By Bruce Jervis
One of the primary functions of a contract is to allocate risk between the parties. The primary tool for risk allocation in the construction industry is the use of exculpatory language, or disclaimers. There, disclaimers pertain to a variety of risk factors: delay, coordination, inaccurate quantity estimates, physical site conditions, design flaws, etc.
The presence of contractual disclaimers can complicate project administration. It is not unusual for parties to disclaim legal responsibility for functions which would be in their own self-interest to perform. For instance, design professionals prepare detailed design documents and then disclaim responsibility for monitoring contractor compliance with those documents. Project owners award multiple prime contracts and then disclaim responsibility for coordinating the work of those contractors. Abdication of responsibility can result in a poorly run project. And then what happens when a court refuses to enforce the disclaimer?
Project administration can affect the enforceability of disclaimers. A course of conduct inconsistent with exculpatory language in the contract may waive the right to enforce the disclaimer. If a party disclaims legal responsibility for a function it really ought to be performing, and then performs that function at least in part during the construction process, it may result in the worst of both worlds. The party fails to fully protect its interests in the field and loses the protection of the disclaimer.
What do you think? Do contractual disclaimers sometimes create a false sense of security which may lead to careless project administration? And when a disclaimer conflicts with a normal or logical division of responsibility, might the disclaimer be waived through a course of conduct and become unenforceable anyway? I welcome your comments.
Featured in Next Week’s Construction Claims Advisor:
- Reference to Unstated Conditions Ruins Low Bidder’s Bond
- Government Imposed Testing Requirements beyond Specifications
- Reference to Commercial Clauses Inconsistent with Construction Contract
