Most individuals involved in the construction process recognize the importance of signing documents only in their capacity as authorized agent of the entity they represent. The responsibilities and liabilities are not being assumed by the individual, but by the corporation, LLC, limited partnership, public agency, etc. A recent case from Tennessee provides an instructive scenario where an individual signed a construction contract only once, clearly in his capacity as an authorized representative of the construction corporation, and still found himself with personal liability exposure.
The AIA contract form included a box where the “Contractor” was named. Someone entered the name of the corporation and the name of the individual. The appellate court reasoned that as a named party to the contract, the individual could have become bound despite the lack of any signature in his individual capacity. The court additionally noted parties can indicate assent through their actions, inactions or spoken words.
The second case in this issue involves a contractor’s $369,990 bid preparation error when transposing a subcontractor price quotation. The contractor demanded a price reformation of the contract. The federal agency should have recognized that a clerical mistake had occurred, yet the project owner never sought verification of bid accuracy prior to contract award. Unfortunately for the contractor, the agency never had access to the bid preparation worksheets, which would have alerted it to the error.
The third case addresses the limitations of enforceability of broad “flow-down” clauses in subcontracts. When the sub agreed to assume toward the contractor all the obligations the contractor had assumed toward the project owner, did the subcontractor simply agree to construct its work in accordance with the technical specifications? Or, did the sub agree to all the general conditions incorporated into the prime contract?
