What does it mean to sign a contract? Typically a contract is a mutual agreement between two parties to perform certain activities to accomplish some scope of work and usually by an agreed time. Contracts have an interesting history. In Japan, it was not until a few years ago that a one-page contract even came into being. In a "mutual trust" society, honor is key and the agreement and promise to someone to do something is as good as gold. In the past few years, the key elements of the project, general scope, agreed cost and completion time have been reduced to a signed one-page agreement. However, the majority of the rest of the world works under a "mutual mistrust" concept. Contracts become more complex, detailed, legalized and often run hundreds of pages.

However, the basic assumption that each party makes when signing the contract is that the other party has read the contract. While a pretty basic assumption, it is not uncommon for the project manager while testifying that in fact he or she had not read the contract and that he relied on his lawyer to advise as to what was important. I have witnessed other situations where the one party simply says that the certain clauses are unreasonable and are not typical of what one would expect for that type of project. Somehow these "testimonials" are to "replace" the terms of the contract allowing the trier of fact to ignore the terms agreed to by the parties before the work started.

It is also interesting to note the massive discussions that often occur in negotiation after the fact, the briefs written by counsel and the arguments made as to why certain terms of the agreed contract should be waived, ignored or not enforced when at the end of the day the project has become delayed with significant cost overruns. It is even more interesting to see experts argue why certain clauses should not be upheld, or opining on legal precedent (despite the fact that they are not lawyers) or arguing that the interpretation which would be standard in the particular industry somehow in this particular case would be different. I am still amazed at the amount of time which is spent arguing the clauses and terms of the Contract at the end of the when the time to argue was BEFORE signing the agreement!

It is becoming more and more common to see owners customizing their contracts to correspond with their own internal practices or to tailor to contract to the particulars of a specific project. What may be important to a particular owner in a contract for one project may not have been important to another owner or even the same owner in a different situation. Thus, the critical importance of reading the contract BEFORE YOU AGREE TO THE TERMS!!! So what if you sign the contract? The "so what" means that you have agreed to the terms, have agreed to abide by the terms and if you fail to do so, then you face the consequences—what ever those may be given the project and the issue claimed.

January 30, 2007

Too many times owners and contractors do not understand the services they are buying and as a result try to make one contract fit all services and have them flowed down to all subcontractors on a project. This is especially a big problem when professionals are forced to negotiate a contract where the vast majority of the terms do not apply and the contract doesn't even ask for the terms they really need. Judges seem to ignore that and just want to make a deal. With that mentality why do we even need a contract? In fact we may be better off without one!

Fred Mueller

January 29, 2007

How airtight are these clauses? If you hold a contractor to the smallest oversight, your relationship is shattered or your actions are observed under a microscope. In the cut-throat world of sub-trade bidders, especially concrete and rebar, it's not what you know, it's who you know.

Mark Oda

January 26, 2007

Unfortunately sub contractore are told either sign the contract the way it is or The GC will give it to the next Sub. The seems to be no more of the old team work concept that was around when I started in the trades.

Jody M. Favia

January 26, 2007

That's all well and good when you're the big fish in the pond but when you are the little fish in the pond and the big fish decides not to honor the contract then what does the little fish do? Little fish own a small small business and cannot afford a lawyer to fight the big fish. We have had many incidents of not being paid a portion of our contracts because the 'big fish' decided not to. How do you fight that?

Annette

January 26, 2007

As a Construction Consultant for minority & women business owners, I found this article both interesting and true. Stressing the importantance of reading contracts and bid documents has always been at the basis of my workshops. New business owners are often overwhelmed with the bidding process and once they are successful in acquiring the contract, they fail to fully read the contract before signing. This oversight has caused lots of clients to suffer loss of revenue as well as their reputation. Failure to read the contract may result in submitting the wrong pay application, not providing adequate business information or missing billing cycles, all of which costs the contractor both time and money.

Thank you for posting this article and hopefully more and more contractors will take heed when agreeing to contract terms until they fully read and understand ther terms.

Rose M. Maybin, Construction Program Consultant
M/WBE Alliance, Inc.