reporting Act Equal Credit Opportunity Act Contracts and Preserving Rights - Drafting Credit Applications, Quotes, Guarantees, Joint Check Agreements - Reviewing and Revising Contracts UCC Sale of Goods UCC Security Agreements Default & Termination Mechanic s s Lien General Principles Mechanic s s Liens in Virginia, Maryland, Pennsylvania and District of Columbia Payment Bonds Trust Fund Laws and Agreements Enforcement of Judgments Bankruptcy Primer for Creditors -What to do when your debtor files bankruptcy -Defending preference claims 5 Construction Law Survival Manual is available in NACM Bookstore in NACM Reference Library At 6

3 Contract terms will not prevent all problems. If you do business with the wrong people, you will have problems. If you supply the wrong project, you will have problems. (Construction) 7 Do Contract Terms Matter? Contract terms usually do not matter. Does this mean contract terms are unimportant? Contract terms are about: Leverage Cost Risk 8 Attorney s Fees and Service Charges Customer agrees that any amount not paid within 30 days of invoice date will carry interest at the rate of 1 1/2% per month, both before and after judgment, and further agrees to pay all costs incurred in collection, including attorney s fees in the amount of 1/3 of the total balance due if this account is placed with an attorney for collection, whether suit is filed or not. Leverage Cost Risk 9

4 Contract Forms Proposals Quotes Confirmations Purchase orders

5 13 14 Battle of the Forms Proposals Quotes Confirmations Purchase orders You can control contract terms, even if Customer never reads or signs your form. 15

6 Contract Forms Have forms available 16 Forum Selection Clause Customer expressly agrees to submit to personal jurisdiction in Virginia and agrees that the forum for any litigation pursuant to this Agreement or any other contract between Seller and Customer, whether Seller or Customer brings suit, shall be the County of Fairfax, Virginia. This Agreement shall be governed by and construed in accordance with the laws of Virginia. 17 Authorization to Run Credit Checks and Verify Funding I/we authorize Seller from time to time to obtain Business and Consumer Credit Reports on Buyer or any principals of Buyer or to obtain credit and funding information from any other source. 18

7 19 Breach, Insecurity and Adequate Assurance Seller shall have no obligation to begin or continue performance until adequate credit and funding information is provided on request of Seller. Seller may stop the manufacture or supply of any labor or materials when payments stop pursuant to this agreement until payment is made or any other dispute has been resolved. Termination of Agreement Changes in Borrower Entity Customer further agrees to pay all amounts due under this Agreement until Seller has received written notice closing this account, mailed U.S. Mail Certified Return Receipt Requested. In the event other entities or individuals order or use the labor or materials pursuant to this Agreement, it is agreed that both the Customer and such other legal entities or individuals shall be obligated for all amounts due under this Agreement

8 22 Notice and Opportunity to Cure Buyer shall make a careful inspection at the time of delivery. Buyer s failure to give written notice specifying any claim within ten (10) days of delivery shall constitute an unqualified acceptance of the labor and material delivered and a waiver of all claims. Seller will not be liable for any damage, warranty or remedy and back charges will not be accepted without prior notification, an opportunity to view and repair, replace or otherwise cure, and approval by Seller. Express warranty Brochures Salesmen 23 Implied Warranty of Merchantability This means that the goods: Would pass without objection in the trade under the contract description Are of fair, average quality within the description Are fit for the ordinary purposes for which such goods are used Are of even kind, quality and quantity within each unit or lot and among all units or lots involved Are adequately packaged and labeled Conform to the promises or affirmations of fact made on the container or label 24

9 Implied Warranty of Fitness for a Particular Purpose If the seller has reason to know the purpose for which the materials will be used and that the buyer is relying on the seller s s skill or judgment to select or furnish suitable goods 25 Exclusion of Express and Implied Warranties THE FOREGOING WARRANTY IS EXCLUSIVE AND IS IN LIEU OF ALL OTHER WARRANTIES, WHETHER WRITTEN, ORAL, EXPRESS OR IMPLIED, INCLUDING THE WARRANTY OF TITLE, AGAINST LIENS, INFRINGEMENT, THE WARRANTY OF MERCHANTABILITY AND THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. 26 Limitation of Liability UCC Section Contractual modification or limitation of remedy. (a) the agreement may provide for remedies in addition to or in substitution for those provided in this title, and may limit or alter the measure of damages recoverable under this title, as by limiting the buyer s s remedies to return of the goods and repayment of the price or to repair and replacement of nonconforming goods or parts; ; and (b) resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy. (2) Where circumstances cause an exclusive or limited remedy to fail of its essential purpose,, remedy may be had as provided in this act. (3) Consequential damages may be limited or excluded unless the limitation or exclusion is 27 unconscionable.

10 Limitation of Liability Supplier agrees to replace or, at Supplier s option, repair any defective labor or materials within a reasonable time. Buyer s remedies for any delay or any defect in any materials are subject to and limited by any limitations contained in the manufacturer s terms and conditions to Supplier. Further, Buyer s sole and exclusive remedy and Supplier s limit of liability for any and all loss or damage resulting from defective labor or materials shall be for the purchase price of the particular delivery of labor and materials with respect to which loss or damage is claimed. In no event shall Supplier be liable for any damage due to delay of any type, nor consequential, special or punitive damages. THE FOREGOING WARRANTY IS EXCLUSIVE AND IS IN LIEU OF ALL OTHER WARRANTIES, WHETHER WRITTEN, ORAL, EXPRESS OR IMPLIED, INCLUDING THE WARRANTY OF TITLE, AGAINST LIENS, INFRINGEMENT, THE WARRANTY OF MERCHANTABILITY AND THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. 28 Trust Fund Statute in Construction Industry Owner L&M General Contractor Subcontractor Supplier L&M M 29 Trust Fund Statute in Construction Industry Owner $ Trustee General Contractor $ Trustee Subcontractor $ Supplier 30

11 Tracing issues Trust Fund Will beat secured creditors Will beat bankruptcy Preference defense 31 Trust Fund Agreement Contracts, Proposals, Credit Agreements Joint check agreements (Construction) Buyer agrees that all funds owed to Buyer from anyone or received by Buyer relating to materials supplied by Seller shall be held in trust for the benefit of Seller, to the extent that sums are justly due to Seller under this Agreement. Buyer may commingle funds, but agrees it has no interest in Trust Funds held by anyone and to promptly account for and pay to Seller all such Trust Funds. 32 Reviewing Contracts Received from Others Business realities Customer will insist on their form 33

12 Incorporate Proposal or Quote Provision in your Quote: It is agreed that this proposal shall be incorporated into and shall become a part of any further or additional agreement made for this job. Add provision to reviewed contract: Supplier s proposal dated the day of 200 is incorporated herein by reference JFullerton@FullertonLaw.com Construction Law Survival Manual in NACM Bookstore And at JFullerton@FullertonLaw.com 35