What Do You Mean? Ensuring Clear Contract Language
“What do you mean?” It’s a question we often ask to be sure we understand. Words have meaning and can have impact on our interpersonal relationships. Similarly, how we speak and the language we place in our workplace contracts can have significant impacts in our contractual relationships.
Take, for example, the following two statements: “This project is complete” and “This project is substantially complete.” The lay person may not notice a significant difference in these two statements. At Faith Technologies, and throughout our industry, we know just how different these two statements are and the contractual obligations associated with each one.
A legal distinction also exists with respect to certain words used to describe change-order work. Think about the following two questions: “Would you like additional French fries?” and “Would you like extra French fries?” Both seem to imply that if I answered in the affirmative, I would receive more French fries. The distinction several courts have made, though, is that one of these implies you get more based on the price already paid, whereas the other implies you must pay more to get more.*
In general, these courts have determined that additional work is work that was “necessarily required in performance of the contract,” entitling the party performing the additional work to no additional compensation. Whereas extra work is work that was “entirely independent of the contract and not contemplated by the parties.” Extra work entitles the party performing it to extra compensation for the work.
There are several steps that organizations can take to ensure that any change-order work performed is work that is compensated:
- Define the scope of the work as extra work and in sufficient detail so there is complete clarity that it was not part of the original scope of work contemplated.
- Do not perform any change-order work without a signed change order which incorporates the defined scope of the extra work.
- Eliminate contract language that says the subcontractor is responsible for all scope “reasonably inferable” from the contract documents. This language creates ambiguity and allows for the assumption that a subcontractor is obligated to perform more work than is defined in its scope.
Although it is impossible to avoid all disputes concerning change-order work, implementation of the above steps can help to lessen disputes over the work, allowing you more time to do the work rather than spending time arguing over it.
* At present, courts in Missouri, Illinois, California, Texas and the 7th Circuit (the Federal Court of Appeals presiding over federal disputes in Wisconsin, Illinois and Indiana) have all expressed this distinction between extra and additional, making it the rule of law in these jurisdictions. Spirtas Company v. Division of Design and Construction, 131 S.W.3d 411, 419 (Mo.App. W.D. 2004), and American Drilling Serv. Co. v. City of Springfield, 614 S.W.2d 266, 274 (Mo.App. S.D. 1981)