Ambiguity Kills in Construction Contracting
Well, I’m back and hope to have a more consistent publishing schedule moving forward. I appreciate the continued readership through what has been a busy time for my solo construction practice over the last couple of months. Now, back to our program. . .
Here at Construction Law Musings, I have often beaten the drum of a solid contract that leaves as little as possible to chance or the dreaded “grey areas” where we construction lawyers like to make money. An example of the issues that can arise from ambiguity can be found in a case from 2017 in the Western District of Virginia, W.C. English, Inc. v. Rummel, Klepper & Kahl, LLP et al
In this case, English, a general contractor, entered into a contract for Quality Assurance (QA) functions with RK&K, the defendant, on a contract English entered into with the Virginia Department of Transportation (VDOT). Needless to say, because this would not be a post at Musings otherwise, there were issues with the QA performed by RK&K leading to additional costs for English to correct certain work that did not comply with the contract documents between VDOT and English. English sued for breach of contract based upon a term sheet, signed by the parties, from RK&K that required RK&K to indemnify English for claims by VDOT that related to RK&K’s work (the English Term Sheet). RK&K moved to dismiss the complaint based upon a different term sheet, also signed by the parties, which stated that RK&K could not be held responsible for English’s failure to perform pursuant to the contract documents (the RK&K Term Sheet).
The Court, in looking at these seemingly (and actually) contradictory clauses in the two term sheets found that the terms of the “subcontract” (meaning the two term sheets) were ambiguous and therefor denied the motion to dismiss. In doing so, however, the Court limited the possible liability to those negligent acts of RK&K as found in the more specific language of the English Term Sheet. In doing so, the Court stated as follows:
Accordingly, the Court finds that the Subcontract does not, as a matter of law, preclude Plaintiff’s breach of contract and indemnity claims because the Subcontract can be reasonably interpreted to permit breach and indemnity actions against RK&K “to the extent directly caused by the negligence of subcontractor but not to the extent caused by the acts or omissions of [English] or its subcontractors or consultants of any tier.”
In short, the parties created an ambiguity between them that precluded the result the RK&K wanted and limited the result that English wanted.
The lesson? In my mind it is that the expensive proposition of litigation can be made less so with clearer contracts. While this is a fairly extreme example (there are 2 contradictory written term sheets), ambiguities in construction contracts give lawyers room to argue where clarity simply gives lawyers room to point to the contract. The second is almost always a better situation for a construction professional than the first.
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