Q: Our firm was engineer of record managing the reconstruction and repair of a road for a municipality. Now that the project is finished, the contractor is first making a claim for differing site conditions. The contract documents state that written notice must be given of any subsurface or latent physical site conditions differing materially from those indicated in the contract documents when first discovered. The claim for latent conditions was initially rejected because of lack of notice. Ultimately, the city settled the claim with the contractor who received some compensation. I feel that this was wrong, and the contractor should not have received any money. Is my opinion justified?
A: Notice provisions, such as the one in these contract documents, including notice regarding subsurface conditions or other notices regarding delay or change order work, are oftentimes ignored by courts. As a result, project participants begin to believe that there is little reason to bother with putting such clauses in the contract if courts are not going to enforce them.
While the law regarding notice before a party can pursue a claim differs from state to state, courts do not like "waivers" or automatic relinquishment of rights or claims. This is because such lack of notice acts as a forfeiture of legitimate compensation, which often causes an unjust enrichment. Courts evaluate the conduct of the parties to determine whether any party would suffer any undo prejudice by the strict enforcement of a clause requiring notice thereby unduly benefiting one party to the contract.
Whether written requirements of notice are going to be upheld often depends on the effect that the lack of notice has on an ow n e r ’s rights to avail itself of certain options to protect its economic interest in the project had the notice been given on a timely basis. Generally speaking, notice requirements pertaining to different site conditions are enforced because the project owner’s options are limited or compromised if the conditions are disturbed, particularly in the case of subsurface conditions. While the owner here would have been on solid legal ground to deny this claim, there are oftentimes sound reasons to settle a lawsuit, and without more information, the wisdom of settling the lawsuit should remain an open question.
Q: I am an engineer and government representative on a U.S. Army Corps of Engineers project. Recently, a contractor made a delay claim on a project even though the contractor completed the work within the contractually required deadline. The contractor claimed delay because it finished after its planned early finish date. This sounds ludicrous to me. How can there be damages for delay when the work is completed within the time required by the contract?
A: There have been cases where the contractor has sued and recovered for gove r nment interference with early completion. While these cases are indeed rare, it is a viable theory.
Basically, if a contractor schedules the work in order to achieve early completion and that schedule was achievable, a contractor can recover additional compensation if it would have met the planned completion day except for the delay caused by the government entity. In reality, contractors have an extremely difficult time proving that they could have completed early and that the government interference caused any delay in the early completion.
Basically the contractor has to prove that the work could have been accomplished as it was set forth in its schedule and that it was achievable. Assuming a contractor can do that, then there is a more difficult element to prove. The contractor must prove that—except for the government interference—the delay or interference would not have occurred. This is a very difficult standard, and the cases where contractors have been successful in advancing such a claim are as rare as snowflakes in July in Florida.
Q: We use a general indemnity clause in our engineering contracts; however, I have been told that my firm, or the professional engineer, cannot be indemnified for the engineer’s own negligence. Is this accurate, and can you give any suggestions for drafting such clauses?
A: The drafting of indemnity clauses is something that should be undertaken by a lawyer familiar with the law in your jurisdiction as the law differs from state to state. Generally speaking, when professional errors and omissions or negligence is involved, it is state law that usually applies, and typically, that is the law where the project was located or the work was undertaken. Thus, specific advice in a column of this nature would not be helpful as it could differ from jurisdiction to jurisdiction.
Addressing the issues in general terms as to what a majority of jurisdictions hold in the United States, the courts have generally allowed the indemnitee (party being indemnified) to indemnify itself from acts of negligence with several important exceptions. Under a general indemnity provision only passive, not active, negligence will be covered. This means that the engineer could not have been actively negligent, but merely passive. In most jurisdictions, construction and design contracts with provisions seeking to indemnify for sole negligence, willful misconduct, or the indemnitee’s own active negligence are generally held to be unenforceable, and, in some states, are deemed void. While you should seek the assistance of a lawyer to draft an enforceable indemnity clause, an agreement can provide for indemnification against an indemnitee’s own negligence, but such an agreement must be clear and specific.
Michael J. Baker, Esq., is a partner in the Los Angeles-based law firm of Burke Williams & Sorensen, LLP. He is an expert in design and construction contracts, mediation, and litigation. Please send him your legal questions via e-mail at firstname.lastname@example.org.
Disclaimer: The answers to the questions provided herein, although intended to be accurate, authoritative, and informational, may or may not accurately reflect the law in your jurisdiction or where you do business. In providing answers to these questions, it should be recognized that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional licensed in your jurisdiction should be sought.The information provided herein is for informational and hypothetical purposes only.