Ambiguous Language and Other Terms to Look Out for in Construction Contracts

While contract drafting and review are usually delegated to lawyers, it’s essential for contractors to pay attention to key terms when entering contracts, whether they are with general contractors or homeowners. This attention to detail can prove highly beneficial, particularly when a form contract is not utilized. If a project is going smoothly and free of major conflict, the terms of the contract are largely irrelevant aside from price and scope. However, when disputes arise, the terms of the contract become paramount.

One of the primary concerns to be vigilant about is ambiguous language, particularly those terms that may not appear problematic at first glance. For example, one might think that “day” is an unambiguous term. But when a contract says, “the project will be completed in 10 days” and the term “days” is not defined, two reasonable people could interpret this term in two different ways. If “days” means calendar days, then those 10 days are 10 consecutive days. But if “days” means business days, then that would mean the project would be complete in 12 calendar days (or 11 if a company runs on a six-day-per-week basis, or it could mean the same thing as calendar days if a company ran on a seven-day-per-week basis). Terms of particular significance, such as those concerning timelines, materials to be provided, and so forth, should be clearly defined to minimize potential complications.

Conversely, another issue to watch out for is overly specific terms. Sticking to the same contractual issue of timeline, a project timeline defined by a completion date instead of a period of time could put a roofer in a bind as well. If a contract is signed with a specified end date, and then it pours down rain for days or weeks on end, a disgruntled client could get up in arms about the promised completion date.

Material Price Increases

Another issue, which came up for many contractors during COVID, is the failure to include contractual terms for material price increases. When material pricing is volatile, or there is a risk of it becoming so, it is of the utmost importance for roofers to include contractual language protecting themselves against excessive price increases. If the parties to the contract are put on notice of this possibility from the outset, language specifying how material price increases will be dealt with can save a lot of headaches.

Take, for example, a roofer who sends in a bid to supply and install a roofing system for an office building. The general contractor accepts the bid within 30 days, as the roofer required in the terms of the bid, and a contract is executed. However, following the acceptance of the bid, the project owner encounters an unforeseen delay in permitting or rezoning, resulting in a six-month setback to the project’s start date. In the six months after the delay, the pricing of the required materials skyrockets because a shortage of materials has developed. The general contractor insists that the roofer adhere to the bid price, as the contract lacks a provision allowing the roofer to adjust the price in case of an unexpected price surge. In such circumstances, the roofer may find themselves bearing the brunt of the price hike.

Under these circumstances, terms governing delays are also relevant. Many contracts contain provisions governing how delays are handled depending on the cause. If the terms governing the delay treat it as a breach by the general contractor, then the roofer may have a way out. However, if the terms do not treat such a delay as a breach, then the roofer may be stuck bearing the cost of the price increase. In the previously discussed scenario with a set end date, a well-defined provision addressing weather delays can resolve disputes before they arise.

Arbitration Clauses

Another term to look out for is an arbitration clause. For some, arbitration might be the best mechanism for dispute resolution, but others may prefer to opt for either mediation or their day in court. Arbitration clauses are now ubiquitous in the construction industry, so when contracting with a general contractor, a roofer who wants to avoid arbitration needs to read the contract and make sure to object to the arbitration clause when negotiating with the general contractor. A roofer contracting directly with property owners may want to consider whether their form contract should include an arbitration clause or not.

While there are many other contractual pitfalls to look out for when contracting to complete a roofing project, these are some of the most common issues to look out for. Though delving into contract details might appear inconsequential since few disputes escalate to legal battles, it’s always better to be proactive than reactive. When a project heads south and litigation begins, it is the contractual language that will govern the dispute. A seasoned roofer will make sure that the terms of the contract protect their company’s interests. Skilled and experienced attorneys can provide crucial assistance in drafting, negotiating, and reviewing a full range of contracts.

Author’s note: This article is intended only for informational purposes and should not be construed as legal advice.

About the author: Christian Lunghi is an attorney with Anderson Jones, PLLC practicing in North Carolina. Questions about this article can be directed to him at [email protected]. Author credit is also given to Jack Ayers, law clerk with Anderson Jones, PLLC.