THE LAW AND CIVIL ENGINEERING – MAY 2019 NEWSLETTER
Read Your Contracts Carefully
by Eugene Bass
Most engineering is done pursuant to a written contract. The form of the contract, however, can vary from a simple letter to a multi-page document filled with legalese. Although everyone knows better, often the full contract is not read or understood before signing. It is obvious that such a practice can be dangerous both because of what the contract may say and what it may not say.
A well-written contact serves to establish a clear understanding between the parties at the beginning of the engagement. It should define the rights, duties, and responsibilities of the parties and should accurately describe the expectations of the parties.
Until one is fully comfortable with the language in a contract, including all of the small print, and understands the meaning and interpretation of the terms, it is advisable to have the agreement reviewed by your attorney and insurance advisor. There can be requirements in a contract for which there may be no insurance coverage. You need to know this. You or your attorney may not be aware of those provisions and an insurance review will be critical. Extreme or unfair provisions should be identified and negotiated out of the agreement if possible. As alternatives, indemnify and hold harmless terms could be included. In addition, fees could be increased to compensate for the increased amount of risk involved. The option of not entering into the contract should always be maintained if compensation and terms commensurate with the risks cannot be negotiated.
Contracts can include provisions for the engineer to be indemnified and held harmless by the other party. Indemnity is particularly appropriate where the project involves an inherently high level of risk such as where there is a long term potential for public injury or where the owner may reuse plans or where the contract may be terminated before completion of the engineers’ services.
Even if comprehensive indemnity and hold harmless provisions can be incorporated into the contract, the inherent limitations of such provisions must be borne in mind. They will not protect the engineer for damages arising out of sole negligence or willful misconduct. Finally, the promise of the other party to indemnify and hold the engineer harmless is only as good as the ability of that party to fulfill the promise if and when the time comes. If the owner is no longer financially viable, the best contract indemnity and hold harmless terms will be worthless.
Other contract pitfalls and advice will be discussed in future articles. In the meantime, take time to read your contracts, try to understand everything and if you don’t, ask.