Construction contracts can be quite daunting. They contain literally hundreds to thousands of pages depending on the project. Included in the myriad of texts are geotechnical reports, specs, drawings, special and general conditions, and more. Understanding, let alone digesting and following the volumes of information in a construction contract is monumental, to say the least.
In this blog we’ll look at Scope of Work and Incorporation by Reference.
Scope of Work
Construction contracts usually contain a provision to stipulate to the scope of work agreed to be provided by a contractor and paid for by an owner. This may seem overly simple, hardly worth mentioning. The truth, however, is that when the scope of work is vague/poorly defined, ambiguity enters into the agreement that often leads to disputes. A good contract avoids disputes instead of causes them. The Scope of Work provision in a construction contract need to be thorough, clear and not at all vague. The Scope of Work should include clear definitions of all terms utilized and be both technically accurate and complete.
Precision, specificity – these are essential to avoiding confusion or disputes down the road. Avoid expansive or vague language. For example, “any and all work needed or deemed appropriate” can be highly problematic. Contractors will typically ask for change orders that increase the cost and time for completion for anything that is not included in the original scope of work. In addition to frustration, these change requests can lead to lender and relationship controversies, none of which accomplishes the goal of the construction.
Document Incorporation by Reference
The more sophisticated the contract/agreement with a contractor (e.g. if there are numerous sub-contractors involved), the more additional documents will need to be referenced. These extra documents may include drawings, plans, technical specifications, manuals, conditions, geotechnical reports, etc. Moreover, it’s not uncommon for subcontracts to incorporate the prime/general contract for reference.
“Flow-down” provisions may also be included that bind the subcontractor to the same terms and conditions to which the general/prime contractor is bound.
Incorporation by Reference is a provision that can balloon the rights and obligations of the parties and where not well understood lead to controversy as well as increased cost to the party subject to those contracts or documents that are incorporated by reference. What’s more, terms included in these documents are just as enforceable as any contained within the signed contracts. What’s more, this is true even if you’ve not even received the document incorporated by reference.
A business and construction lawyer can help you understand and negotiate construction contracts. But there are many more things a business attorney can do besides just this. If you have any additional questions about construction contracts or wish to discuss other related legal issues, call Stephen Rizzieri at 214.434.1017 or fill out the form on our site today.