Commercial and Legal Considerations of Offsite Construction Projects and their Hybrid Transactions

Abstract

The commercial and legal challenges of offsite construction technology have become more pronounced with the ongoing rise and growing popularity of such construction method. Offsite construction represents a combination between construction services-based activities and manufacturing/fabrication goods-based tasks, thus called hybrid transactions. This mixed nature has created many uncertainties concerning whether the common law or the Uniform Commercial Code (UCC) shall govern. To this end, this paper aims to enhance the knowledge of the commercial and legal treatment of hybrid offsite construction transactions. To achieve that, this paper followed a research methodology that employs three types of analysis: analysis of the commercial and legal provisions, case study analysis, and comparative analysis. That said, the paper (1) studied the UCC’s commercial and legal stipulations with regard to hybrid offsite construction transactions; (2) analyzed six case studies in the US to examine the decision structure upon which the courts determine whether the common law or the UCC shall govern the hybrid offsite construction transactions; and (3) compared between the common law and UCC provisions as related to the treatment of hybrid offsite construction transactions. To verify the usefulness and benefits of the performed analyses in this paper, the authors shared the outcomes of the paper with a focus group of leading attorneys and experts at two major US law firms with an average experience of more than 20 years in hybrid transactions, offsite construction processes, and their related commercial and legal considerations. This paper provides guidance on different commercial and legal aspects of hybrid offsite construction transactions including offer acceptance and withdrawal, requirements for a written contract, offsite-fabricated goods’ inspection and rejection, risk of loss, and warranties, among others. Further, eight factors were identified to determine whether the common law or the UCC shall govern hybrid offsite construction transactions. This paper makes many contributions to the body of knowledge, with the primary contributions being providing a better discernment of the commercial and legal aspects of hybrid offsite construction projects and offering guidance to the management, commercial, and legal practitioners on different considerations related to offsite construction transactions.