ConstructionPro Week, Volume: 2 - Issue: 35 - 08/30/2013

Are Buried Waivers Enforceable?

By Bruce Jervis

 

Construction contracts are rife with waivers. Parties are asked to waive certain types of claims, damages or remedies. This leads to questions. Are these waivers effective? What does it take to make a waiver enforceable?

 

Waivers, which are similar to disclaimers, are viewed with skepticism and strictly construed against the party attempting to impose the waiver. If clear and unambiguous, however, they are frequently enforceable. It depends in part on how fundamental the waived right and how intentional the waiver. This was illustrated in a recent case in Montana.

 

A subcontract stated that the subcontractor -- and the sub alone -- waived the right to a jury trial in any claims or disputes arising under the subcontract. This unilateral waiver was troublesome, as the right to trial by jury in civil disputes is guaranteed under the U.S. Constitution. But that right can be waived if the waiver is knowing and voluntary.

 

A court ruled that this waiver had not been knowing and voluntary. It was buried in boilerplate language presented by the contractor to the subcontractor as non-negotiable, required of every sub that wanted to do business with the contractor. The waiver was not conspicuous or prominent and had not been discussed. The subcontractor was entitled to have its claim tried to a jury despite the waiver language.

 

Can it not be argued, however, that the subcontractor bore responsibility for carefully reviewing the terms and conditions and discovering the waiver? If one signs a contract in ignorance of its contents, should that party be relieved of the results? Does your organization have procedures in place to thoroughly review “standard” terms and conditions? Or, when seeking to impose a waiver, do you call the waiver to the attention of the other party? I welcome your comments.

 

COMMENTS

I review most of our contracts at our company and I agree we bear the responsibility of reviewing the terms. But I'm not a lawyer and there is somethings I don't understand that may some day get us in trouble and I hope the courts would take that into consideration as played out in this case.
Posted by: Mark Nielson - Friday, August 30, 2013 11:38 AM


Do we have an example of a Canadian take on this issue? It is quiet interesting as our subcontracts are normally very clear and concise, however the prime contracts normally have additional supplemental conditions added into boiller plate templates that create significant ambiguity.
Posted by: John Peterson - Friday, August 30, 2013 12:50 PM


Because of this type of court ruling many contracts have a space that must be initialed by important waivers and conditions. When initialed it becomes knowing and voluntary. Conversely if there is a place in a contract that needs to be initialed, the person initialing had better find out all of it's consequences. More than once I have returned a "boiler plate" contract with a section crossed out on all copies which I then initialed. I employed a wise lawyer once who told me "Just because a contract is their standard contract does not mean it is carved in stone".
Posted by: Dan Hone - Friday, August 30, 2013 1:19 PM


Initialing next to the "important" clauses has it's merits, but many times signing the contract is the prerequisite to getting the work. If you don't sign it, chances are one of your competitors will sign it, often out of ignorance or foolhardiness. It seems the court wants to recognize that power discrepancy by ruling as they did in this case. This isn't a good situation, as it effectively punishes the party who wouldn't initially sign to contract due to onerous clauses. But until EVERY party conducts a thorough review of the language to which they are agreeing, this type of situation will be commonplace.
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