September 18, 2015

Top 5 Tips to Avoid Ambiguity in Construction Contracts

Ambiguities arise in construction contracts for a variety of reasons. They often result from combining numerous
documents – such as the principal agreement, general conditions, supplementary conditions, specifications,
drawings and change orders – into a single contract. The rush to finalize contracts and change orders may result
in conflicts being missed or other unintended consequences.

Avoiding ambiguity should be a primary goal when drafting and negotiating construction contracts. This helps
ensure that you get what you want, including the bargained-for benefits of the contract, smooth contract
administration and fulfillment, and avoidance of lengthy and expensive legal disputes. Follow these five tips to
minimize ambiguities:

1. Keep it simple.
Keep your writing simple, clear and concise. Construction contracts are read and interpreted by a wide variety of
people, including judges with no knowledge of the construction industry. Using plain English and shorter
sentences while avoiding legalese and redundancy will make your contracts easier to read and understand.

2. If it’s part of the agreement, include it in the contract.

If a contract appears complete and comprehensive on its face, courts will prohibit the use of other documents to
give meaning to the parties’ intentions. Statements made during pre-bid meetings or negotiations will not be
effective in contradicting express terms in the contract. Include all terms of the deal in the contract, or incorporate

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key documents by reference.

3. Define key terms.

Courts give ordinary terms their ordinary meanings and technical terms their technical meanings. But the
meanings of words cannot be divorced from the context in which they are interpreted, and parties often disagree
on what terms mean in certain contexts. To avoid disputes, capitalize and define terms to attribute specific
meaning. Then use the capitalized term as needed throughout the contract.

4. Include an order-of-precedence clause.

Because numerous documents make up construction contracts, conflicts may arise between requirements
contained within the documents, such as the drawings and specifications. One way to address these conflicts is to
include a clause providing that in the event of a conflict, the specifications take precedence over the drawings, or
that contract documents take precedence according to a prescribed order of hierarchy. You may also wish to
include a provision stating that what is required of any contract document shall be binding as if required by all.

5. Make proper use of standard forms

Standard-form agreements such as AIA and ConsensusDocs are commonly used throughout the construction
industry. However, as we noted in an August 2015 article, there are risks with using such forms because they are
written broadly, they may contain terms that are inapplicable to the transaction at issue, and parties often use
such forms without fully reviewing them. Even if both parties orally agree to terms that differ from what is written,
oral understandings will yield to written agreements, so it is important to read all the terms before using
standard-form agreements. Add terms you think should be included in the contract and delete terms that are
inapplicable.

Keep the above principles in mind to help minimize ambiguities in your construction contracts.

[See Bruner & O'Connor on Construction Law §§ 3.6, 3.7, 3.11, 3.19, 3.31, 3.37, 3.40]

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