Best Practices Construction Law : Construction Lawyer & Attorney : Matthew DeVries : Stites & Harbison Law Firm : Green Building & LEED Litigation

Noted author and business attorney, Peter Siviglia, once said: "In this world, ... there are two forms of writing: creative (such as novels, plays, and poetry) and expository (such as treatises, letters, memorandums, and briefs).  I've tried both and prefer a third: contracts, which do not entertain, do not convey information or ideas, and do not try to persuade."

In the world of commercial real estate and construction contracts, Siviglia hit the nail on the head.  Using some of Siviglia's tips in Courses on Drafting Contracts, 12 Scribes J. Legal Writing 89 (2008-09), here are a few items to think about when drafting contracts:

• A contract is about defining transactions and relationships.  This more more than the definition that we learn in law school (i.e., "An agreement between or among two ore more parties for the purpose of ...").  According to Siviglia, the contract will help define: (1) a transaction, such as the purchase of real estate; (2) a relationship, such as a partnership, or (3) a combination of both, such as a partnership to purchase and develop real estate.
• A contract is a set of instructions.  Just like the building plans and specifications instruct the contractor how to build the water treatment plant, commercial condo or new hospital, the written contract instructs the parties on their course of conduct in the transaction.  And when problems arise ... and they will ... the written contract instructs the parties on how to perform in such circumstances.
• A contract should include standard provisions.   Although each contract is different, there are a number of terms and conditions that are part of the "A Player" list, including: 

1. Termination, which defines the parties' rights to terminate the contract;
2. Assignment, which outlines whether the parties are allowed to assign their rights to another party and the terms in which they are allowed to do so;
3. Governing law, which defines the law (i.e., Tennessee, Virginia, New York) that will apply to the parties' contract in terms of both substance and procedural issues;
4. Disputes, which defines whether the the parties will litigate in court, mediate, or arbitrate;
5. Notice, which identifies where legal notice of disputes, claims, changes, etc. are directed;
6. Modifications, which outlines the procedures for modifying or amending the contract terms (not to be confused with a "changes" clause);
7. Changes, which outlines the procedures for modifying or changing the scope of work by one of the parties (not to be confused with a "modification" or "amendment" clause);
8. Claims, Rights and Remedies, which describes the method for submitting claims and may also include rights to recover or limit certain types of damages (consequential damages, liquidated damages for delays, attorneys' fees, interest); and
9. Indemnification, which describes the circumstance in which one party may have to indemnify (or pay the losses or claims) of the other party for some legal purpose.

Of course, each transaction or relationship should have a written contract tailored to its own project or development needs. In other words, while standard form agreements can be used on successive and multiple transactions, each project should nonetheless be reviewed for the applicability of particular standard form provisions to the particular project.  On occasion, circumstances dictate the necessity of revisions to your standard agreement.

Image: Juli Shannon

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"Pay me less before the dispute erupts ... or pay me more after the dispute erupts ..." is a phrase that many construction litigators have said to their clients.  What that means, practically, is that if you invest the time and money to have your attorney review construction contracts before the job starts, you will save time, money and effort later when the dispute begins (and perhaps you may even fend it off). Despite the warnings, there are many out there who want to "go it alone" ... and that's okay.  This post is for you.

The American Bar Journal posted an article two weeks ago about a federal bankruptcy judge who was fed up with "superfluous words and too much capitalization."   The judge took a stand against legalese and issued some guidelines (pdf) to the practicing bankruptcy attorney.  Some of my favorites include:

• Lawyers apparently disfavor articles, both definite and indefinite. Use the
  articles “the,” “a,” and “an” as appropriate. Write the way you would speak.
• Never use and/or.
• Eliminate superfluous words. They serve no purpose other than to make the
  document sound more legal ... Examples of such words are: “hereby,” “herein,”
  “in and for,” “subject,” “that certain,” “now,” “that,” “undersigned,”
  “immediately,” “heretofore entered in this case,” “be, and hereby is”–the list
  goes on and on.
• Keep plurals and possessives straight and consistent. Know when to use
  debtors (plural), debtor’s (singular possessive), and debtors’ (plural
  possessive). Make sure the verb matches the subject of the sentence.

You can tell by the terse language in the judge's guidelines that he likes clarity and he wants litigants (and particularly their attorneys) to follow those guidelines.  If I were a construction litigator ... which I am ... I wonder what my suggested guidelines would be for construction contracts.  Here are a few:

• Keep the names consistent.  I know this will take some searching and replacing in your form contracts, but it is important to track the parties' names correctly.  Many times, I have found a "subcontractor" listed as "contractor" in one section and "subcontractor" in another section.
• Identify the "contract documents" for the parties.  Too many disputes arise because someone thinks the proposal or purchase order is part of the parties' agreement only to learn later that it has not been incorporated as part of the contract documents.  Many form contracts have an "order of precedence" clause that ranks the precedential value of the documents in the event of a dispute.  Make sure to expressly include every document that you want into the contract documents.
• Evaluate and clarify the "dispute" provisions.  Again, I have seen a number of lawsuits between parties spend too much time on the procedural issues such as litigation, arbitration, mediation (because the contract was not clearly written), rather than getting to the heart of the matter.  Make sure your contracts clearly identify your method of dispute resolution.

Do you have any other guidelines for your construction contracts?

Photo: Flckr - LucasTheExperience

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