To a non-lawyer, the language that lawyers use can seem confusing. Where else would “criminal conversation” mean having an extramarital affair? On top of its Latin roots, the words of law have been over layered with French and early English. My personal favorite is “la utilité del chose excusera le noisomeness del stink,” which means: the usefulness of the thing excuses its evil consequences.
There are more common legal words and phrases frequently used by laymen as well, for example, consequential damages, indemnification and fraud. They are just as often misused and misunderstood.
The following is a brief introduction to some legal terms which may apply to your construction business.
Literally, the right to “speak the law.” It is the legal authority in terms of geography. So, if you have a project in New York City, that city and state have jurisdiction over any lawsuit.
Statute of Frauds
Originally, not a statute, and only indirectly related to fraud. For about 300 years, England did have a statute that required certain contracts to be in writing. While England has repealed most of this rule, it is alive in the United States.
Generally, contracts in excess of a certain dollar value, or ones which cannot be completed in one year, must be in writing. In other words, be careful with oral agreements. There are hundreds of exceptions to the rule, but there are hundreds of new statutes, particularly with home improvement contracts, which have extended the scope of the rule.
Parol Evidence Rule
Linked in a way to the Statute of Frauds, the Parol (spoken) Evidence Rule is this: testimony that varies or supplements a written agreement should not be allowed. This rule, however, does not prevent testimony as to how the agreement was negotiated and formed. As a result, the rule can be circumvented by evidence of past dealings between the parties, standards of the trade, or by arguments of waiver or estoppel. In court, the objection that “the document speaks for itself” is the Parol Evidence Rule.
Waiver and Estoppel
Waiver is a voluntary relinquishment of a known right. What does that mean? Basically, if you have a right to something and you let it go, the right has been waived. For example, your contract requires a 10-day written notice for extras. You regularly submit your notice 20 or 30 days after the event, and the owner negotiates a change order with you every time. It may be said that the owner waived the 10-day requirement.
Estoppel is the other side of the coin. This concept arises where you are misled by someone’s wrongful actions. Using the above example of written notice, the owner agrees to a few late change notices, then later holds strictly to the 10-day requirement. Maybe he did not waive his rights completely, but by misleading you, he may be estopped from raising the notice defense. Because of the “wrongful” requirement, estoppel is usually harder to prove than waiver.
You use these concepts when you have little else to use.
To be “estopped” is to be barred from doing something. Promissory estoppel bars you, under certain circumstances, from reneging on a promise. In contracting, the most common application of this doctrine is to subcontractor bidding.
When a sub bids to a general, there is no contract, even when the general accepts the sub’s bid. Why? Because a condition to the contract coming into existence is the award by the owner. When the general submits its bid to the owner, it is relying on the sub’s bid. That reliance is enough to bind the sub. So, even before award, if the sub wants to back out (bad estimate, other work, etc.), it will have a hard time of it. There are, of course, exceptions.
This concept is a powerful one. The language of the contract will be interpreted most strictly against (contra) the drafter (proferentum, the one who makes the proffer or offer). Any ambiguities or vagueness in the written instrument, as they have been created by the drafter, will be held against the drafter.
Translated: A reasonable interpretation of an ambiguous clause or specification will prevail over the owner’s interpretation, even where the owner’s interpretation is itself reasonable. There is also the area of latent vs. patent ambiguities, which will be another article.
Northwest Airlines recently lost a case on this concept. Northwest had forfeited a passenger’s return ticket because the passenger changed her reservation to a later flight after the original flight had departed. The forfeiture language appeared on the ticket, but it was in a clause labeled “refunds,” not under “rescheduling” or “forfeiture.” As the passenger was not seeking a refund, the court decided against the airline, finding that the airline’s unclear language was not sufficient notice of the forfeiture penalty.
Here we enter a strange world of unformed, non-contracts. If an electrician gets called by an owner to do some repairs, and the work is done without a written agreement, the law says that there is an implied contract. If the electrician sees an emergency electrical problem that he or she fixes, without advance agreement with the owner, can those costs be recovered? If the owner does not pay, has the owner been “unjustly enriched?”
Recovery under quantum meruit (the amount it is worth) depends on not having a contract. How can such a thing occur? The abandonment of contract by a party, or a contract that is found void for indefiniteness after partial performance, or a contract that has been rescinded, or wrongfully terminated—these are some situations where quantum meruit may apply.
A cardinal (of first importance) change voids the contract. It is a change of such magnitude that it alters the basic understanding of the parties, and the contract cannot be enforced. This concept is raised often in court and rarely proven. All cardinal change cases have extremely unique elements.
Inclusio Unius Est Exclusio Alterius
This expression is great to quote at parties. Literally, by including one thing in a list, all other things therefore cannot be in that list.
Originally, the concept was mostly applied in interpreting legislation. So, a law which applies only to “automobiles” does not apply to other motorized transportation, such as mopeds. The Latin is rarely quoted, but it is a useful concept in construction disputes. Example: A rough-in diagram for an intercom system excludes the intercom itself, unless referenced elsewhere. “One thing” can mean one type of thing. For example, a specification which requires the contractor to include all screws, bolts and attachments may not apply to welded joints.
It is amazing how often documents are destroyed or otherwise tampered with when litigation is threatened. Spoliation of documents not only brings severe consequences in a civil matter, but may also cause criminal sanctions to be applied.
This concept does not just apply to the destruction of internal documents, as with Enron. In a recent case, the facts were these: A consultant was hired to prepare a report to be used in court. Over a period of time, he modified the report to correct errors and to add information. The drafts were thrown away. A court found that the consultant’s spoliation, even though it might have been innocent, affected the credibility of the evidence.
Sometimes lawyers use arcane words in order to impress their clients, or frighten their opposition. The reason for these technical terms, however, is just the opposite: It is to give clarity to legal reasoning and to establish a base line for legal discussion.
All specialties have their own language. The language of the law has been developing since ancient times, and it continues to evolve. Some basic concepts, however, should be learned by contractors. All of my articles are written, at least in part, toward that end. EC