Construction Engineering 380

Contract Interpretation

Contract Ambiguity

• Legal requirements– Substantial completion (not strict)– Law controls completion, not contract language– Must prove causation to collect residual damages

(high burden of proof)– Contractor not liable for objectively impossible work

specified (use 3rd party standard)– Contractor not liable for practically impossible or

commercially senseless work specified (use 3rd party standard, must be triggered by an altering event)

• Shop Drawings– Owner/designer approval does not relieve

contractor/supplier of responsibility– Contractor must warn owner if design defect

is open, obvious, and apparent– Waiver- knowingly relinquishing a right

(proved by evidence of conduct, not writing)– Acceptance- owner can accept work with

knowledge of obvious defect

Contract Ambiguity

• Onerous or exculpatory clauses- contract language that nullifies a fundamental legal right or violated public policy

Contract Ambiguity

• Scope of work should be clear in the plans and specifications to aid contract interpretation and reduce ambiguity

• Interpretation of scope involves determination if contract is ambiguous, then application of various rules to determine scope interpretation

Contract Ambiguity

• Ambiguous contract– Two reasonable interpretations– Only examine documentary evidence– Must understand the claims for determination– Absurd interpretations disallowed– Onerous, exculpatory, and unconscionable

interpretations are disallowed

Contract Ambiguity

• Application of rules– Parol evidence- outside the contract (letters,

memos, phone logs, meeting minutes- must be in writing)

– Patent ambiguity- resolve in favor of drafting party

– Custom and usage- must be introduced through expert testimony

Contract Ambiguity

– Course of dealing- prior behaviors between the parties

– Ordinary meaning- special definitions of words not allowed unless spelled out

– Implied terms- some work is implied as necessary for completion (used carefully)

– Whole argument- must follow the spirit of the entire agreement

Contract Ambiguity

– Clear expression of intent- drafter must make intent obvious or ruling will go to non-drafting party (contra proferentem)

– Clerical error- clerical errors are ignored unless materially relied upon by non-drafting party

Contract Ambiguity

Contract Ambiguity

– Order of precedence- conflicting provisions are common. Preference given to:

• Special over general• Handwritten over typewritten• Typewritten over pre-printed• Words over figures