Schools And Municipalities–Don’t Make These Construction Contract Mistakes

Contributed by Matthew M. Hoffman

School districts and municipalities often accept form agreements provided by their design professional or consultants, or use a standardized set of construction contract documents (such as the American Institute of Architects (AIA) documents) for their public construction projects.

It is important to remember that these forms were created with the design and construction professional in mind, so they always deserve careful review by your attorney (if they are knowledgeable in construction law.) The contracts typically require some modifications to protect the interests of the school or municipality which is the project owner. The most common oversights we find in these agreements are the following:

Time Limitations on Claims

Most states have established statutes of limitations on claims.  Pennsylvania statutory law and case law on these time limits statutes, recognizes a legal doctrine known as nullum tempus occurrit regi (“no time runs against the king”), providing that public entities, such as school districts, are not subject to statutes of limitation.

However, standardized construction-related agreements generally include provisions that establish time limits for initiation of claims by the parties. That works against a public entity because the Commonwealth Court of Pennsylvania has held that contractual time limits result in the waiver of the nullem tempus doctrine. Consequently, a public entity’s failure to modify these claim limitation provisions can result in defeating a claim for defects in design or construction which are not immediately identifiable.

Dispute Resolution: Is Arbitration Always Wrong?

Standardized construction agreements typically provide for submission of disputes to binding arbitration with the American Arbitration Association. It is common for a school district or municipal solicitor to delete such provisions, resulting in all disputes requiring litigation in courts.

However, construction disputes come in broad variety. A claim that involves complex engineering issues or the concurrent interpretation of project drawings and related technical specifications may be more suitable for adjudication by a construction industry professional in arbitration rather than by a jury whose members have no construction knowledge or experience. Dispute resolution provisions should be reviewed with consideration of nature and the array of claims that may arise.

Ambiguous Terms: What is Reasonable?

Parties sometimes resort to imprecise terms to describe obligations when drafting contract terms,. The parties may express mutual understanding of the intended parameters of terms such as “reasonable,” “usual” or “customary” in the context of amicable negotiations at the onset of the project, but once problems arise during construction, parties invariably have different opinions of what these indefinite terms require. Contractual obligations should be as clearly stated and defined as is possible to minimize disputes and to avoid litigation.