Construction Engineering 380
Contract Interpretation
Contract Ambiguity
• Legal requirements
– Substantial completion (not strict)
– Law controls completion, not contract language
– Must prove causation to collect residual damages
(high burden of proof)
– Contractor not liable for objectively impossible work
specified (use 3rd party standard)
– Contractor not liable for practically impossible or
commercially senseless work specified (use 3rd party
standard, must be triggered by an altering event)
Contract Ambiguity
• Shop Drawings
– Owner/designer approval does not relieve
contractor/supplier of responsibility
– Contractor must warn owner if design defect
is open, obvious, and apparent
– Waiver- knowingly relinquishing a right
(proved by evidence of conduct, not writing)
– Acceptance- owner can accept work with
knowledge of obvious defect
Contract Ambiguity
• Onerous or exculpatory clauses- contract
language that nullifies a fundamental legal
right or violated public policy
Contract Ambiguity
• Scope of work should be clear in the plans
and specifications to aid contract
interpretation and reduce ambiguity
• Interpretation of scope involves
determination if contract is ambiguous,
then application of various rules to
determine scope interpretation
Contract Ambiguity
• Ambiguous contract
– Two reasonable interpretations
– Only examine documentary evidence
– Must understand the claims for determination
– Absurd interpretations disallowed
– Onerous, exculpatory, and unconscionable
interpretations are disallowed
Contract Ambiguity
• Application of rules
– Parol evidence- outside the contract (letters,
memos, phone logs, meeting minutes- must
be in writing)
– Patent ambiguity- resolve in favor of drafting
party
– Custom and usage- must be introduced
through expert testimony
Contract Ambiguity
– Course of dealing- prior behaviors between
the parties
– Ordinary meaning- special definitions of
words not allowed unless spelled out
– Implied terms- some work is implied as
necessary for completion (used carefully)
– Whole argument- must follow the spirit of the
entire agreement
Contract Ambiguity
– Clear expression of intent- drafter must
make intent obvious or ruling will go to
non-drafting party (contra proferentem)
– Clerical error- clerical errors are ignored
unless materially relied upon by nondrafting party
Contract Ambiguity
– Order of precedence- conflicting provisions
are common. Preference given to:
•
•
•
•
Special over general
Handwritten over typewritten
Typewritten over pre-printed
Words over figures