When a hurricane struck a job site causing partly installed tilt-up construction panels to collapse, suit was brought for professional malpractice by the owner against his architect. The architect countered that this aspect of the project was not his responsibility and that it was more an engineering issue. To support his contention, the architect showed that there was no corresponding duty enumerated in his contract with the owner. Had the architect looked a bit closer at his contract documents, he would have found what the court discovered—a supplementary document marked as an exhibit to the architect’s underlying agreement with the owner, specifically stating that the architect’s scope of services encompassed “structural engineering, including site visits during construction.”
Understanding how documents are included in your contracts will help prevent this type of situation from happening to you.
Incorporation by reference
A contract is made up of the document you are looking at and many other pieces of paper that are incorporated into the contract merely by reference. In other words, a contract could say “This contract incorporates by reference” then provide a list documents–many which are not physically in your possession. This legal language makes the documents part of the contract.
For subcontractors, the most significant document that is often incorporated by reference is the prime contract (the contract between the owner and general contractor). Contracts also usually reference plans and specifications. Other referenced documents can include safety manuals, proposals, and other agreements.
All the obligations that exist in referenced documents are your obligations. It is not a defense for you to later say that you never saw the documents or didn’t understand the provision. A judge will give you no sympathy.
Limiting your liability
Let’s take a closer look at some key documents. Usually there is a sentence in the construction contract that says “drawings, plans, and specifications by the architect for the project as amended are incorporated by reference.”
If you are a subcontractor, you’ll want to limit those plans and specifications only to those that apply to your scope of work. For example, let’s assume you are the window contractor on a specific contract. If there are 87 plan pages and you looked at only six pages to provide your scope of work and price, then try to limit your contract to those six pages. Otherwise, if one of the other 81 pages happens to have a note or other reference related to your work, you will be obligated to fulfill it.
You may also want to include your proposal as a contract document as it likely spells out most clearly what your work will and will not entail.
Contracts have many ins and outs and referenced documents add to the complexity. Don’t leave your liability to chance. Always work with an attorney who understands state laws regarding construction contract documents and other provisions. He or she can help you review and negotiate your contract terms and protect your company from any unwanted surprises.
Editor’s note: For more information on contracts and other construction law topics, visit the Barthet Firm or Alex’s blog at TheLienZone.com. You can also get additional tips on ways to protect your construction company on the Sage Risk Management web page.