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ConstructionPro Week, Volume: 4 - Issue: 46 - 11/25/2015

Are Claim Settlements Producing Unexpected Consequences?

By Bruce Jervis

 

Claim settlement agreements can be drafted any which way. Sometimes they are drafted with broad, general language. Sometimes they produce unexpected consequences. Parties signing claim settlement agreements need to be aware.

 

A South Dakota supplier of aggregate was twice victimized by faulty material testing: prior to bid submittal by an independent laboratory hired by the supplier and after contract award by the state highway department. The supplier sued the state and settled for a stipulated amount. The supplier then sued the testing laboratory. But there was a problem.

 

The settlement agreement with the state released any claim the supplier might have against “all others directly or indirectly liable.” Even though the testing lab had no business relationship with the state and was not a party to the settlement agreement, the supplier’s claim against the laboratory had been extinguished.

 

While this broad release may have been protective for the state, it was not in the supplier’s best interest. One can’t help questioning whether the supplier considered the implications of this “boilerplate” language. What do you think? Do parties frequently sign settlement documents without adequate analysis and consideration of the consequences? Your comments are welcomed.

 

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