5 ways to avoid ambiguity in construction contracts
TRANSCRIPT
Ways to Avoid Ambiguityin Construction Contracts
5
In construction contracts, there are many ways forambiguity to rear its head. Since construction contractsare usually a combination of many documents – theprincipal agreement, general conditions, supplementaryconditions, specifications, drawings and change orders– the single document that results can often be full ofvague wording and ambiguous details. Rushing thesedocuments can lead to conflicts being missed or many
other unintended consequences.
Making an effort to avoid ambiguity should be a primarygoal when drafting or negotiating a construction
contract. This helps ensure that all parties get what theywant, including whatever benefits you bargained for inthe contracts, and the smooth administration and
fulfillment of the contract. You also get to avoid lengthyand expensive legal disputes. To avoid ambiguity in yourconstruction contract, you can follow these 5 steps.
Keep your contract writing simple and concise.Construction contracts will always be read by a lot ofdifferent people from a wide range of professions –including judges that have no knowledge of the
construction industry. Using simple, plain english andshorter sentences will keep things clear. Also try to
avoid legalese and redundancy, as it will only cloud andconfuse your language. You want your contracts to beclear, and easy to read and understand for everyone.
Keep it Simple
Courts will give ordinary terms their ordinarymeanings and technical terms their technical meanings.The meanings of words can not be separated from thecontext in which they’re interpreted on a contract, andoften times the parties will disagree on what termsexactly mean in different contexts. To avoid these
disputes, simply capitalize and define terms to attributespecific meanings. Then use the capitalized terms as
you need throughout the contract.
Define key terms
If a contract is comprehensive, courts will often prohibitthe use of other documents to give meaning to thecontractor’s intentions. This means that you have toinclude every part of the agreement in the contract.Statements or negotiations made during pre-bid
meetings, or even signed documents from during thistime, will not be effective in contradicting express termsin the contract. Include every term of the deal in thecontract or incorporate key documents by reference.
Include all parts of theagreement in the contract.
Since there can be many documents making upconstruction contracts, conflicts can arise between
requirements contained within the documents. For example,the drawings and specifications are usually on a differentdocument. One way to address that is to include a clausethat states that in the event of a conflict, the specifications
take precedence over the drawings. Or that certaindocuments in the contract take precedence over others.Simply lay out the order of hierarchy for all documents andmaterials. You can also state that what is required of anycontract document is binding as if required by law.
Include an order-of-precedence clause
Standard-form agreements such as AIA and ConsensusDocsare used commonly in the construction industry. Howeverthere are risks associated with these forms as they tend tobe written broadly, contain terms that are inapplicable to thetransaction at issue and are often used without a full reviewby the associated parties. Even if both parties orally agree to
terms that are different from what is written, oralunderstandings should always lead to written agreements. Soit’s important to read all terms before using standard-formagreements. Add terms that you think should be in thecontract and delete terms that are inapplicable to you.
Make proper use ofstandard forms.