27 March 2024

It Pays To Review The 'Review The Contract Documents' Clause Before You Sign The Contract

Peckar & Abramson PC


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It is fairly common for a construction contract to include a provision requiring the contractor to perform some level of review of the plans and specifications and perhaps other contract documents...
United States Corporate/Commercial Law
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This article was written for the ConsensusDocs newsletter and first appeared here.

It is fairly common for a construction contract to include a provision requiring the contractor to perform some level of review of the plans and specifications and perhaps other contract documents as part of their responsibilities. Typically, this provision is found in a section of the contract on the contractor's responsibilities, although it can be anywhere. Owners and contractors are, with reason, focused on three main issues in reviewing contracts: (1) price, costs, and payments, (2) time and scheduling, and (3) scope of the work. Eyes may glaze over the contractor's responsibilities section. Not only does it seem to be boilerplate, but industry professionals know what a contractor is supposed to do; in a nutshell, build the project.

An old school type of contractor may regard this role as strictly following the plans and specifications, no matter what they provide. That could lead to a situation where construction comes to a complete stop because, for example, two elements are totally incompatible with each other. If that happens, the contractor would then turn to the owner and architect to ask for a corrective plan and instructions on how to proceed. That may also be accompanied by a request for more time and money while the problem is resolved. The 'review the contract documents' clause is designed to avoid this. It is intended to address an understanding that everyone makes mistakes, even architects and engineers whose job it is to design a buildable, functional project. The clause also addresses the understanding that a contractor is more than a rote implementer of plans and specifications because its expertise in building necessarily means the contractor has expertise in understanding the documents that define the construction and how things are put together.

A 'review the contract documents' provision can take different forms, with different implications. At one end of the spectrum is this provision found in a contract I have seen:

The Contractor shall examine the Contract Documents thoroughly before commencing the Work and report any errors, conflicts, or discrepancies to [Owner]. The Contractor should immediately report to [Owner] any error, conflict, or discrepancy detected during the course of the Project.

The second sentence is not truly onerous. It does not require the contractor to undertake a review but simply calls for the contractor to report any error, conflict, or discrepancy it may come across in performing the work. This is inherent in a general contractor's work; RFI's are routinely sent when design issues are discovered. RFI's can lead to change orders, but, generally, not to liability on the part of the contractor. The first sentence of this provision is altogether different though.

The first sentence requires the contractor to undertake a comprehensive review of the drawings, specifications, and other contract documents affecting the design and construction at the very beginning. It essentially makes the contractor a reviewer of the architect's and engineer's final product. The provision does not spell out the consequences of not performing this study of the design or of not reporting what the contractor has found. Undoubtedly, the owner would argue that the contractor is responsible for costs that could have been avoided by reviewing the design and reporting errors, etc. On the other hand, the contractor would argue that it was hired to perform general construction services, and not to do a peer design review and the provision must be read in this context. The outcome would be up to the courts. This provision actually is found in another form and under another name in many construction management contracts. It is called a constructability review, and the construction manager is allotted time to do the review and paid for its efforts. That is reasonable and owners who want this service performed should be prepared to compensate the contractor for it. However, requiring a contractor to do a comprehensive review of the design before starting work while holding the contractor to a schedule that only accounts for construction activities and also not paying the contractor for this significant undertaking is not reasonable.

The AIA A201 General Conditions requires a contractor to, before starting each part of the work, study and compare the design related documents involved in that phase of the work. This AIA document specifically states that the purpose of this review is to facilitate construction and not to uncover design defects. However, it requires the contractor to report any design defects found in the review to the architect. In a following section of the AIA A201 general conditions, the contractor is made liable to the owner for costs that could have been avoided if the contractor did not perform its required review obligations, while the contractor is exempted from liability for damages stemming from design deficiencies if it made the review.

These provisions are more specific than the first clause quoted above and attempt to strike a balance. Still, questions as to the extent of the review and the consequences of not doing it well remain. For example, construction cannot stop while a contractor reviews the design. The review would have to be done before the phase of the work is reached, requiring either additional personnel or 'after hours' work by the project team. Also, the consequences of doing the review but not finding the design deficiency are subject to interpretation. The provision states that the contractor is not liable for damages stemming from design deficiencies if it performs the review. Taken literally, this is a basic truism: a contractor is not liable for mistakes by an architect or engineer. However, would the contractor be liable for additional costs that could have been avoided by discovering and reporting a design deficiency had it performed a careful review but did a cursory review instead? That begs the question of what standard of care is applied to the review?

The ConsensusDocs contracts, for instance, the ConsensusDocs 200 standard agreement and general conditions between a contractor and owner also are more specific than the first clause quoted above and attempt to strike a balance. Under the ConsensusDocs provision on this subject, the contractor is required to conduct the review before "commencing the Work." As "Work" is essentially defined as the project as a whole as pertaining to the contractor, the review is to be done at the outset and at one time for all design documents. The ConsensusDocs provision also uses the term "examine" rather than "carefully study," which may create a different standard to measure the obligation. Importantly, the ConsensusDocs provision specifically states that the contractor is not performing this task in the capacity of a licensed design professional and the provision does not impose an affirmative responsibility to discover design defects. To that end, the ConsensusDocs provision does not address liability on the part of the contractor for not performing the review. If the owner wants something more in this regard, it would have to be discussed and agreed to by the contractor.

Each of these provisions spells out expectations for the contractor's performance. Under each of these provisions, the contractor is required to do more than just build according to what the documents spell out. However, each of these provisions imposes a somewhat different review obligation on the contractor. The point is to take nothing for granted. Review this provision as you would review a provision as obviously important as the payment provision. Otherwise, during the project a contractor may discover that there are more services to be done than anticipated or an owner may discover that there are less services it will receive than it had in mind.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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