By Bruce Jervis
Many project owners, contractors and subcontractors use their own “standard” forms of agreement. Not surprisingly, these customized contracts tend to favor the drafting party. What is disturbing is the lack of transparency. Sometimes, the other party never actually sees the document. The drafting party seeks to impose its terms through reference.
In a recent Alabama case, a contractor issued a purchase order to a subcontractor. The order said, “A Subcontract will be created by [contractor] for billing purposes.” The sub never saw or signed the contractor’s “standard subcontract agreement,” yet the contractor argued that by performing work and receiving payment, the sub was bound by the terms of that document.
This problem is more widespread than one might think. Cross-referencing among documents and reference to external documents are common in construction contracting. There may be an express incorporation by reference, or it may be just a casual mention. Does your organization have practices in place to determine which documents define the agreement? Are all these documents examined before finalizing the agreement? Your comments are welcomed.
