Tag Archives: Change Order

Construction Terms Glossary with Missouri References

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

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)).

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2.     Arbitration

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.

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3.      Architect

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.

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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.

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5.     Bid

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.

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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.

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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
  • Contract
  • Specifications incorporated into the contract
  • Addenda
  • Any documentation incorporated into the contract
  • Any documentation that would modify amount of time or price of project

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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.

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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.

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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).

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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.

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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)).

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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.

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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.

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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).

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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.

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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.

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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.

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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).

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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

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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).

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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.

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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.

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24. Contract

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.

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25. Corporation

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.

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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.

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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).

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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.

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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 designbuild 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).

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41 Contracts Our Attorneys Draft, Review, and Litigate

Types of Contracts in Missouri

Our attorneys are experienced in handling a variety of different matters relating to contracts.

To give our clients an idea of how we can assist them with their contract needs, we have prepared a list of the contractual agreements that we have litigated or prepared for clients in the past.

We’ve also attempted to give a general description of the various agreements, so our clients and any viewer of this website will be informed regarding the types of agreements that are at their disposal.

Our attorneys are on call to answer questions about any of the agreements set forth below, and we’d be happy to draft any of these agreements or another document that is suited for your particular situation.


Acquisition Agreements

Acquisition is the gaining of wealth or control over new assets or things.  Any time that a business or assets of a business are acquired, the purchaser and/or seller would be well-advised to consider an acquisition agreement.

An acquisition agreement sets forth the terms of the transactions to eliminate uncertainty amongst the buyer and seller and facilitates the fluidity of the sale/purchase.  Many questions arise when business or commercial entities make purchases including the price, the payment terms, financing, and minor details governing the acquisition.

Ordinarily, acquisition agreements deal with acquiring equity or wholly purchasing other companies.  A number of the important negotiating points deal with closing conditions, indemnity, disclosure of liabilities, and other points that greatly affect the value of the acquisition.

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Agent or Agency Agreements

An Agency Agreement typically sets forth the role and duties of an agent to a principal.  There are numerous situations when this type of agreement may be necessary, but it is frequently seen in the real estate context as described in the brokerage agreement section.  However, it is not limited to this context.  Agency agreements are common throughout all industries.  In fact, any time that a third party (agent) is acting on behalf of a principal, there is usually some type of agency relationship.  An agency agreement is a way to memorialize that and expressly grant or limit powers which the agent has.  It is also important because it defines the duties and obligations of the agent to the principal and vice versa.

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Amendments or Modifications to a Contract

Amendments or modifications to a contract are pretty self-explanatory.  A change order would be a more specific example of an amendment or modification to a contract.  Also, in real estate transactions, the parties will often amend the contract to add conditions precedent to the sale or contingencies which make the contract dependent on a certain occurrence.  One specific example would be the contingency that the buyer has to sell their own house before the contract is binding on both parties.  Our attorneys are experienced in drafting various types of modifications or additions/deletions to contracts, and we are prepared to assist you with your situation.  Please contact one of our attorneys if you need help amending or revising a contract that doesn’t exactly fit your situation.

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Asset Purchase Agreements

Asset Purchase Agreements are a type of acquisition agreement as described above.  As most people are aware, assets are those things of value owned by a company like cash, equipment, inventory, real estate, accounts receivable, and the goodwill of the company.

When dealing with asset purchase agreements in their simplest form, it usually governs the acquisition of equity and/or stock in a company.  Many of the considerations deal with an overview of the financials of the company (assets) that the prospective buyer is looking to acquire.

The solvency of the company is obviously a major factor.  However, solvency can be described in two different ways: (1) the company cannot pay debts as they come due or (2) the liabilities of the company outweigh the assets.

The type of insolvency sometimes is of no import to investors as the purchaser/investor believes that s/he can turn the business around with a new marketing or operations model or an injection of financing will give the company the necessary cash to continue operations in order for it to realize profits from an earlier investment.  In a similar but nuanced viewpoint, some investors merely want to use the acquisition for a limited purpose as a certain product line owned by the company warrants the purchasing of the entire company.

For more information regarding asset purchase agreements see the description under Acquisition Agreements.

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Bill of Sale

A bill of sale is usually a document that evidences a transaction of personal property between two parties.  Oftentimes a bill of sale is incredibly simple.  Sometimes it conveys title, but not in every scenario. One of the most common situations where individuals will encounter a bill of sale is in the purchase or sale of a motor vehicle.  It should be noted that in Missouri and Kansas a bill of sale does not convey title.  Instead, the title of the vehicle must be assigned to the purchaser. The bill of sale merely evidences the details of the transaction (and typically serves to satisfy the statute of frauds requirement for a sale of goods over $500).

The department of revenue for each state usually has a form that can be used as the bill of sale, which contains the basic details of the transaction including make, model, and year of the vehicle as well as the mileage and other details relevant to the transaction.

In the event that you need a bill of sale for a specific situation our lawyers can prepare numerous types of bills of sale specifically customized for your situation.

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Broker-Carrier Agreements

A broker-carrier agreement usually deals with the transportation of employees or other individuals or personal property by a broker.  In this case the broker acts as the carrier for the principal in which the broker agrees to transport and the principal or the owner agrees to make payment for the broker providing logistics and/or actual physical transportation services.

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Broker (Real Estate) Agreements

Most individuals have dealt with broker real estate agreements.  A lot of times these will be called an Exclusive Limited Agent Buyer’s Agreement or Exclusive Limited Agent Seller’s Agreement.  These are just fancy names that set forth the real estate agent’s commissions, duties to, and rights against the client (purchaser or seller, depending on the principal). Real Estate broker agreements are probably the most common, but broker agreements are not strictly limited to such context.

Really, any situation where a broker or agent is acting as an intermediary creates a broker arrangement.  In such a case, the parties should consider defining their rights and duties toward each other to avoid falling at the whim of Missouri’s statutory scheme, which may not reflect what the parties intended to be the agreement.

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Business Contracts

Business Contracts come in all shapes and sizes.  Business contract is such a general description of a contract that it could really refer to anything.  Throughout this webpage, there are numerous contracts that relate to the business context.  Thus, business contract can only be defined generally as a contract that governs some type of operation, action, or transaction that arises out of, relates to, or refers to a business or commercial context.

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Change Order

A Change Order is basically a change or a modification to an original contract.  Change orders can be for the extension or reduction of time, the increase or decrease in the cost of certain items, increasing or decreasing the scope of the work, value engineering, may account for delay days or extra work requested by the owner.

A change order does not have well-defined requirements.  It must be supported by consideration as other contracts, but apart from the basic contractual requirements, change orders may come in any shape or form.  In fact, there is case law in Missouri that allows a contractor to recover on the basis of equity if extra work is performed by agreement but the change order was never reduced to writing (even if the original contract requires all change orders to be in a signed writing).

Change orders are most frequently seen in the construction industry.  Owners often avail the the reduction in price due to limited mobilization and overhead (contractors are already out on the project, so they can perform additional work for a more economical price).  One of the most common contexts where we see change orders that cause problems is when there is a remediation project for fire, water or mold damage, and the homeowner wants an addition or extra work performed on their homes.

Many times the homeowner does not realize the incredible expense that additional construction work will cost and refuses to pay.  On the other hand, some contractors take advantage of the homeowner and charge exorbitant rates.  In any case, litigation is quite common in such scenarios.

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Confidential Disclosure Agreements (CDA)

A Confidential Disclosure Agreement  or CDA or Confidential Agreement (CA) is one party’s promise to refrain from disclosing information that is confidential to the other party, such as trade secrets, classified information, or proprietary information.

In many situations where the company deals with sensitive or confidential information that is critical to the success of the company, the employment agreement will include a clause or even a separate contract that pertains to confidential disclosure or non-disclosure agreements. Confidential disclosure agreement is a close relative to the non-disclosure agreement, or even a twin, depending on the language used.

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Construction Contracts

Construction Contracts come in all shapes and sizes.  Depending on the type of project, owner requirements, or general contractor capabilities, a contract specifically catered to the situation may be necessary.

The following are a number of different types of contracts which may be used on a construction project and can be prepared by our attorneys for your use.

1.      Unit Price Contracts

2.      Lump Sum or Fixed Price Contract

3.      Cost-Plus Contracts

4.      Time and Material Contracts

5.      Incentive Contracts

6.      Guaranteed Maximum Price Contracts

7.      Percentage of Construction Contracts

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Contract for Building & Sale of Residential Property

A contract to build and sell real estate to be used as a residence is common when a consumer hires a general contractor to construct a home for them.  The home purchaser would be well-advised to have an attorney draft the contract, paying close attention to the terms contained therein as the purchase of a new home is a major decision.  One that can greatly affect the life of the home purchaser, and the purchaser should have recourse in the event that the builder does not perform the work as agreed upon by the parties.

Equally, a home builder should have a contract for the construction and sale of a residence prepared in a manner favorable to the builder.  This is critical for the builder because there are numerous responsibilities and duties that should be accounted for in the contract in order to clarify the parties’ responsibilities.

Any additional work for which the builder is not compensated is lost money for the builder. The purpose of a builder or general contractor that constructs homes is to make a profit and a valuable final product for the home purchaser.  However, to ensure that the builder stays in business, there must be some element of profitability.  If the duties are not well-defined, and the builder has to continue to perform extra work without compensation therefor, the builder is losing money. For that reason, the contractor should have a contract drafted to protect its/his/her interests.

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Deed of Trust

A deed of trust is the name for a mortgage in Missouri.  Despite the common misconception, on a technical level, a mortgage is not used in Missouri.  Instead, we use a deed of trust.

The way a deed of trust works is as follows: when a bank or financial institution gives a loan to a borrower, so the borrower can buy the house, the bank wants to be able to reduce its risk and ensure that it gets paid back on its loan.  Accordingly, the bank wants some type of collateral to secure the loan.  The house serves as the collateral for the loan.  The deed of trust evidences the bank’s security in the house.

In order for the bank to put third parties on notice (put all the world on notice as the treatises and legal textbooks like to say) that it has first dibs on the house (the house is collateral and the bank has priority), the bank files a deed of trust with the local recorder of deeds office. Thus, as a matter of course, a deed of trust usually is executed at the same time that the bank issues a promissory note (loan) in order to make sure that it takes priority as a creditor in the event that the borrower defaults on the note.

There are a number of other differences between a deed of trust and a mortgage.  However, for the sake of brevity and to stay focused, the differences between mortgages and deeds of trust are explained in more intimate detail on the real estate section of this website.

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Employment Agreement

Whether a worker has an employment agreement or not really depends on the type of work.  Given the fact that Missouri is an employment at will state, employers are not really incentivized to enter into contracts with their employees.

In certain limited circumstances to give the employees peace of mind or to create a sense of security, the employer will enter into an employment agreement for a certain term.  Many of these contracts are based on contingencies, which often relate to performance.

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Equipment Use Agreements

Equipment Use Agreements are essentially rental agreements.  Equipment is usually personal property, articles, or goods used for some commercial or business operation.  This does not mean that equipment use agreements are not present in consumer transactions.  However, typically these types of agreements are witnessed more frequently when a business enterprise is renting equipment to carry out some particular commercial purpose.  These agreements are important as they can be based on time of usage, fixed time periods, fixed prices, and/or a number of other hybrids or unique methods of pricing.

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Exclusive Limited Buyer’s Agreements

This type of agreement is typically seen in the context of a homebuyer-real estate agent relationship.  The real estate agent wants to ensure that his/her commission is set forth in writing, and the agreement also typically includes the statutory and fiduciary responsibilities and duties owed to the homebuyer.

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Forbearance Agreement

A forbearance agreement is typically the prolongation of payment on a loan or the foreclosure of a property.  Forbearance in general refers to a situation where one party foregoes its legal right.

According to studentaid.ed.gov, with a forbearance “you may be able to stop making [student loan] payments or reduce your monthly payment up to 12 months.” However, it should be noted that interest will continue to accrue during the time period that the loan is in forbearance.  These types of provisions may be negotiated out of forbearance agreements, by an industrious lawyer, but the flexibility of the agreement varies from situation to situation.

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Guaranty (Personal Guaranty)

A guaranty or sometimes referred to as a personal guaranty is when a person agrees to pay for the debt of another.  These are usually required to create security for the lending of money or other property.  Accordingly, these are most common when dealing with banks or financial institutions where the lending of money is involved.  Additionally, when companies have a line of credit, the banks offering the line of credit want to secure it with a personal guaranty from a member or shareholder of the corporate entity.  Similarly, when someone has poor credit the lender will often require a co-signer or a personal guarantor before agreeing to lend the money.

The word co-signer is used loosely in most contexts.  However, from a technical standpoint it can mean either personal guarantor or surety.  For most people, this does not make a difference, but looking at it technically, a surety usually has primary liability and upon default, a creditor can go after the surety without first pursuing the borrower.

However, when a creditor wishes to pursue a personal guarantor, typically the law requires that the creditor have made a good faith attempt, or exhaust its legal remedies, to collect against the original borrower.  These two variations are sometimes semantics as the language of the guaranty may account for the situation and make any co-signer primarily liable.

Guaranty agreements come in various shapes and sizes.  Below are a few examples of different types of personal guaranty agreements:

  1. Absolute
  2. Conditional
  3. Continuing
  4. General
  5. Specific
  6. Special

If you need a guaranty drafted, we have attorneys with experience litigating and preparing various types.

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Independent Contractor Agreement (ICA)

Independent Contractor Agreement is a contract that sets forth the duties of an independent contractor and clarifies the relationship between the hiring company and the contractor.  An independent contractor is typically hired by a person or entity to perform a designated task, but legally, the hiring person/entity does not have control over the independent contractor.

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Employee v. Independent Contractor

Missouri courts state the following to determine “the existence of the independent contractor relationship, the common law of agency right to control shall be applied. The common law of agency right to control test shall include but not be limited to: If the alleged employer retains the right to control the manner and means by which the results are to be accomplished, the individual who performs the service is an employee. If only the results are controlled, the individual performing the service is an independent contractor.” Fritts v. Williams, 992 S.W.2d 375 (Mo. App. S.D., 1999).

The independent contractor agreement merely lays out the responsibilities and duties of the contracted party.  Additionally, it may be the employer or hiring party’s opportunity to include certain risk allocating provisions such as an indemnity clause.  An indemnity clause is further defined below under the common contractual provisions section.

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Lease Agreement

A lease is probably one of the most common agreements that a real estate lawyer has to draft.  There are certain critical provisions that a landlord will want in a lease.  A number of those provisions, though seemingly minor, can make a huge difference when dealing with a troublesome tenant.

Generally described, a lease is when an owner of real property agrees to convey the right of use of the property in exchange for rent payments, usually in the form of cash, but may also be in-kind (something of value other than cash).

For information about Landlord-Tenant Law in Missouri follow the foregoing link. 

Regardless of whether a lease is for commercial or residential rental property, there are a number of provisions that should be included in the lease to ensure that your rights are protected—no matter whether you are the landlord or the tenant.

If you need a lease drafted or revised, we are more than happy to assist you.  Also, in the event that you need to enforce the provisions of a Missouri lease, or if you need to evict a non-paying tenant, please contact one of our landlord-tenant attorneys today.

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Master Services Agreements

A master services agreement or master service agreement is a contract between two parties who usually have an ongoing relationship.  The master agreement sets forth the common terms that the parties have agreed upon, and it can be used as the basic foundation for any future agreements.  Thus, the provisions of the master services agreement are usually incorporated by reference into any of the future agreements between the parties.

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Memorandum of Understanding (MOU)

A memorandum of understanding is sometimes referred to as a letter of intent.  A letter of intent is a statement reduced to writing which details the preliminary understanding of two or more parties who plan to enter into a contract.

Many sources state that a memorandum of understanding is not binding.  However, Missouri courts often treat these agreements as contracts, and in most of the cases in which a memorandum of understanding is discussed, such document involves a school, city, or other governmental entity.  In other limited circumstances, the parties used the memorandum of understanding to divide their interests in a business or form a partnership.

A letter of intent that is signed by high school football athletes, committing to a university, are bound by signing the letter of intent.  According to www.nationalletter.org, an athlete agrees to attend the academic institution for a period of one year in exchange for the institution granting a specified amount of financial aid.

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Mortgage

A mortgage was generally defined above under deed of trust.  In Missouri a deed of trust is used, but the counterpart of the deed of trust is the mortgage, which is used in states like Kansas, Iowa, and Oklahoma.

From a practical standpoint the difference is slight and is predominantly felt in the foreclosure process.  A mortgage requires a judicial foreclosure (use of the court process to effectuate a foreclosure), whereas a deed of trust allows for a non-judicial foreclosure (where the property can be sold on the courthouse steps.

The mortgage basically represents the lender’s security in its collateral (the house).  Once the promissory note is paid in full, the lender must file a release of mortgage with the recorder of deeds which extinguishes the mortgage.  In most states, there are statutes which penalize any lenders who do not timely file releases of mortgage.

If you need a mortgage drafted or a subordination agreement prepared, we can help you do so.

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Non-Compete Contracts

Non-Compete Contracts are not as typical as including a mere non-compete covenant into a contract.  Typically, when there is danger of usurping the business from an employer, the employer, in order to protect itself, includes a non-compete clause into the contract.  The non-compete clause prevents the party subjected to such clause from engaging in the same type of business in the same geographic region for a certain time period.  Missouri courts typically require.

Missouri does not look favorably at non-compete agreements:

Contracts in restraint of trade are unlawful in Missouri. Section 416.031 RSMo (1994).3 “A promise is in restraint of trade if its performance would limit competition in any business or restrict the promisor in the exercise of a gainful occupation.” RESTATEMENT (SECOND) OF CONTRACTS Section 186(2) (1981). “Every promise that relates to a business dealing or to a professional or other gainful occupation operates as a restraint in the sense that it restricts the promisor’s future activity.” Id., cmt. a. Restrictive covenants limiting individuals in the exercise or pursuit of their occupations are in restraint of trade. Sturgis Equip. Co., Inc. v. Falcon Indus. Sales Co., 930 S.W.2d 14, 16 (Mo.App. 1996). Post-employment restrictions are generally considered restraints of trade. House of Tools & Engineering, Inc. v. Price, 504 S.W.2d 157, 159 (Mo.App. 1973). Healthcare Services of Ozarks, Inc. v. Copeland, No. 26410 (MO 7/27/2005) (Mo, 2005).

However, there are certain limited circumstances where Missouri courts have allowed them:

“there are two areas in which non-compete agreements may be enforceable. ‘A restrictive covenant in an employment agreement is only valid and enforceable if it is necessary to protect one of two well-defined interests, trade secrets and customer contacts, and if it is reasonable as to time and place.’” Healthcare Services of Ozarks, Inc. v. Copeland, No. 26410 (MO 7/27/2005) (Mo, 2005)(quoting in part Schmersahl, Treloar & Co., P.C. v. McHugh, 28 S.W.3d 345, 348 (Mo.App. 2000).

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Non-Disclosure Agreements  (NDA)

A non-disclosure agreement is one party’s agreement not to disclose trade secrets, innovative or sensitive information of a company.  These are typically signed by employees who work in industries where certain trade secrets carry significant value.

Non-disclosure agreements are also used in contexts where one person or entity is proposing a business plan, and said person or entity wishes to keep the information disclosed in the meeting confidential.  Hence non-disclosure agreements are sometimes referred to as confidential disclosure agreements.

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Operating Agreements

The Missouri Secretary of State defines operating agreement as: “an internal document (it is not filed with the Secretary of State or any other government agency) that establishes the rules and regulations for the conduct of the company’s business and affairs, and the rights, powers and duties of the company’s members, managers and employees. https://www.sos.mo.gov/business/outreach/startup_guide

Typically the operating agreement is responsible for defining:

  • The classes or groups of members and their rights and benefits;
  • Voting structure for company decisions;
  • Restrictions on transfer of membership interests;
  • Allocation of income and losses among the members; and
  • Tax elections for the company.

The above information is taken from the Missouri Secretary of State website discussing :  https://www.sos.mo.gov/business/outreach/startup_guide

An operating agreement is necessary and required by Missouri statute when forming a limited liability company (LLC).

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Partnership Agreements

Pursuant to R.S.Mo § 359.011, a partnership agreement is “any valid agreement, written or oral, of the partners as to the affairs of a limited partnership and the conduct of its business.”

In essence, a partnership agreement defines the rights and obligations of partners.  It does not necessarily limited to only two partners.  Often times more than two people or entities can become partners.  The type of relationship typically depends on the structure of the business.

In Missouri a partnership is defined, under R.S.Mo § 358.060, as “an association of two or more persons to carry on as co-owners a business for profit and includes, for all purposes of the laws of this state, a registered limited liability partnership”

Missouri statutory scheme allows individuals to form general partnerships, limited partnerships, limited liability partnerships, and limited liability limited partnerships.  These forms all have different statutory default rules that are generally set forth under Missouri Chapters 358 and 359.

Usually when individuals or entities are interested in forming a partnership, they would like to have their own terms in place in order to supersede the default rules laid out in Missouri statutes.

This objective can be accomplished by hiring one of our attorneys to draft a partnership agreement for you.  For further counsel regarding your rights in forming a partnership or to have one of our attorneys draft an agreement for you, please contact us.

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Prenuptial (or Antenuptial) Agreement

A prenuptial agreement or sometimes referred to as an antenuptial agreement is entered into prior to marriage and is designed to pre-plan the division of property and marital support upon the termination of the marriage.

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Professional Services Agreement (PSA)

A professional services agreement (PSA) is used to enter into a contract with a person or entity providing professional services, such as a consultant, an attorney, an accountant, or some other professional, which provides services.

The services agreement typically requires the non-consulting party to allow access to its company information, documentation, and/or facilities to allow the service provider to access and perform the designated tasks.  The professional services agreement essentially delineates the duties and responsibilities of each party and attempts to clarify any potential gray areas relating to the relationship.

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Promissory Note

A promissory note is a loan in which one party lends money to another in exchange for a promise to pay the other back, usually with a certain fixed interest rate.

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Power of Attorney

A power of attorney is a document that can come in all shapes and sizes.  Often we see a power of attorney drafted in the context of an estate plan.  In such a case, typically durable powers of attorney are drafted in order for the power of attorney (powers granted to the agent/attorney-in-fact) to survive mental incapacitation in the event that the principal (person who appoints someone as their attorney-in-fact) cannot make decisions for himself/herself.

In other instances, commonly seen in the real estate context, a husband or wife, who may not be able to attend the closing and will grant their spouse the authority to sign on their behalf in their absence.  Usually the power of attorney will be limited in time and scope.  For example, the limited power of attorney may only last until a few days after the closing is scheduled to occur.  Other times the length of time is a fixed duration.

With respect to limiting the powers of the attorney-in-fact, the power of attorney may limit the powers to signing, authorizing certain transactions, or limit the powers to only dealing with certain limited entities or persons.

The most common in the real estate context is stated above, but the most common in the estate planning context are powers of attorney for health care and powers of attorney for financial decisions.  If you need a power of attorney, our lawyers are more than happy to discuss what may be best for your situation, and we can assist with the drafting of the same.

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Purchase Order

A purchase order is a statement in writing which documents the purchase of goods but allows the purchaser to make payment at a later time.

A purchase order usually includes:

  • Type or name of product
  • Quantity purchased
  • General terms and conditions
  • Special terms and conditions (specific to that purchase)

In order for a purchase order to become a contract, the buyer must accept the purchase order and the terms thereof.

Transactions that involve a purchase order are typically governed by the Uniform Commercial Code as they involve the sale of goods.  The Uniform Commercial Code is applicable in Missouri as it has been adopted by all 50 states, the District of Columbia, and the various U.S. territories. Accordingly, Missouri case law, in interpreting the Uniform Commercial Code, will presumably hold that a buyer impliedly accepts the terms and conditions of a purchase order by merely accepting the goods and failing to reject within a certain specified amount of time.

Accordingly, it is important to read any purchase orders, including the fine print.  If you don’t understand the language set forth therein, please contact one of our attorneys to assist you with understanding your rights and duties under said agreement.

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Real Estate Contracts

A majority of Missouri’s citizens will have reviewed and executed a real estate contract in their lifetime. Oftentimes the purchase of a home is the biggest decision in one’s life.  The real estate contract in chock full of legalese and boilerplate provisions, making it difficult to understand and know exactly what you’re getting yourself into with the home purchase.

However, usually when the real estate contract is supplied by a reputable real estate agent, the contract has been approved by the brokerage firm, and the use of which is required by said brokerage firm.  Accordingly, the terms of the contract are usually drafted to be fair for both the buyer and seller.

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Sale of Goods Contracts

Sale of goods contracts obviously deal with any transactions where the parties are buying or selling goods.  These transactions are governed by the Uniform Commercial Code, which applies in every state, the District of Columbia, and the U.S. territories, as briefly discussed above.

In certain situations, a sale of goods contract is required to be in writing signed by the party to be charged.  In the event, that the contract is not in writing and signed, the party attempting to defend the case may assert a defense called the statute of frauds.  This bars contracts for the sale of goods which equal or exceed $500.00.

The Missouri statute, which is applicable to this situation, section 400.2-201, states the following, in relevant part:

(1) Except as otherwise provided in this section a contract for the sale of goods for the price of five hundred dollars or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker.

Accordingly, it is important to make sure that your transaction, particularly when dealing with sales and purchases of goods, is in compliance with Missouri law.  One of our contract lawyers can assist you with drafting this type of agreement if you find yourself in that situation.

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Sales Commission Agreements

A sales commission agreement sets forth the commissions that an employer will pay the commissioned sales representative.  In a number of industries, especially in the financial industry, the sales commission agreement prevents a salesperson’s commission from becoming vested until a certain period of time passes or certain triggering event occurs.  For example, some companies will pay their sales representative on a monthly basis.

When the sale is made, the salesperson would receive his/her commission the following month.  However, the contract would require the sales representative to pay back any amount that is not vested in the event that the customer cancels the policy.  Usually the time period for vesting, which is included in the agreement, would take into consideration the amount of time the customer has to cancel or in which the right to revoke expires.

Salespersons should be aware of this and those companies, firms, and organizations employing a sales staff should ensure that their sales commission contracts contain clauses which account for any cancellation of policies or return of products if commission is distributed concurrently (or in close proximity thereto).

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Security Agreements

A security agreement is a document that represents a party’s interests in personal or real property. The agreement is considered “secured” because the return of payment is “secured” by some type of collateral.

For example, in some circumstances, the security agreement uses personal property as the collateral, such as a car.  Car dealerships usually would enter into a retail installment sales contract at that time, which would contain the financing terms as well as the language that would reflect the fact that the vehicle would be treated as the security.  The retail installment sales contract is the security agreement. In order to perfect the security agreement, a notation is put on the title that shows the lender’s interest in the vehicle.

When real property is used as security, typically the security agreement is called a deed of trust or mortgage.  As noted above in this article, in Missouri the security agreement used for homes is called the deed of trust.  This is entered into concurrently with the promissory note.  The lender is known as the mortgagee because the borrower is giving them a mortgage (deed of trust).  Thus, the borrower in that transaction, even when it involves a deed of trust, is known as the mortgagor.

The foregoing examples represent typical uses of a security agreement.  However, there are numerous types of security agreements. If you want to lend someone money, but you want to make sure that you are paid back on that loan, then you should consider securing the loan with some type of collateral.

Security agreements require that the document state:

  • It must state that there is a security interest;
  • It must describe the collateral; and
  • It must be signed by the borrower/debtor.

If you find yourself in a situation, where you want to lend money, and you need direction or a security agreement drafted, please contact one of our attorneys.

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Service Contract

A service contract is a broad name for an agreement which relates to the provision of services.  The services provided under the contract can range from strictly services, such as painting, landscaping, installation of electrical in a building, etc, to provision of services and materials, which could be the same type of contract, but would the owner would provide the materials in the former type of contract.

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Settlement Agreements

Any time parties are involved in a dispute, litigation, claims, or if they have any other theory of recovery against each other, the most efficient resolution is entering into a settlement agreement.  Presuming the attorney who drafts the settlement agreement properly prepares the same, any subsequent attempt at bringing a lawsuit would be barred by the settlement agreement.

In a typical settlement agreement the parties state the background of the dispute that gives rise to the settlement agreement, both parties usually deny any liability against themselves, and then the parties mutually waive future (and sometimes all) claims against each other.

The parties will also list out the terms of the settlement agreement, usually including the amount each party will be paying to the other, the terms of payment, and any other terms that would relate to dismissing the lawsuit.  Usually the settlement agreement will also include provisions which account for the default of any of the parties’ duties.

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Subordination Agreements

Our lawyers are well-versed in real property transactions and have dealt extensively with title companies, closing companies, and lenders. In certain situations, lenders will agree to make their loan junior to a new lender.  In these cases, a subordination agreement subordinates the senior loan to make it junior (typically to a new loan).

However, as a sidenote, it is not necessary that the loan is a newly originated loan as any loan can be subordinated so long as the lender or financial institution agrees to subordinate their loan.

After the subordination agreements are signed and notarized by the parties, they are usually filed in the recorder of deeds in the county in which the real property at issue is located.  The filing of the subordination agreement puts all the world on notice that the subordinated loan now takes a subordinate position to the other.

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Takeover Agreement

A takeover agreement is often used in the construction industry by and between a surety and a contractor.  When a contractor who purchased a bond defaults on their performance under a performance bond, the surety is then required to step in and the takeover agreement defines the duties and obligations of the surety to complete the performance of the original contract.  For the most part, the surety will typically hire another contractor to come in and complete the work and merely provides the financing.

As a sidenote, usually the defaulting contractor is required to indemnify the surety, but the defaulting contractor probably defaulted for a reason and may not be in a position to indemnify the surety.

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Transportation Agreements

Transportation is described as the movement of goods or people from one location to another. When employees wish to transport goods or persons, they usually have to enter into some type of agreement to effectuate this purpose.  Typically, the employer wants to delineate the services offered and limit liability to the extent possible.

In certain situations, where the entity or person providing the transportation is deemed to be a common carrier, any clauses that purport to limit liability may be against public policy.  An attorney that is astute in drafting transportation agreements, and who is aware of the case law articulating exculpatory provisions in carrier agreements, can potentially prepare a contract that will protect the carrier in a number of circumstances.

In any event, if you are an employer or looking to transport people or goods, you should have a contract in place that sets forth your duties, obligations, and limits your potential liability.  For assistance with drafting a transportation agreement, contact an attorney today.

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