This is the first in an ongoing series discussing construction contracts.
Would you ever agree to a contract without knowing the terms? Most contractors would say no, perhaps a bit more emphatically. But, it happens every day—where contract terms that you have never seen are incorporated into the contract by reference. Be on the lookout for phrases that incorporate external terms or standards to make sure you know what you are signing.
The most popular types of reference phrases are those that incorporate the terms of the prime or other contracts into the subcontract For example, the AIA A401 Subcontractor Agreement incorporates a number of documents by reference:
The Subcontract Documents consist of (1) this Agreement; (2) the Prime Contract, consisting of the Agreement between the Owner and Contractor and the other Contract Documents enumerated therein; (3) Modifications issued subsequent to the execution of the Agreement between the Owner and Contractor, whether before or after the execution of this Agreement; >
Do you really know what terms are contained in the Prime Contract and any changes that have been made since you signed the Subcontractor Agreement?
Some contracts incorporate certain building standards that will impact the way you complete the project. Such as:
Subcontractor will comply with LEED procedures for indoor air quality and other LEED requirements relating to the work.
Contactor shall familiarize himself with the relevant requirements of LEED and provide the necessary information and instruction to all subcontractors and installers.
What are the relevant LEED procedures and what instruction are you supposed to provide to subcontractors?
These simple sentences can obligate you and your company to significant duties and liability.Make sure you know all of the terms that are not only written but referenced in your contract.
Great thoughts! I can’t count the times I get a potential claim and the sub has not read all of the documents, including those that are incorporated. A great reminder.