Challenging clauses can cause confusion:

I have searched through actual contracts for some clauses to challenge you. Compare them to the provisions in your own agreements. What do they mean? What are they meant to mean? Can you live with these obligations?

Once you have thought about each clause and how it applies, read my commentary for my views.

I.

Contract Clause: “The following documents, any other documents specifically referenced in any of the following documents, and all Contract Change Orders, form the entire Agreement and are the ‘Contract Documents.’”      

Commentary: The phrase “entire Agreement” is significant. The so-called “parol evidence” rule can exclude precontract terms, which differ from or contradict the agreement. But, written contracts can have their terms “supplemented” by precontract understandings and promises. The “entire” language forecloses that potential for supplement. What you need to make certain is that any other document that should be incorporated into the agreement (your proposal, for example) is “specifically referenced.”

II.

Contract Clause: “Contractor undertakes to indemnify the Owner against all losses, damages, costs and expenses suffered or incurred by reason of any acts, default or omission on the part of the Contractor.”

Commentary: Would you sign a contract with this clause? Realize that the indemnity here is not limited to personal injury or property damages, losses that can be controlled by insurances. The scope of this language is limited only by your imagination. By its terms, the clause makes you liable for claims by other contractors where those claims relate to your work or for the owner’s delay damages.

III.

Contract Clause: “Contract Documents are complementary. In the event of discrepancies, the Order of Precedence shall be: 1. Narrative Scope of Work; 2. Contract Drawings; 3. Specifications.”

Commentary: It is typical for a contract to provide that anything shown in the drawings or specifications shall be treated as if shown in both. This clause goes further. For “discrepancies” (errors? ambiguities? omissions?), the most general terms take precedence over the most detailed—a reversal of ordinary rules of contract interpretation. Here, if there is something wrong with the specifications, but the scope of work description generally covers the issue, the specification error may be forgiven.

IV.

Contract Clause: “If Contractor is delayed at any time in the progress of the work by any act of Owner, another contractor of Owner, strikes, lockouts, fire, unusual delay in transportation, Act of God or other causes over which Contractor has no control and could not reasonably anticipate, then the time of completion shall be extended and no adjustment shall be made in the Contract Sum.”

Commentary: All in one, we have a no damages for delay clause, a force majeure clause and a time extension clause. This combination is worrisome. Misdirection by the owner, interferences from other contractors, and potentially late responses from the owner’s design consultant may lead to added time for you, but no claim for extra money. In addition, the delay must be one that you could not “reasonably anticipate.” Perhaps the only positive thing that can be said about this clause is that it appears to be directed only at delays and not “disruptions” or “accelerations.” That distinction may not be easy to make.

V.

Contract Clause: “If there is any ambiguity in Owner’s drawings or instructions, Contractor shall ask Owner for clarification. Upon written request of Contractor, Owner shall furnish, with reasonable promptness, additional instructions. Contractor shall do no work without proper instructions.”

Commentary: It seems fundamentally unfair for an owner to require a contractor, at no cost, to double-check the owner’s design. On the other hand, this type of clause is common. The real danger lies in the last sentence, especially as errors in design are often discovered after installation has begun. On close examination, the clause only applies to “ambiguities,” not necessarily errors.

VI.

Contract Clause: “Owner, without invalidating the Agreement, may order changes in the Work, and Contractor shall promptly perform all changes authorized under this Section. Contractor shall not be entitled to receive an addition to the Contract Sum or an extension of time absent a change order, signed by Owner before Contractor performs such work.”

Commentary: What is wrong with this clause? Does it apply only to changes ordered by the owner? What do you do when the owner will not sign a change order? Where the change is an integral part of the work, should you proceed without making the change until someone stops you? By the way, the order to change may be oral under this clause.  

VII.

Contract Clause: “Contractor is responsible for repairing all damage caused by the Work.”
Commentary: This clause is exactly as it appears in a multimillion-dollar contract. It is foolish as drafted. Does the silliness of the language (damage caused by the Work?) entitle you to ignore it? Generally, the courts will allow for corrections of obvious mistakes (“caused to the Work”), but not always.

VIII.

Contract Clause: “Contractor shall not assign this Contract without the prior written consent of Owner. Any assignment without the prior written consent of Owner shall be void.”

Commentary: “Assignments” are misunderstood. In this clause, the owner forbids the assignment (transfer to another party) of the entire contact, without permission. What of assignment in part? This clause, for example, may apply if there is a change of ownership of your company. However, this provision does not prevent your assignment of accounts receivable or of claims.

Did you look at these clauses the same way I did? Did you understand my criticisms? You will likely find similar clauses in your own contracts, using some of the identical words and phrases. In many cases, it is poor drafting and unintended meaning that causes problems later on. Look for these problems in your own contracts before you sign them so you can get them corrected, or you should prepare for the consequences.     EC

ITTIG, of Ittig & Ittig, P.C., in Washington, D.C., specializes in construction law. He can be contacted at 202.387.5508, e-mail: USBuildlaw@aol.com, or his Web site, www.ittig-ittig.com.