Few items in a construction contract are more important than a clear, well-defined scope of work that, in detail, outlines the work a contractor performs. Almost as important, the scope of work excluded needs to be defined. Finally, the scope of work needs to identify all work to be done by others, including the owner, that needs to occur prior to or interface with the contractor’s scope of work. Whether you’re a general contractor, subcontractor, or owner, you should be familiar with all aspects of your contract. Most importantly, you should be able to understand and answer, “What is my scope of work?”
While this might seem like a simple question, scope issues often are at the heart of construction litigation. A well-defined scope helps prevent disputes. Scope of work provisions can range from vague to detailed. Regardless of the length or detail of this contract provision, the scope of work section serves one purpose: to establish the duty owed by one party to another. Thus, clearly identifying your scope of work is a crucial task. Without this information, it is impossible to determine where a party’s liability begins or ends.
Given the importance of the scope of work provisions, careful drafting is required to have the most effective contract possible. However, even if you have a precise scope of work in your contract, other contract provisions can affect the defined scope. The following contract terms are often found in construction contracts and can effectively expand the scope of a contractor’s work.
INCORPORATED DOCUMENTS
Many construction contracts incorporate other documents. Once incorporated, these additional documents become part of the contract. The contract language need not say, “incorporated by reference.” The words “subject to” are sufficient to incorporate outside documents. Frequently incorporated documents include specifications, drawings, bid proposals and clarifications, tests (such as soils reports), industry standards, professional standards, manuals, and manufacturer’s instructions. It is easy to incorporate a document, but far harder to determine if it conflicts with negotiated contract requirements. A contractor needs to review all incorporated documents prior to signing the contract and identify any conflicts, as some terms may be inconsistent with the contractor’s understanding of its scope of work.
SITE INVESTIGATION
Site investigation clauses are contract provisions in which the contractor represents that it has visited the site of the work and familiarized itself with conditions under which the work is to be performed. These clauses will often also provide that the contractor has satisfied himself as to the subsurface conditions at the worksite. These clauses may shift the risk of differing site conditions to the contractor. A contractor must beware of accepting liability for anything underground or concealed and avoid expansion of its scope of work if the conditions are different from planned or anticipated. Instead, contractors should limit this clause to what a reasonable visual inspection would reveal.
ADEQUACY OF CONTRACT DOCUMENTS
Contracts often include provisions in which the contractor “acknowledges and agrees that the contract documents are adequate and sufficient to provide for the completion of the work.” Contractors should avoid making any warranty as to the adequacy of contract documents. Unless you have reviewed the design carefully, do not take responsibility for design of the work.
Most states have adopted the United States Supreme Court’s holding in United States v. Spearin in which the Court held that a contractor would not be responsible for the consequences of defects in plans and specifications supplied by the owner. Accordingly, the owner impliedly warrants the sufficiency of the plans. However, if a contractor agrees to the adequacy of the plans, this may undermine the owner’s liability. Similarly, an owner’s disclaimer of any warranty of the plans might limit the owner’s liability.
GAP FILLER CLAUSES
Here is a sample “Gap Filler” clause: “Contractor is responsible for all items which may be reasonably inferred to be required for the completion of the work.” These types of clauses make the scope of work difficult to define and create confusion. Attempt to avoid them. A better clause would be: “Performance by the Contractor shall be required only to the extent expressly provided by the Contract Documents.”
CODE COMPLIANCE
Contracts often provide that the contractor is responsible for completing the work in accordance with all applicable laws, codes, regulations, and professional standards. However, code compliance is generally a design issue as opposed to a construction issue. This type of provision can place a contractor in the impossible position of being contractually obligated to comply with two conflicting requirements. Additionally, the absolute language of this provision might be construed as a performance guarantee and thus expand the contractor’s scope.
SATISFACTION
Satisfaction clauses generally require that “the Work shall be completed to the satisfaction of the Owner” or “No payment shall be issued until the Owner is satisfied with the Work.” By agreeing to a satisfaction clause, a contractor risks unacceptable expansion to the scope of its work. Many courts require the party making the determination of satisfaction to be reasonable and exercise good faith in its determination. However, beware of any satisfaction clause that obligates a contractor to perform to the subjective satisfaction of the owner.
CONCLUSION
These are only a few examples of how a contractor’s scope of work can be expanded by the various provisions in their contracts. Contractors must always be vigilant and avoid undesirable expansion of their scope of work. Cautious review of the entire construction contract is recommended. ■
About The Author
Todd H. Colvard serves as of counsel in the Houston office of Ford Nassen & Baldwin (www.fordnassen.com), which is nationally recognized in the industry. His practice focuses on all aspects of the construction process. He can be reached at thcolvard@fordnassen.com or 281.953.7703.
Modern Contractor Solutions, December 2014
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