Performance Bonds Newsletter



*JUNE NEWSLETTER...*
*PROBLEM SUBCONTRACTS* CONCERNED ABOUT FLYING SIGNIFICANT OTHER WORKPLACE RELATIONSHIPS	*WANT TO BE PART OF THIS COMPANY?* END OF THE 20TH CENTURY PLATITUDES OF WISDOM USELESS FACTS AND STATISTICS *CURRENT NEWSLETTER*
THE 20th CENTURY… looked a lot different for someone in 1900 than it does for those of us who reflect on it in the year 2000. The 19th century, in general was a rather shocking event. So many things changed so quickly and this had never happened in recorded history. Because the 19th century had begun in war and ended in peace and material progress, the feeling was that the good times could just keep on going and that change was positive. Never had humanity faced a new century with that attitude before. As much of the world celebrated a new century on New Year’s day, 1900, few had any idea how violent life would be for the next three or four generations. If you were a toddler in 1900, you stood a good chance of dying in World War I and its related conflicts. If you survived that or even if you didn’t, your children would be caught up in an even more violent World War II. Your grandchildren had a wide assortment of little wars to keep them terrified. Only your great-grandchildren would encounter a world at peace, more or less. While no one could imagine the scale and extent of the coming violence, it was even harder to picture the changes in day-to-day life. In 1900, most Americans lived without indoor plumbing, electricity of modern medicine. There was no radio or TV and only silent movies for those few living in cities with movie theaters. Cars were new technology and very rare. Phonographs and telephones were also new and used by just a small segment of the population. Most people went to bed when the sun went down, for the only artificial light was from candles and kerosene lanterns. The average life span was a mere 47 years, and minor infections or a bad chill could easily cause death. A century ago, people read more, walked more, talked more, worked longer hours and went to bed earlier. It has been quite a ride through the 20th century. No one in the history of this world has ever witnessed such technological and sociological change as those living in the 20th century. In celebration of this rapidly changing world, our quotes in this issue will be on "change". Heraclitus (540-475 b.c.) said: "There is nothing permanent except change." Irene Peter said: "Just because everything is different doesn’t mean anything has changed." And, the most famous quote regarding change was from Alphonse Karr who said: "The more the change, the more it’s the same thing." Return toTopics * * *

GIVE YOURSELF THE RIGHT TO END PROBLEM SUBCONTRACTS… whenever you choose. Sometimes you find yourself stuck in a subcontract you would like to end based upon the lack of performance by the subcontractor. The job is being delayed, the sub is uncooperative and the relationship has deteriorated to the point that the profitability of this job will be materially affected unless you can replace the sub. Unfortunately, your attorney advises you that there is no easy way out of it for you. The typical subcontract allows you to terminate it only if the subcontractor has defaulted. Fortunately, you can give yourself greater flexibility than this and avoid getting stuck in a subcontract that is not in your best interest. I recently noted a clause suggested by two Virginia construction attorneys (Peter M. D’Ambrosio and Carl T. Hahn). This is basically a "termination for convenience" clause that should be included in your subcontracts allowing you to terminate all or part of the subcontractor’s performance of the subcontract "for convenience." By including this clause, you’ll be able to terminate an unsatisfactory sub for any reason and at any time.

To make this strategy work, the clause must set ground rules on how the termination for convenience will be handled. You need to spell out the sub’s obligations, and of course, you need to indicate that you will pay the subcontractor for the work done. This clause will benefit both you and the subcontractor in the following ways:

It gives you flexibility. As an example, if you are unhappy with just part of the sub’s work, you can terminate the sub’s performance of that part of the work and have the sub complete the rest of the work.
You avoid renegotiations or lawsuits over disputed contract provisions. Because the termination for convenience clause gives you a way to end the subcontract if you and the sub have irreconcilable differences, both you and the sub can benefit.
You avoid the possible risks of terminating for default. If you terminate a subcontractor for default and it later turns out that the sub had defaulted on the subcontract, you could have to pay the sub its anticipated profit (the profit it would have made if it had completed the project), its "unabsorbed over-head" and the legal fees it incurred in successfully challenging the defaulted termination.
A termination for convenience allows the subcontractor to avoid damage to its reputation and/or its bonding capacity. If a sub is terminated for default, its relationship with the bonding company will be hurt as well as its ability to get future work. The "termination for convenience" clause benefits both you and the sub in this regard.

The "termination for convenience" clause is much too long to include in the Bond Newsletter, but if you request it, I would be happy to fax you a copy of this clause for your information. This is obviously a matter that should be addressed with your legal counsel. The sample "termination for convenience" clause is simply a starting point to work out this approach in your subcontracts.

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MOST OF US ARE A LITTLE MORE CONCERNED ABOUT FLYING… after the Alaska Air MD80 crash. It is, however, comforting to learn that statistically at least, air travel remains extremely safe. As an example, a passenger has only one chance in 7,000,000 of dying in a scheduled domestic jet flight. That means that someone who flies daily would, on an average, go 19,000 years before dying in a crash. For international flights on U.S.-owned airlines, the chance of death is one in 1.5 million flights – meaning that you would fly daily for 4,000 years before dying on an international route in a U.S. carrier. Return toTopics


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