ConstructionPro Week, Volume: Construction Advisor Today - Issue: 21 - 09/17/2009

Incorporation of External Documents Leads to Confusion

Ideally, the terms of an agreement are spelled out within the four corners of the written document itself. Due to the complexity of construction projects, however, it is common to incorporate additional documents into construction contracts by reference. These documents may or may not be physically attached to the contract. The language purporting to make the documents part of the agreement may vary.

Adding to the confusion is the fact that additional documents addressing the performance of the work may be generated after contract execution. The documents are probably not mentioned in the written contract itself. Yet the parties rely on the documents as they proceed with the project.

In one recent case, a fabrication subcontract contained no schedule for the delivery and installation of the fabricated components. But a “layout schedule,” generated after the subcontract was signed, was quite specific regarding that schedule. When the subcontractor failed to meet the deadlines, the subcontract was terminated for default.

Please feel free to comment below.

In the upcoming issues of Construction Claims Advisor . . . case summaries and articles covering:

  • Expert Failed To Establish Additional Delay but Contractor Recovers Unabsorbed Overhead
  • Changes Clause Allowed Deletion without Compensation for Lost Profit
  • Federal Dispute Procedures Governed Subcontract Claim

 

Comments

Mr, Jervis,I have said this nomerous times over the past 8 years ago since hearing the advice NOT to include third party documants such as subsoil investigations and surveys in the architect's contract documents, which are the "instruments of service" I believe is the term. However, I ahv been scorned by many, including my current employer as being too picky or too precautious. Architects always want to take the path of least resistance, and it is much easier to bind these third party documents into the CD set of drawings or the Project Manual. So I was very glad to see your article, but a bit disappointed that you do not go further in explaining the problem or recommending possible ways to avoid the issue. 

Sorry; Gotta agree that including documents by reference can be carried too far but gotta disagree that documents by reference as a whole are a confusion to be avoided. Project Drawings and manuals (including the specifications) are obvious examples of documents that are critically part of the contract but cannot be contained within the four corners of the contract. Building and relying on Mr. Jervis comment...it would seem that emptying the garbage can by reference, (the path of least resistance) into the contract 4 corners is a real problem.

 

It seems that there must be a reasonable medium. On many projects it would be impractical to include every document or provision within the four corners of the contract. But it invites misunderstanding and disputes to, as the commenter states, "empty the garbage can by reference." Would it be fair to say that the best practice is to limit incorporation by reference to the greatest reasonable extent, while making referenced documents readily available to all parties?

 

We recently had a Contractor declare that the Geotechnical Report was not part of the Contract Docs. Although specifications did spell out that the soil DATA wasn't part of the CD's, no mention was given to the recommendations given, which were in fact referenced to in the structural CD's. What a bunch of hooey that was - a GC trying to wiggle out of performing proper subsoil prep. The upshot is that we will now included notation to included the Geotechnical recommendations as part of the CD's. So, in this case what was thought to be external docs will now be considered integral to the CD's.

 

Our premise has always been the Contract stands alone at time of signing. Anything generated after the contract is signed can only be included by Change Order. The fabrication sub in the example should not be terminated by default and will probably get a boat-load of money for wrongful termination.

 

Did the contract require the development of the schedule and the agreement of both parties to follow the schedule? There had to be some contract basics for the default.

 

The facts of the fabrication subcontract case were somewhat unusual. The original subcontract contained a specific schedule for delivery and installation. The project owner then suspended the work for a lengthy period of time. The original schedule dates had passed by the time the subcontract was revived by change order, but the change order failed to establish a new schedule. The parties then started to conduct themselves in accordance with the laydown schedule.
Responding to a couple of the other comments: The soil data "recommendation" would not be part of the contract documents in the absence of express incorporation by reference. And I agree that an after-generated document can become part of the contract documents only via a change order. But as with the fabrication subcontract, the parties can adopt a document through their mutual course of conduct.

 

Please, advise me of a good source to obtain a list of mandatory required documents to support litigations of construction cases.

 

 

 

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