By AIA Contract Documents
October 31, 2022
One of the most common ways to contract for maintenance work on an existing building is to start with a standard form contract, then add in appropriate terms from the contractor’s proposal – such as price, schedule, and description of the work. While using a standard form contract can result in an easier negotiation process, significant problems can, and often do, arise when the contractor’s proposal is referenced in, or attached to, the contract. When this occurs, typically all the terms and conditions included in the contractor’s proposal are incorporated into the agreement. In other words, when trying to reference the contractor’s proposal just for a few key items, the entire proposal inadvertently gets incorporated into the contract.
If the terms and conditions of the proposal conflict with the terms of the contract, this will likely result in contractual ambiguities that a court will struggle to reconcile and interpret. Worse yet, if the proposal’s terms and conditions address issues that are not in the contract, there is a good argument that those terms and conditions are enforceable. A common example of this is when a contract is silent on the issue of whether the maintenance contractor’s liability is limited in any way, then the contractor’s proposal is attached to the contract and that proposal contains a limitation of liability provision. In this scenario, it is possible that a court would interpret the limitation of liability clause in the contractor’s proposal as being part of the contract even though it was not included in the body of the contract itself.
Here are a few strategies to overcome contractual ambiguities that can arise from this scenario.
(1) Avoid attaching or directly referencing the contractor’s proposal in the contract.
One way to avoid conflicting and ambiguous terms between a contractor’s proposal and the contract is to not directly reference the contractor’s proposal in the contract and not attach the contractor’s proposal to the contract. If the contractor’s proposal contains information that the parties wish to include in the contract, simply copy only that information over into the contract. For example, if the contractor’s proposal includes a price and payment schedule that the parties agree upon, just copy that information directly into the contract. If the proposal contains additional payment terms that conflict with the terms in the contract, make sure to avoid carrying those over into the contract. Similarly, if the contractor’s proposal contains a description of the work the contractor will provide that is agreeable to both parties, extract that description from the proposal and insert it into the contract. The key to this method of assembling a contract is to avoid pulling over terms and conditions from the proposal that would conflict or usurp terms of the standard form contract.
(2) Strike out all terms and conditions from the contractor’s proposal that you do not want to be part of the contract.
If the contractor’s proposal is attached to, or referenced in, the contract make sure to clearly strike out all the terms and conditions in the proposal that you do not want to be part of the contract. This can be done by striking out provisions on a line-by-line basis by hand or by using software to mark up the contractor’s proposal.
(3) Include an integration clause into your contract.
An integration clause is a provision in a contract that states that the terms of a contract are the complete and final agreement between the parties. Integration clauses are sometimes referred to as a merger clause or “entire agreement” clause. In most contract negotiations, there are multiple versions of a contract that get passed between the parties and marked up with various proposed edits. An integration clause, like the sample provided below, makes clear that there is only one final contract between the parties.
This contract represents the entire and integrated contract between the parties and supersedes prior negotiations, representations, or agreements, either written or oral. This contract may be amended only by written instrument signed by both the Client and Contractor.
Not only does this clause make clear that this contract supersedes prior negotiations, representations, or agreements, it proscribes how the contract can be amended. Just as it is important for the parties to clarify which version of document is the actual, controlling contract, it can be equally important to clarify how that contract can be amended. This way, the parties are not left to guess as to whether informal conversations, emails, or other communications are part of the contract. The language quoted above allows for amendments only if they are done by a written instrument signed by both parties.
(4) Include a clause that disclaims terms and conditions from the contractor’s proposal.
One last way to avoid potential ambiguities between a contractor’s proposal and a standard form contract is to include in a provision that specifically describes why the contractor’s proposal is attached to, or referenced in, the contract. Here is an example of such a provision.
This contract supersedes the Contractor’s proposal for the Maintenance Work and any terms and conditions contained in the proposal. If the Contractor’s proposal is referenced in this contract, the parties agree that such reference is intended only to describe the Maintenance Work that the Contractor will perform, and any other terms and conditions contained in the Contractor’s proposal shall not be a part of this contract.
This provision makes clear that the agreement supersedes the contractor’s proposal. This provision also notes that if the contractor’s proposal is refenced in the contract, the parties agree that such a refence is only intended to describe the maintenance work that the contractor will perform, and that other terms and conditions will not be part of the contract.
AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.