A construction contract is the cornerstone of any building project, a legally binding agreement that serves as the framework for the scope of work to be carried out. Construction contract ambiguity is a silent adversary in construction contracts growing from poorly defined clauses and coming into the spotlight at the most inconvenient moment.
Gray areas cost contractors as these may lead to project delays, cost overruns, and litigations; as such, it’s essential for contractors to partner with a construction litigation attorney.
A legal counsel can interpret contract ambiguity, advise in case of a dispute, and help with litigation.
Understanding Construction Contract Ambiguities
Construction contract ambiguities are provisions or phrases that are not clear, and, hence, open to interpretation and are classified into two types.
Patent ambiguities are glaringly evident, while latent ambiguities arise when a contract, which seemed clear-cut, becomes unclear in light of external or unforeseen circumstances.
Contractual ambiguities stem from several sources; however, vague language and conflicting provisions are the primary reasons.
Missing information is equally culpable as it leaves room for different interpretations. Industry-specific jargon can also be grounds for contract ambiguity if not properly defined.
Consequences of Contractual Ambiguities
The most immediate effect of contract ambiguity is project delays caused as work stalls when stakeholders disagree on what the unclear clauses mean.
In many cases, arbitration and litigation follow as each party tries to defend its interpretation of the ambiguity. This worsens the situation and further delays the project.
Financial consequences can also manifest in the form of time delays and damages. The project delay could also necessitate a change order, under which the contractor may be compelled to assume additional work with no extra compensation.
Contractual ambiguities also project far-reaching consequences such as strained relationships and project termination. Both scenarios reduce the contractor’s present and future business prospects.
Proactive Measures for Ambiguity Prevention
While drafting contracts, construction companies should provide a comprehensive scope of work. This ensures contractors and owners are on the same page regarding the definition of the inclusive scope of work to be completed.
The contract should detail construction materials, completion timelines, and acceptable standards of quality. Contract drafting should be in clear and concise language.
Industry-specific jargon should be avoided where possible. Where unavoidable, these terms should be properly defined, as some terms can have different meanings depending on the context.
A glossary of terms can be useful in this aspect. There should also be consistency across all contract documents. For example, the work scope should align with the technical specifications.
Contractors should also have legal experts review the contract before signing. This can bring a fresh perspective by spotting sources of ambiguities that may not be obvious.
Resolving Ambiguities When They Arise
When a construction contract ambiguity occurs, a resolution will be needed quickly to avoid disruption of the project.
By immediately enlisting the services of a construction litigation attorney, ambiguity can be resolved through negotiation and mediation, during which the parties involved engage in open communication and try to establish a mutually agreeable resolution.
In cases where negotiation and mediation fail, litigation may be the only way forward. The following are the major principles used in interpreting and resolving contract ambiguities:
The Parol Evidence Rule
This principle curtails the admission of evidence. Under this principle, previous or concurrent oral or written statements that can alter, negate, or vary the contractual terms of a written contract are inadmissible.
It applies if the written contract is intended to be a complete and final depiction of the parties’ agreement.
Contra Proferentem Rule
Under this rule, ambiguity is interpreted against the interests of the party that drafted the ambiguous clause.
It is based on the premise that the drafter had control over the clarity of the language used in the contract and, therefore, meant to benefit from the contract ambiguity.
Reasonable Person Standard
Under the reasonable person standard, contract terms are interpreted in the way that a reasonable person would understand them.
It takes into account the contract’s purpose, the circumstances surrounding the contract’s formation, and the subsequent conduct of the parties.
The Importance of Legal Counsel
With their high level of complexity, construction contracts are susceptible to ambiguities. With an experienced construction litigation attorney, a resolution can typically be reached.
An attorney can clarify contract provisions and help in renegotiating terms, providing guidance in arbitration, mediation, and litigation if necessary.
Partner With KPPB LAW Construction Litigation Attorneys for Clarity
As a contractor, the last thing you want is to be entangled in a lengthy legal battle over a contract ambiguity.
As such, having a reliable construction litigation attorney represent your interests can ensure the best possible outcome for your situation, as quickly as possible with most cases beng resolved outside of a courtroom.
The experienced team of construction litigation attorneys at KPPB LAW can help you navigate through the gray areas of contracts. We excel resolving contract ambiguity issues through mediation, negotiation, or litigation.
today for a consultation, and let our team help you protect your business interests.