Legal Advice

I Agreed to do What?

Timothy R. Hughes, Esq.
Hughes & Associates, P.L.L.C.

This month's column is a departure from the more formal world of legalistic language and concepts and an entry into the realm of "nuts and bolts," common-sense contract advice. We take a step back from the specific toward the more general concepts that masonry contractors need to keep in mind when signing a contract. The basic premise can be summed up as caveat emptor, the traditional Latin phrase meaning "let the buyer beware." In the context of contracts, the better phrase would be let the signer beware.

1. Read the Fine Print
Each of us deal with contracts on a daily basis. You may sign a lease for an apartment. You may be closing on a home or refinancing. You may hire a person to repair a water heater, or even buy a water heater at a retail store. Each of these transactions is a contractual relationship. Often, these contractual relationships are accompanied by standard terms and conditions.

Standard terms and conditions often consist of fine print on the back of the purchase order. As a lawyer, I know firsthand how few people actually read these terms and conditions. Indeed, in my own personal life, I have irritated many sales people who try to rush me to a deal only to become frustrated as I actually read the language in the agreement. Naturally, I am faced with the intended cutting remark of, "You must be a lawyer, huh?" The exercise of actually reading these terms and conditions is one of professional interest for me as a lawyer, but it is also important to have a clear understanding of what you are agreeing to when you sign a contract.

Reading all that fine print becomes a force of habit, one that can pay off in your personal life. I had the good fortune of successfully arguing that I was entitled to return a large shipment of furniture I did not like for cash rather than having to accept a store credit I did not want based on these terms and conditions. I can tell you it was quite enjoyable to successfully point out to multiple sales people at the store that they did in fact have a return for cash policy, while several of them argued — quite loudly — that they did not. The return policy was established by a written contract that they did not even review.

While reading the fine print in your personal life can be of assistance, doing so before you sign professional contracts is absolutely essential. Your company lives and dies by that fine print. It should be noted that the fine print only truly comes into play when you are dealing with a problem project. No one cares about the termination clause unless things are going awry on the job.

Similarly, the risks of a project going south need to be priced into the job. You need to know your rights, duties and responsibilities before you start performing the work. If your exposure is capped with a contractual limitation of liability or waiver of consequential damages, you may be able to charge less money for the job than if you have broad indemnification exposure to liability.

2. Clearly Define the Scope of Work
It continually surprises me how many contracts have a poorly defined scope of work at the start of the job. The essence of a good contract is one that is simple, clear and as concise as possible. The basic definition of "clear" here requires a complete statement of what work is to be performed and in what manner. A poorly defined scope of work is an invitation to misunderstandings and litigation.

3. Understand the Scheduling Requirements
As with poorly defined scopes of work, it is truly impossible to properly price a job unless you understand the schedule and what it will take for you to complete your efforts on time. Time means money in all businesses, but on construction projects the translation is literal. In addition, there is no more complex of a case to litigate than a complicated delay claim. These cases are heavily fact intensive and require extensive and expensive expert witness analysis. You can avoid these expenses, if possible, by understanding the schedule requirements before you start work.

4. Be Careful of Incorporated Standards
It has become commonplace for architects and engineers to incorporate extensive industry standards and codes by reference into specifications. For example, as a masonry contractor you can probably expect specifications to incorporate by reference the standards for performance of the American Brick Institute (ABI). The potential rub occurs when there is something omitted from the drawings and specifications that is arguably inferable from the ABI standards. Similarly, conflicts can occur between the base specifications, applicable codes and the incorporated standards of performance.

Contracts often contain an order of preference clause stating whether the specifications control over drawings and the like. Such a provision could contractually provide that the incorporated standards control over the specifications, or vice versa. It is critical for the person responsible for performance on the job to know and understand not only the drawings and specifications, but also the code requirements and incorporated standards of performance. Without this base of knowledge, your company could find itself performing extensive work for free that you did not anticipate as part of the base contract.

5. Know What the "Contract" Is
You may have heard a lawyer discuss the "battle of the forms." This is a situation where one side makes a contract offer in writing and sends attached terms and conditions. The other side agrees to the price, but sends its own terms and conditions back. This process can involve partial acceptance of contract, rejection and counter-offers, and other contractual concepts, often cycling through multiple rounds. The process is further complicated when the parties are located in different states, thereby raising the question of which state's laws come into play.

The permutations of this type of cycle are endless so it is impossible to say here whose contract controls. The simple advice is to always have a signed contract making clear what the terms are. If you fail in this venture, you run the risk of having agreed to someone else's terms and conditions when you did not mean to.

6. Watch for the Hidden Counter
A corollary to number 5 above is to be careful of hidden counter offers. For example, you send a contract proposal for work with a specific scheduling term. The other side agrees to the price, but changes one specific term buried in the agreement. You do not review the documents when they come in and start work on the project.

A situation like this example is ripe for disagreement. One side will argue that their proposal was accepted, while the other side will argue the offer was rejected, there was a counter-offer, and the counter-offer was accepted as demonstrated by the initiation of work on the project. The main point here is to review all contract proposals and correspondence carefully to make sure everyone is on the same page about the scope of work, the pricing and the terms of the deal. There is no better way to get into litigation than to have a misunderstanding before the job even starts about the terms of the deal.

Conclusion
The simple points listed above probably sound overly basic. In some senses, they are; however, in my practice I am continually faced with repetitive issues where my clients or opponents failed to follow these six guidelines. Adhering to these basic principles can help to greatly reduce the chance of a misunderstanding over the basic terms of the deal and the potential for litigation on your projects.