Construction contracts typically allow for modifications during the course of performance. Parties can agree to change the scope of work or price that was originally agreed to. For example, contractors can run into unexpected costs due to another’s negligence or delays. Material costs may go up and the contract price may become inadequate. Modifications allow for contractors to be fairly compensated for the increased costs that result through no fault of their own.
Each party should be aware of releases that are included in typical contract modifications. Some owners include a release agreement, or waiver, of outstanding claims for damages in their contract modifications. The worst-case scenario is making a claim for a modification only to find out you released your rights for such a claim in a previous agreement.
Waiving Your Right to make Past Claims
Be cognizant of what claims are covered by the release language. Does the release cover all outstanding claims that arose prior to the release agreement? If so, preserving the claim in writing. Your best practice is to preserve outstanding claims before signing a release agreement, even if you are confident the language doesn’t cover your type of claim.
Waiving Your Right for Future Claims?
The release may also attempt to cover future claims. If so, consider foreseeable increases in costs you may face during the course of performance. Negotiate for carveout language in the release agreement that allows you to make a claim for a modification when costs arise that are within the scope of your carveout language.
If you need help interpreting or drafting a modification or release agreement, we recommend you contact an experienced construction attorney.