Construction Management legal issues requires professional attention.

 

Case #5 Mega Manufacturer, Inc. (MMI) sought to build a new factory. MMI retained Awesome Architects, Inc. (AAI), an architectural firm, to create the plans and specifications and administer the project. Based upon this design, the owner entered into a $2 million fixed-price contract with Prime Builder. Inc. Under the prime contract, Prime Builder was required to obtain payment and performance bonds, which it acquired from Surety, Inc. To obtain the bonds, Prime Builder and its individual owners entered into an indemnity agreement broadly promising to reimburse Surety for its expenses incurred "by or under the bond." Prime Builder hired several subcontractors, including a framing subcontractor (Framer) and a roofing subcontractor (Roofer). Framer built the building's framework with lumber purchased from a supplier. Roofer assembled materials on the site in preparation for building the roof. AAI was unhappy with the quality of the work and consistently approved only partial payments for Prime Builder. The prime contractor began cutting back on payments to subcontractors and suppliers. When these parties complained to Surety, Surety investigated and discovered that Prime Builder's finances were in disarray. On February 25, Surety informed MMI to forward all future progress payments to it. Instead, MMI sent a $100,000 progress payment on March 1 to its contractor. On March 20, MMI declared Prime Builder in default and terminated the prime contract. MMI notified Surety of its actions. On March 21, a fire destroyed Roofer's materials (which were still in storage on the ground) before they could be removed. On March 25, Prime Builder wrote a long letter to Surety, explaining that its cash flow problems were caused by AAI's failure to certify payments and as a result that its termination by MMI was wrongful. The prime asked Surety not to assume its bond obligations. Instead, Surety hired Prime Builder to complete the project. MMI objected. stating that it would not allow Prime Builder back unto the site. Question: Using all the content you have learned in the course this semester, please evaluate this scenario from a legal perspective. I will be looking for legal terms and jargon, case law justification and citation of source of your response. You need to include at minimum a detailed discussion on bonds; surety; obligation: performance; liabilities: payments; claims; reimbursements; regulations; bankruptcy and contracts outside the USA.