Past Sage Advice posts have covered how construction contracts should clearly define your scope of work, price and payment terms, and other key elements related to the services you will be providing. Sometimes, however, your responsibilities aren’t specifically spelled out in the contract itself. Understanding these “hidden” obligations will protect your company from any legal surprises. Here are two common compliance areas you need to be aware of.
Generally, all applicable laws are considered part of the contract without being specifically referenced. Your construction lawyer can help you understand the laws that apply to your projects and keep you updated on any changes that may affect your projects. Also realize that laws differ by state and even by county and municipality. Consequently, anytime you expand your work into new geographic territory, make sure you are briefed on any differences in the area’s construction-related laws.
Even though applicable laws are already read into the contract, it’s still prudent that the contract clearly state that parties are each obligated to comply with all related laws. The language should also indicate that failure to comply will require correction at their own cost. This could apply to anything from obstructing traffic during material loading to noncompliance with building codes. A typical contract provision looks something like this:
“Each party shall, at its own expense, obtain all necessary licenses and permits pertaining to the work and comply with all federal, state, and local statutes, ordinances, laws, rules, regulations and orders as may be applicable to it and to the work and the performance thereof, including, but not limited to, those relating to occupation, permitting, building codes, taxes, environment, hazardous materials, safety, wages, discrimination and equal employment opportunity. Each party shall promptly correct any violations of such statutes, ordinances, rules, regulations and orders committed by it, its agents, servants and employees.”
Contract documents by reference
Contracts often reference other documents such as the prime contract, plans, specifications, safety manuals, and other agreements. Simply by using the language “this contract incorporates by reference,” any documents referenced become part of the contract. All obligations that exist in referenced documents are your responsibility, even if you’ve never seen the documents. You can find out more about this topic in my Sage Advice post “Hidden obligations: Don’t let contract documents catch you by surprise.”
Contracts can be complicated. Knowing what is expected of you—whether specifically outlined in the contract, referenced, or applicable by law—will protect your legal rights.