Construction Be Clear and Concise or Pay the Price When It... Clauses Breaking

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Construction Hotsheet -Breaking Developments in Construction Law
09.05.2006
Be Clear and Concise or Pay the Price When It Comes to Indemnity
Clauses
Indemnification provisions are some of the most important paragraphs of any construction
contract. Indemnification provisions allocate risks of unintended adverse consequences between
the parties.
Recently, the Washington Court of Appeals in MacLean Townhomes, LLC v. P.J. Interprize,
Inc., reminded us of the traps that can befall parties when indemnity provisions are not clearly
written.
MacLean Townhomes, as developer and general contractor for a condominium project, retained
subcontractor P.J. Interprize to perform work. Following completion of the project, the
homeowners association sued MacLean for breach of contract, alleging construction defects.
MacLean settled with the homeowners and, pursuant to the indemnity clause in the
MacLean/Interprize contract, brought an indemnity claim against P.J. Interprize. The indemnity
clause provided:
SUBCONTRACTOR shall defend, indemnify, and hold CONTRACTOR harmless from
any and all claims, demands, losses and liabilities to or by third-parties arising from,
resulting from, or connected with, services performed or to be performed under this
Subcontract by SUBCONTRACTOR or SUBCONTRACTOR’S agents, employees, sub
tier Subcontractors, and suppliers to the fullest extent permitted by law and subject to the
limitations provided below:
SUBCONTRACTOR’S duty to indemnify CONTRACTOR shall not apply to liability
from damages arising out of bodily injury to persons or damages to the property caused
by, or resulting from, the sole negligence of CONTRACTOR, or CONTRACTOR’S
agent or employees.
SUBCONTRACTOR’S duty to indemnify CONTRACTOR for liability for damages
arising out of bodily injury to persons or damages to property caused by or resulting
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from the concurrent negligence of CONTRACTOR or CONTRACTOR’S agents or
employees shall apply only to the extent of negligence of SUBCONTRACTOR or
SUBCONTRACTOR’S agents, employees, and sub tier Subcontractors and suppliers.
Interprize sought and was granted dismissal of MacLean’s indemnity claim, arguing that the
language of the indemnity clause limited its scope to third-party tort claims (claims based on
negligence such as personal injury) and excluded breach of contract claims such as those
MacLean settled with the homeowners association.
MacLean appealed the decision.
The Court of Appeals reversed the trial court and held that the indemnity clause was not limited
to tort claims but also covered breach of contract and any other claims arising out of Interprize’s
performance under the contract. If Interprize wanted to limit the indemnity to tort claims, the
Court of Appeals said that Interprize should have inserted the word “tort” between “all” and
“claims” in the first sentence.
While MacLean does not change existing case law in Washington regarding enforceability of
indemnity clauses, it does underscore the importance of clear and concise contract drafting. Say
what you mean. Use words that are not susceptible to multiple meanings. If presented to a court
for interpretation, an ambiguous clause will, at best, be construed in your favor after you have
incurred attorneys’ fees and costs to obtain the court’s holding. At worst, the ambiguous clause
will be construed against you; you will have to pay your attorneys and, depending on your
contract, the fees of your opponent. The short lesson that may be drawn from MacLean regarding
contract drafting: be clear and concise or pay the price.
For more information, please contact the Construction Practice Group at Lane Powell:
206.223.7000 Seattle
503.778.2134 Portland
[email protected]
www.lanepowell.com
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