This is a basic glossary of commonly used terms in the construction world. The descriptions and definitions were not meant to be comprehensive but rather a summation of a number of fairly complex terms and concepts.
The Missouri law cited throughout this article may not be the most up-to-date information available. It is always advised to consult with an attorney or keycite the referenced case(s) or laws to confirm that the law is in fact authoritative.
This article was strictly intended to be a resource for Missouri contractors and the general public who are interested in learning more about construction law in Missouri.
- 1. All-Risk Builders’ Risk Insurance
- 2. Arbitration
- 3. Architect
- 4. At-Will Employment
- 5. Bid
- 6. Bid Bond
- 7. Bid Documents
- 8. Bid Peddling
- 9. Bid Rigging
- 10. Bid Shopping
- 11. Boilerplate Provisions
- 12. Breach of Contract
- 13. Certificate of Inspection
- 14. Certificate of Occupancy
- 15. Certificate of Substantial Completion
- 16. Code of Federal Regulations (CFR)
- 17. Code of State Regulations (CSR)
- 18. Change Order
- 19. Clean Air Act
- 20. Clean Water Act
- 21. Commercial General Liability Insurance (CGL)
- 22. Completed Operations Liability Insurance
- 23. Completion Bond
- 24. Contract
- 25. Corporation
- 26. Cost Proposal
- 27. Critical Path Method (CPM)
- 28. Davis-Bacon Act
- 29. Design/Build Contract
1. All-Risk Builders’ Risk Insurance
All-Risk Builders’ Risk Insurance is a type of insurance that is designed to account for a number of occurrences that cause damage to the building, usually including machinery, equipment, materials, supplies, and fixtures that are appurtenant to the structure. This usually does not include insurance coverage defective work (but oftentimes will for ensuing damages).
When referring to all-risk insurance, there’s a “general understanding…that ‘recovery under an ‘all-risk’ policy will, as a rule, be allowed for all fortuitous losses not resulting from misconduct or fraud, unless the policy contains a specific provision expressly excluding the loss from coverage.’” Missouri Commercial Inv. Co. v. Employers Mut. Cas. Co., 680 S.W.2d 397, 400 (Mo. Ct. App. 1984)(citing 13A G. Couch, Cyclopedia of Insurance Law § 48:141 at 139 (R. Anderson 2d ed. 1982). See also : Annot., 88 A.L.R.2d 1122, 1125 (1963)).
A form of alternative dispute resolution that is used as a vehicle for resolving disputes on a construction project or with a construction contract (though not specifically limited to construction disputes), in which an arbitrator is chosen and decides the matter. Often times the evidentiary and procedural standards are more lenient in an arbitration as compared to a case that is litigated through the court system. This also typically saves the parties money as the case is expedited and does not typically demand the heavy motion and discovery process involved in a formal court proceeding.
An architect is a person who is licensed by the Missouri Division of Professional registration (in Missouri) to practice architecture. Typically, to qualify for the licensing application, an architect must have a degree in Architecture from a school or university that is accredited by the National Architecture Accrediting Board.
The architect usually facilitates the completion of the project by performing an evaluation of the project requirements and communicating with the general contractor to ensure that the work is performed in compliance with the specifications.
The architect is also usually in the best position to communicate with the general contractor regarding such matters as the architect is often responsible for preparing the specifications and designs.
On certain projects the architect will also be involved with evaluating pay applications or working with the owner or its representative to ensure that proper payment is made.
4. At-Will Employment
A type of employment in which an employer can terminate the employee at any time. The employer does not have to have reason for the termination. Equally, the employee does not have an obligation to stay with the company and can leave at any time.
In most cases, when engaged in an employment-at-will relationship, the employer can terminate the employee for virtually any reason.
However, in Missouri there are certain safeguards. The Missouri Human Rights Act, section 213.055, states: It shall be an unlawful employment practice: “For an employer, because of the race, color, religion, national origin, sex, ancestry, age or disability of any individual: (a) To fail or refuse to hire or to discharge any individual…” R.S.Mo. § 213.055.
A formal offer to a general contractor or the owner to perform certain work set forth in the contract, its terms and conditions, specifications, and any other documents incorporated therein.
On a construction project, the bid would typically require the bidder to furnish all labor, materials, and other necessaries on the project and reach substantial completion in the time prescribed in the contract documents.
6. Bid Bond
A bid bond is a type of bond the ensures that the contractor will perform the specified work at the bid price. Once the contractor secures the job by entering into a contract with the owner, the contractor and surety are absolved from duties to satisfy the contractor’s inability to carry out the bid. At that time, the contractor is typically required to purchase a payment and performance bond, which would be the party responsible for making payment in the event of any subsequent failure to carry out the terms and conditions of the contract.
Bid bonds are required on a number of public projects in Missouri. For example, in Missouri the statute requires 10% down or requires a bid bond “[w]henever it shall be ordered by the county commission, township board or district commissioner, as the case may be, that any road, bridge or culvert in the county be constructed, reconstructed or improved or repaired by contract, and the engineer’s estimated cost thereof exceeds the sum of five hundred dollars…”
The specific statute is R.S.Mo. § 229.050, and with respect to the aforedescribed requirements of 10% or a bid bond, states the following, in pertinent part:
“All bids shall be accompanied by a certified check equal to ten percent of the engineer’s estimate of cost, payable to the county treasurer, to the use of the county, township or road district, as the case may be, or a bidder’s bond executed by some surety company authorized to do business in this state or other good and sufficient surety in a like sum shall be given, as a guarantee on the part of the bidder that if his bid be accepted he will, within ten days after receipt of notice of such acceptance, enter into contract and bond to do the work advertised, and in case of default forfeit and pay sum of ten percent of the engineer’s estimate of cost.” R.S.Mo. § 229.050.3
In the State ex rel. Missouri State Highway Comm’n v. Hensel Phelps Const. Co., the Missouri Supreme Court case cited a California case to express its rationale in determining that a contractor can rescind a bid and be relieved from the obligation to perform on the project:
There is a difference between mere mechanical or clerical errors made in tabulating or transposing figures and errors in judgment, as, for example, underestimating the cost of labor and materials. (Emphasis added) The distinction between the two types of errors is recognized in the cases allowing rescission and in the procedures provided by the state and federal governments for relieving contractors from mistakes in bids on public work. (Citations omitted) Generally, relief is refused for error in judgment and allowed only for clerical or mathematical mistakes. (Citations omitted) Where a person is denied relief because of an error in judgment, the agreement which is enforced is the one he intended to make, whereas if he is denied relief from a clerical error, he is forced to perform an agreement he had no intention of making. State ex rel. Missouri State Highway Comm’n v. Hensel Phelps Const. Co., 634 S.W.2d 168, 171 (Mo. 1982)(citing M. F. Kemper Construction Co. v. City of Los Angeles, 37 Cal.2d 696, 235 P.2d 7 (1951).
The Court in State ex rel. Missouri State Highway Comm’n v. Hensel Phelps Const. Co. stating that “[i]f a contractor is allowed to rescind its bid, the bid bond would be cancelled. Certainly, the state may not require forfeiture of the bid bond either as a penalty or liquidated damages if the contractor has no legal obligation to fulfill its bid.” State ex rel. Missouri State Highway Comm’n v. Hensel Phelps Const. Co., 634 S.W.2d 168, 171 (Mo. 1982).
The Court went on to perform an analysis to determine whether the contractor had a right to rescind its bid. The Missouri Supreme Court ultimately deferred to the decision reached by the jury, which was in favor of the Missouri commission. The ultimate legal holding by the Missouri Supreme Court was that the contractor could not rescind the contract based on a unilateral mistake and therefore could not avoid forfeiting the bid bond to the Commission.
7. Bid Documents
The bid documents is a general term used to describe the bid package prepared by a contractor in an effort to secure a construction contract.
Some of the documents that may be included in the bid documents include, but are not limited to:
- An invitation to bid
- Bid sheets
- Bidder’s Questionnaire regarding experience
- Proof of Financial Responsibility or ability to obtain adequate insurance/bonding
- Bid instructions
- Bid Schedule
- Specifications incorporated into the contract
- Any documentation incorporated into the contract
- Any documentation that would modify amount of time or price of project
8. Bid Peddling
Bid peddling is when a subcontractor, who was not the lowest bidder after the first round of bidding, offers a lower bid price to secure the award of the contract from the general contractor.
Bid peddling is when subcontractors will offer to perform the work for a lower amount contractor a lower amount than their original bid to secure the award of the contract from the general contractor. Usually the general contractor may entertain these subsequent bids to create cost savings for the general contractor, but bid peddling, in some cases, can also save the general contractor money.
Bid peddling is a practice that is not encouraged and could subject those implementing such practices to potential liability. Accordingly, it is good practice to simply move onto the next project and avoid interference or some type of tortious interference claim against you.
9. Bid Rigging
Bid rigging occurs when contractors conspire by submitting their bids in a manner aimed at driving up or rigging the bid to increase the amount that the lowest bidder submits and is thereby awarded. This type of behavior is unethical in that it is conspiring with other contractors to manipulate the system.
10. Bid Shopping
Bid Shopping is when the general contractor receives the first round of bids and takes those bids to the other bidding subcontractors to leverage lower bids from those subcontractors. In extreme circumstances, a contractor or subcontractor may try to create a bidding war between the other bidders to drive down the price by creating a competitive dynamic between them.
“Bid shopping occurs when a general contractor solicits estimates from specialty contractors to compute his lump sum bid and then, after being awarded the contract, again canvasses the specialty contractors in an effort to obtain prices lower than those previously given. This practice may deprive the specialty contractors who strove to be the first round low bidders from receiving the work after the wheeling and dealing in the second round. Moreover, the general contractor realizes savings rather than the owner, unless the general contractor lowered his initial bid anticipating that he could procure the specialty work at less than the estimated prices. Further, fierce competition in the second round may result in underbidding by the specialty contractors and consequent shoddy work as they attempt to keep costs within their bid.” Nash, Jr. and Love, Jr., Innovations in Federal Construction Contracting, 45 Geo. Wash. L. Rev. 309, 315 (1977).
11. Boilerplate Provisions
Boilerplate provisions are what the average person might refer to as the fine print. Boilerplate provisions are those provisions which appear to be “form” provisions that are typical in most contracts. Oftentimes boilerplate provisions are found at the end of the project.
If you’d like to learn more about boilerplate provisions, you should read this short article discussing terms that should be in every contract.
12. Breach of Contract
“To recover for breach of contract [in Missouri], a plaintiff must plead the following elements: (1) the existence of an enforceable contract between the parties to the action; (2) mutual obligations arising under its terms; (3) the party being sued failed to perform obligations imposed by the contract; and (4) the party seeking recovery was thereby damaged.” Jackson v. Williams, Robinson, White & Rigler, P.C., 230 S.W.3d 345, 348 (Mo. Ct. App. 2007) (citing Superior Ins. Co. v. Universal Underwriters Ins. Co., 62 S.W.3d 110, 118 (Mo.App. S.D.2001)).
13. Certificate of Inspection
In the vast majority of municipalities in St. Louis, Missouri a certificate of inspection must be obtained prior to occupying or renting a structure.
The St. Louis municipal code makes it an ordinance violation if a certificate of inspection is not obtained prior to occupying or renting:
“It shall be unlawful for any person, firm, partnership, corporation, or any other legal entity to occupy or permit the occupancy for any purpose or collect the rent of any occupied dwelling unit when a complete change of occupancy has occurred without first securing a Certificate of Inspection for said dwelling unit.”
Who is responsible for obtaining the certificate of inspection in St. Louis City?
“It is the responsibility of the owner or grantee to secure a Certificate of Inspection. It shall be the responsibility of the owner or the owner’s agent and/or the tenant to provide access to all applicable areas subject to inspections as provided in this chapter.”
St. Louis City Municipal Code – 25.56.040 – Certificate of Inspection requirements.
14. Certificate of Occupancy
A certificate of occupancy is issued by a building inspector when the structure satisfies the necessary code requirements for the locality. The certificate of occupancy is typically required prior to allowing individuals to legally reside or utilize such structure.
In Creve Coeur, Missouri, there are a number of requirements prior to obtaining a temporary certificate of occupancy. The City of Creve Coeur as well as the fire department are required to issue the partial certificate of occupancy, requiring the following to be satisfied:
- St. Louis County mechanical, electrical, plumbing and heath inspections or specific approval of each of these inspectors to allow temporary occupancy
- Emergency egress lights and exit signs
- Emergency operation of elevators
- Egress doors on hold open devices
- Egress doors utilizing special locking arrangements and/or access-control devices
- Any atrium smoke-control or removal system
- Fire protective signaling system
- Smoke and HVAC detectors
- Fire sprinkler system
- Any other fire suppression system
- All fire resistance rated fire separation assemblies
- All components comprising of means of egress
- All other building construction per all building permits
- Emergency generators
The above requirements are merely the requirements necessary to qualify for a temporary in certificate of occupancy in the Creve Coeur area. Each municipality has its own requirements to qualify for such certificate.
15. Certificate of Substantial Completion
A certificate of substantial completion is a certificate issued by the architect designating the project as substantially complete. Substantial completion can assume a wide array of meanings depending on the contractual language and the nature of the project being performed.
However, the typically accepted, case law definition of substantial completion in Missouri is the following:
“[A] building is substantially complete so as to entitle the contractor to the full contract price when it has reached the state of its construction so that it can be put to the use for which it was intended.” L.L. Lewis Const., L.L.C. v. Adrian, 142 S.W.3d 255, 260 (Mo. Ct. App. 2004).
16. Code of Federal Regulations (CFR)
The Code of Federal Regulations often assists in fleshing out the specifics of many federal statutes as well as its own standalone rules.
The Code of Federal Regulations are divided into 50 general titles which are each broad categories. Each of these broad categories are updated once a year on a staggered basis.
A number of OSHA regulations are set forth in the Code of Federal Regulations. Additionally, the Code of Federal Regulations has a vast number of regulations governing the Housing and Urban Development as well as the construction of manufactured homes and the safety standards related thereto.
17. Code of State Regulations (CSR)
The Missouri Code of State Regulations contain a number of regulations that articulate many Missouri statutes and establish a framework of rules to assist in the administration of various matters within the state.
One specific example of a regulation that is commonplace in many government funded construction projects is Division 30 of the Rule of the Office of Administration. Chapter 5 of said Division creates Minority Business Enterprises (MBEs) and Women Business Enterprises (WBEs). Various governmental funding programs use tax credits and other incentives to promote the use of MBEs and WBEs on publicly funded projects.
18. Change Order
A change order is a modification to the contract. Typically a change order is written and signed by the owner and architect (if an architect is on the project). However, in Missouri, an oral change order is typically enforceable so long as the contractor and owner have mutually agreed upon the terms. In the event that they did not, then the contractor may still have recourse by virtue of its equitable remedies such as quantum meruit and unjust enrichment.
19. Clean Air Act
The Clean Air Act regulates air emissions and is set forth under
42 U.S.C. §7401 et seq. “The Clean Air Act (the Act) was enacted by the United States Congress on December 17, 1963. With the Clean Air Amendments of 1970, Congress enacted a comprehensive national program that made the federal government partners with the states in the fight against air pollution, requiring the Environmental Protection Agency (the EPA) Administrator to promulgate national ambient air quality standards (NAAQS) for certain pollutants.” Friends of Agric. for Reform of Missouri Envtl. Regulations v. Zimmerman, 51 S.W.3d 64, 66 (Mo. Ct. App. 2001)(citing General Motors Corp. v. U.S., 496 U.S. 530, 532–33, 110 S.Ct. 2528, 2530, 110 L.Ed.2d 480 (1990)).
Generally, the Federal Clean Air Act preempts the Missouri air conservation commission from enacting laws that have already been covered by U.S. Congress in the Federal Clean Air Act. “The Commission continues to have rulemaking authority to regulate Missouri air quality in all ways, and in all areas, not covered by the federal Clean Air Act.” Friends of Agric. for Reform of Missouri Envtl. Regulations v. Zimmerman, 51 S.W.3d 64, 80 (Mo. Ct. App. 2001).
20. Clean Water Act
The Clean Water Act regulates the discharge of contaminants and pollutants into stormwater and wastewater systems in the United States. The Clean Water Act is set forth under 33 U.S.C.A. §§ 1251 et seq. (1981).
Missouri has its own parallel law called the Missouri Clean Water Law, which is set forth under R.S.Mo. § 644.006 et seq.
The policy of the Missouri Clean Water Act is set forth under R.S.Mo. § 644.011 and states the following, in pertinent part:
“it is hereby declared to be the public policy of this state to conserve the waters of the state and to protect, maintain, and improve the quality thereof for public water supplies and for domestic, agricultural, industrial, recreational and other legitimate beneficial uses and for the propagation of wildlife, fish and aquatic life; to provide that no waste be discharged into any waters of the state without first receiving the necessary treatment or other corrective action to protect the legitimate beneficial uses of such waters and meet the requirements of the Federal Water Pollution Control Act…” R.S.Mo. § 644.011
21. Commercial General Liability Insurance (CGL)
Commercial General Liability Insurance is a type of insurance that typically covers bodily injury and damage caused to property. The Missouri Court of Appeals describes the intent of Commercial General Liability Insurance policies: “to protect against the unpredictable and potentially unlimited liability that can result from accidentally causing injury to other persons or their property.” Am. States Ins. Co. v. Mathis, 974 S.W.2d 647, 649 (Mo. Ct. App. 1998)(citing Columbia Mut. Ins. Co. v. Schauf, 967 S.W.2d 74, 78 (Mo. banc 1998)).
The Court of Appeals goes further to make a distinction, indicating what commercial general liability insurance policies are not:
A commercial general liability policy is not intended to protect business owners against every risk of operating a business. Columbia Mut. Ins. Co. v. Schauf, 967 S.W.2d 74, 78 (Mo. banc 1998)).
“Business risks are those risks that are the ‘normal, frequent, or predictable consequences of doing business, and which business management can and should control and manage.’ ” Columbia Mut. Ins. Co. v. Schauf, 967 S.W.2d 74, 78 (Mo. banc 1998)(quoting James T. Hendrick & James P. Wiezel, The New Commercial General Liability Forms—An Introduction and Critique, 36 F ed’n Ins. & Corp. Couns. Q. 319, 322 (Summer 1986)).
“It is not the function of the CGL policy to guarantee the technical competence and integrity of business management. The CGL policy does not serve as a performance bond, nor does it serve as a warranty of goods or services. It does not ordinarily contemplate coverage for losses which are a normal, frequent or predictable consequence of the business operations. Nor does it contemplate ordinary business expense, or injury and damage to others which results by intent or indifference.” Hendrick & Wiezel, supra, at 322 n. 6 (quoting George H. Tinker, Comprehensive General Liability Insurance—Perspective and Overview, 25 Fed. Ins. Couns. Q. 217, 224 ((Spring 1975)). Am. States Ins. Co. v. Mathis, 974 S.W.2d 647, 649 (Mo. Ct. App. 1998).
22. Completed Operations Liability Insurance
Completed Operations Liability insurance is a type of insurance coverage for an employer or construction company that protects said entity from liability that arises out of injury or damage that occurs after the operations are completed. Typically operations are considered “completed” under completed operations liability insurance policies once the employer or construction company completes the work in accordance with that set out in the contract.
23. Completion Bond
In Missouri a completion bond is used interchangeably with a performance bond. A performance bond is often required on construction projects to ensure the completion of the performance of the contractors.
For example, if a subcontractor hired by the general contractor goes bankrupt, the general contractor can call on the surety who issued the performance bond to pay for the new subcontractor to come in and complete the work.
A contract is typically composed of an exchange of promises between parties which is supported by legal consideration. A contract usually contains a promise, offer, and acceptance. Consideration is sometimes referred to as a bargained-for exchange.
Contracts in Missouri are enforceable whether they are oral or written.
However, it is always good practice to reduce the terms of an agreement to writing. It helps to avoid future confusion and reflects the true terms of the contract.
A corporation is an entity that is created pursuant to statute that is recognized as a legal entity. Corporations are governed by Chapter 351 of the Missouri Revised Statutes. Corporations differ from limited liability companies in that corporations (when referring to c-corporations) are double-taxed. Corporations usually act as a shell or veil for the shareholders and officers unless certain acts are employed which would be ultra vires (acts outside the scope of the authority granted to agents of the corporation).
In Missouri, a corporation is treated as a separate legal entity from the shareholders who make up the ownership of the corporation. Thus, a corporation’s actions will not typically subject the shareholders to civil liability unless those actions are criminal or ultra vires, as noted above.
26. Cost Proposal
A cost proposal is a document that is submitted by a contractor or subcontractor to the owner or general contractor for approval or denial of a certain scope of work on the project. The cost proposal contains the projected costs that the subcontractor or contractor is requesting for that portion of the work.
27. Critical Path Method (CPM)
The United States Court of Claims defined the critical path method as:
Essentially, the critical path method is an efficient way of organizing and scheduling a complex project which consists of numerous interrelated separate small projects. Each subproject is identified and classified as to the duration and precedence of the work. (E.g., one could not carpet an area until the flooring is down and the flooring cannot be completed until the underlying electrical and telephone conduits are installed.) The data is then analyzed, usually by computer, to determine the most efficient schedule for the entire project. Many subprojects may be performed at any time within a given period without any effect on the completion of the entire project. However, some items of work are given no leeway and must be performed on schedule; otherwise, the entire project will be delayed. These latter items of work are on the “critical path.” A delay, or acceleration, of work along the critical path will affect the entire project.
Haney v. United States, 676 F.2d 584, 595 (Ct. Cl. 1982).
28. Davis-Bacon Act
The Davis-Bacon Act is a federal law that governs construction projects that are federally funded or assisted and requires the local prevailing wage to be paid to the workers on the project.
29. Design/Build Contract
A design/build contract is a contract where the owner hires a general contractor to provide a team of workers to carry out the entirety of the project. In order to carry out these projects, the general contractors are responsible for providing engineers, architects, and other construction professionals to carry out the various tasks required on the project.
In Missouri, pursuant to the Metropolitan sewer district statute, R.S.Mo. § 249.425, a design-build contract is defined as: “a contract between a sewer district and a design–build contractor to furnish the architecture, engineering, and related design services, and the labor, materials, and other construction services required for a specific construction project.” . R.S.Mo. § 249.425 (2011).
Pursuant to R.S.Mo. § 67.5070, wastewater or water treatment projects, a design-build contract is defined as “any contract that furnishes architecture or engineering services and construction services either directly or through subcontracts.” R.S.Mo. § 67.5070 (2016).
Under Missouri Statutes, Chapter 327, Architects, Engineers, Land Surveyors and Landscape Architects, a design-build contract is defined as “a contract between the owner, owner’s agent, tenant, or other party and a design-build contractor to furnish the architecture, engineering, and related design services, and the labor, materials, and other construction services required for a specific public or private construction project.” R.S.Mo. § 327.465 (2002).