Obligations, Contracts, and Specifications

Module 1: Extinguishment of Obligations, Contracts, and Specifications

• Understanding the modes of extinguishing obligations is essential.
• Analyzing the necessary elements for a valid contract is important.
• Interpreting contract specifications is relevant to civil engineering projects.

Obligations

• An obligation: a legal duty to give, do, or not do something.
• Article 1156 of the Civil Code defines an obligation as a juridical necessity.
• Contractors, engineers and suppliers must adhere to contracts and legal duties.
• A contractor has an obligation to complete a bridge within the agreed deadline.

Sources of Obligations

• Law imposes certain obligations
  • RA 944 (Civil Engineering Law) makes engineers adhere to licensing requirements.
  • PD 1096 (Building Code) requires contractors to comply with construction safety standards.
• Contracts: Agreements creating enforceable obligations
  • A building construction contract between a client and a construction company exemplifies this.
• Quasi-contracts: Obligations from one party benefitting without a contract
  • A contractor builds a structure on a neighbor's property by mistake.
  • The neighbor must then pay for the construction due to unjust enrichment principles.
• Delicts: Crimes resulting in civil liability
  • A contractor uses substandard materials that leads to a collapse.
  • The contractor can be charged as criminally liable and civilly obligated to pay for damages.
• Quasi-delicts: Negligence resulting in damage
  • When an engineer fails to inspect a structure leading to a failure.
  • The engineer is liable for their negligence, and must pay damages to the victims.

Modes of Extinguishing Obligations

• According to Article 1231 of the Civil Code of the Philippines, obligations are not permanent and can be extinguished.
• Payment or Performance: Fulfilling the obligations
  • The fulfillment of a monetary obligation is payment.
  • Performance is delivery of the agreed-upon service or product.
  • A construction company completing a condominium project resulting in its obligation being extinguished.
• Loss of the Thing Due extinguishes the obligation if the subject matter is lost or destroyed.
  • An exception: when the loss results from negligence or fraud.
  • A contractor's warehouse burns down by natural causes, which nullifies the contract.
• Condonation or Remission: Forgiveness of debt
  • A creditor forgiving the debtor's obligation.
  • A company gifting a structure to the government, cancelling their monetary responsibilities.
• Confusion or Merger of Rights
  • When the creditor and debtor merge into one person
  • A contractor buys the debt of someone who owes him money-- creating a merger of obligations.
• Compensation: When both parties have mutual debts that cancel out each other
  • An Engineer that owes P1 million to a supplier; the supplier then owes that same engineer P500,000.
  • The new debt is P500,000 instead of P1 million.
• Novation: Replacing an obligation with a new one.
  • A contractor renegotiates a deadline with a client, establishing new terms.

Contracts and Specifications in Engineering

• Contracts must have the following to be valid, (Civil Code of the Philippines, Article 1318):
  • Consent: Agreement between parties
  • Object: The subject of the contract like a construction project.
  • Cause: The reason why the contract exists.

CIAP Document 102

• CIAP Document 102 is created by the Construction Industry Authority of the Philippines (CIAP).
• It serves as a standard guide ensure fairness, efficiency, and clarity for contractors, owners and all stakeholders involved in private construction.
• General Conditions: Scope, Rights, and Responsibilities of Parties.
  • The contract must specify the extend and nature of work involved .
  • Includes road length, materials, and construction techniques when building roads.
• Rights and Responsibilities of Each Party
  • The Owner must provide site access, necessary permits, and timely payments.
  • Duty of the contractor to follow approved plans and specifications, and compliance in accordance with building, environmental, and labor laws.
  • An Engineer should oversee the project and adhere to contract terms, along with any approved modifications.
• Payment Terms:
  • Payments are made in stages, known as progress billing.
  • These are calculated based on the work completed, such as 10% at mobilization, 30% at 50% completion, and the balance paid after acceptance
• To ensure quality work, a 5-10% total payment is withheld until the project is fully accepted.
  • Contractors are required to fix any defects that occur during the warranty period.
• Liquidated Damages mean a penalty fee per day is imposed if the work is not completed on time.
  • If a constractor is given 120 days and goes over 15 days, a fee of P10,000/day is imposed as a penalty.
• Arbitration of Disputes:
  • Benefits: Faster and less expensive than going to court
  • Prevents lengthy litigation.
  • Decisions are made by industry experts, rather than general judges.
• Process of Arbitration (EO 1008 - Construction Industry Arbitration Law):
  • Step 1: Filing a Case – If parties disagree on payment, scope changes or other changes.
  • Step 2: Arbitrator Selection – a neutral third party hears the case.
  • Step 3: The arbitrator decides based on industry standards and contract terms.
  • A construction firm completes 90% of a job; the owner refuses to pay. The contractor files an arbitration case for fair settlement.

PD 1096 (National Building Code)

• PD 1096 Sets minimum safety and quality standards for buildings and structures.
• Ensures public safety, structural integrity, and environmental protection.
• Ensures compliance by Engineers, architects, and contractors to avoid penalties.
• Zoning Requirements define:
  • Building height, setbacks, and land use.
  • Commercial buildings shouldn't be built in residential zones.
  • Heights are specific to the areas.
• Setback Requirements:
  • Front setback: At least 3 meters from the road.
  • Side setback: At least 2 meters from the property boundary.
  • If a contractor puts a house 1 meter from the road it does not meet a 3 meter setback minimum.
• Structural Integrity Rules:
  • Structures must withstand:
    • Earthquakes
    • Typhoons (Wind load requirements)
    • Flooding (Minimum elevation requirements)
  • Concrete can not meet less than 20 Mpa for residential buildings.
  • If low strenght concrete is used and it affects the strucutre, this will result in failure.
• Non-compliance Penalties
• First offense: Between 10,000-50,000 pesos in fines
• Project can be suspended, or have building permit revoked for having incorrect materials and structures.
• Repeated offences can lead to revocation of contrcator's liscense.
• When a condominium developer skips a required safety test and is caught, it can lead to revoking of the building permit and evacuation.

Module 2: Natural and Juridical Persons

• Differentiatons between natural and juridical persons is important to consider in civil engineering.
• The legal personality and responsibilities of civil engineers is to followed.
• Forms of business determine how civil engineers can operate.
• Analayzing legal liability is a aspect of civil engineering projects.

Legal Identity and Its Implications in Civil Engineering

• Natural person
  • With a civil code that entitles legal rights and obligations, it is an individual human being.
  • Begins from birth and ends at death.
  • Civil engineers are natural, with legal rights: responsibilities.
  • Restrictions: Cannot solely own large businesses involved in infrastructure development.
  • Legal implications: Liabilities are personal so a freelancers assets can be seized if sued.

Juridical Persons

• Definition: An organizations legally bound to rights and obligations as a natural person.
  • Incorporations, partnerships, and cooperatives.
  • A corporation can enter into contracts like a natural person.
  • The organization is liable for a contract to build roads, rather than the engineer.
• Advantages:
  • Limited Liability: Protection of personal assets.
  • Larger Financial Capacity: Larger projects are secured.
  • Easier Expansion: The busines continues even if the owner dies.
• Dissadvantages:
  • More government paperwork and approvals needed.
  • Compliance to tax laws and corporate regulations.

Legal Personality in Civil Engineering Practice

• There are two type of civil engineers, those that work, indiviuals and juridical persons.
• Engineering firms and construction companies has to register as juridical persons, thus operating legally.
• A freelance civil engineer is liable for a project's personal mistakes.
• A construction firm is responsible to legally protect the individual engineer.

Licensing under RA 544

• Only licensed civil engineers are authorized to sign engeineering plans and supervise constrcution.
• Companies offering such serveices have to be liscense with engineers.
• Entering without a license is an illegal act under RA 544, and will result in penalty or imprisonment.

Rights and Obligations of Engineers

• Must hold engineering contracts with proper liscensing.
  • There are two ways to hold enter such contracts, as an individual in a licensed engineer and in firm.
  • Personal contracts like liscenser designers is one example of an engieering contract.
  • Coporate constrcution is an example of a legal engeineering company building to bridge, which is a corporate contracrt.

Civil engineer Liability of Individutal vs. Company:

• Defects in a construction project is the one who signs the project.
• Engineer that designs a defective structure is personally liable.
• A firms structure defects is responsible, they company pays damages, even if their individual assets is protected.

Types of Business Entities

• Sale Propietorships
  • Businesses owned and operated by one person
    • Liablity for all debts
  • Very easy to set up
  • Owners keep al the profits
  • Limited ability to get larger projects if sued.

PartnerShip

• Formed by teo or more engineers
• Types

  • General Partners

    • Partners are liable for its business.

  • Limited Partners Partners that have liability for its debts.

• Advantages
  • Allows capital than sale propietario
  • Sharing of responsibilities
• Dissadvantages
  • Responsible for others debts
  • Risk it can involve intrenal conflicts

Civil Engineers as Business Entities. C.3. Corporation (RA 11232: Revised Corporation Code)

• Legally separated from owners
  • Owned by stakeholders
  • Advantages
    • Owners persnal assessts ar protected
  • Able to secure large projects and government contracts
• Diesadvantages
  • Complicaed to set up needs approval
    • Strictier Tax and Repoting

Sample Case Study: Business and Engineering Liability

Scenario: Bridge Collapse Due to Substandard Materials • Facts: - A bridge collapses, causing injuries and deaths - Investigation reveals substandard materials were used.

• Who is liable? The individual engineer, the construction firm, or both? - If the engineer personally supervised and signed the project He/she may be liable. - If the engineering firm handled construction The company may be sued under the Civil Code - fraud is proven (e.g., intentional use of low-quality materials) Both company and engineer face criminal charges.
• What are the penalties under RA 944? - What are the penalties under RA 944?

Module 3: The CE Professional, Her Clients, and the State

• Understanding ethical responsibilities of civil engineers.
• Analyzing legal obligations in contracts and procurement of government.
• Discuss corruption issues and preveting by ethics in civil engenieering

PICE Code of Ethics and Legal Responsibilities

-Defines the moral and professional obligations of a civil engineer .
      - Key  ethical Principles for Civil Engginneers
        - Engineers must put public safey first.
        - Having Integrity in work by no flase claims in work ethics and not exaggerating.
         - Avoiding corrupt dealings ad briber practices.
         - Engineers must design sustainable and eco - friendly porjects.

An engineer needs ethics; one example is that an engineer must approve a design faulty to speed up project and reduces cost, with endgering the public and violating the PICE Code of Ethics

Conflicts of Interest in Civil Engineering

• Common conflicts in ciivil engenierinng, financial conflicts, acceptiing bribes, dual roles, and nepotism can affect civil services. - A project hired construction company owned by hiis relative, the company further overprice materials and use inferior cement. - Consequence = The project collapses affer completion and damage public proprety.

RA 9184: Government Procurement Reform Act

    - Act protects fairness, transperency, and completition in government contracts
     - RA key points such as contract must awarded to best, avood corruption/favoritism with qualifiation.

Standard Bidding Procedures for Civil Works

      - Steps involved in government project , announcement the project, companies submitting legal documents, submitting price offers, with bid elected.
    - It is best to awrd a contraact with cost. qualituations, and win the contract and start work.
         - A contreactor win bid by bribining government officials , if his project is complete and has poor work is vilating RA9184.

Common Disputes Between Clients and Engineers

   - Project Delays , Contract breaches and payment are all disputes in engineering contracts
  - It is better to faster settle in contract issues and avoid lengthy case of years, a month can resolve a contract quickly in CIAC.

Goverment Regulations

Duties with a civil Engineer in public work

    - civil engineer has a role key as ensuring quality safey in infrastucture .
    - Compliance is buildibg code. supervision of public works, and cost with estimation of budget planning

civil Engineers in the State. C.3. Role of DPWH and Local Government

- Department and Local goverment improves governements innfrasutcutre projects
    - Monitors quality of consutrcution.

Example case with DPWH

     _ Briberty in bididng, overpriving, substandred works.
     - Governs pays officials projects and inflatting construction cost or cut cost.

• A 10 billion project collapses due to poor cemented, and investigations will show bribe.