Public Contract

A public contract can be assigned by one contractor to another where the assignment is restricted to funds due under the contract. However, it is not assignable without the consent of the public body with which the contract is made. A contractor and his or her assignee are both bound by the terms of the main contract. The contractor cannot transfer by assignment anything that was not allowed under the main contract. The law can provide that no assignment is valid unless copies of the contract and the assignment are filed with the court administrator in the county where the public works project is located.

A contractor can employ subcontractors to perform certain portions of the work. For example, in the construction of a public building, a contractor will typically hire an electrical and a mechanical subcontractor, along with subcontractors who do cement work, roofing, and painting. A subcontractor enters an agreement with an original contractor to perform part of the work that the contractor has agreed to perform in the original contract.

A public authority has the inherent right to make reasonable and necessary changes or modifications in public contracts, according to a new agreement between the contracting parties. A public contract can also contain a provision governing its cancellation or termination under certain conditions. A public authority generally cannot lawfully rescind its contract without the contractor's consent, except in the case of fraud, mistake, or the invalidity of the contract.

A contractor is bound to the contract as agreed, and a failure to observe it will make the contractor liable for breach of contract. The contractor is entitled to recover for work completely or substantially performed in compliance with the contract. Where a substantial performance of a contract has taken place with the use of defective materials or faulty workmanship, the defects must be corrected if practicable. If correction is not possible or practicable, the contractor will be awarded the contract price reduced by the difference between the value of the defective work and its value if completed according to the terms of the contract.

A public contractor can be compensated for additional work that results from authorized changes in the plans and specifications, as well as for extra work or materials required because conditions differ from their representation in the plans and specifications. Oftentimes contractors realize the bulk of their profit from such "change orders."

When a contractor does not complete the job within the time specified, she or he has committed a breach of the contract. Some public contracts contain penalty clauses, which assess the contractor a certain amount of money for each day past completion. On the other hand, road and bridge contracts may contain clauses that reward a contractor for finishing the project ahead of schedule.