Construction Contracts

In the fourth part of this series on decoding EULAs, we move onto limitation of liability.  As discussed previously, the EULA is the agreement containing the terms the user of a software program agrees to abide by in using the software.  To start with we will review a limitation of liability I recently saw in

In the third part of decoding EULAs, we focus on support terms also known as updates or modifications.  As discussed previously, the EULA is the agreement containing the terms the user of a software program agrees to abide by in using the software.  Below are examples, that have been included in recent software agreements:

“Company

In the previous blog update (Part 1), I promised to continue decoding densely worded End User License Agreements (EULA). As discussed in the prior blog, the EULA is the agreement containing the terms the user of a software program agrees to abide by in using the software. In this blog, I address security. First, an excerpt from a standard form cloud services agreement:

“Company X shall notify Customer of any Unauthorized Access as soon as reasonably practical. In the event that any applicable law requires that any notice be given to Customer’s Service Users or clients, Company X acknowledges and agrees that Customer shall have control over the timing, content, and method of any required notification.”

Many companies
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Software has become an integral part of the construction world and its use is only growing. There are hundreds of software providers for project management systems, estimating, schedule tracking, BIM, accounting, project portal, dropbox, cloud service providers, the list goes on and on.

Typically, users of software are handed a lengthy agreement and asked to click their consent to the terms. We have all seen this type of agreement; anyone with a cell phone has likely absentmindedly agreed, with a click, to each software update. The writing is small.  The lines are spaced close together.  It goes on for page, after page, after page. The only distinguishing feature is occasionally the words are in all CAPS which feels bad-mannered and impolite.  Frankly, the first paragraph, if one gets that far, is enough to cure all insomniac tendencies one may have in a matter of seconds. These agreements are typically called End User License Agreements (EULA) and are the terms the user of a software program agrees to abide by in using the software.

There is a lot of important information hidden in all that small writing, such as: where a dispute is litigated (not always your home state); non-assignment without consent (i.e. if the software division or your company is purchased by another, you are required to update the terms of the agreement); indemnification; payment terms; termination; confidential information; etc.  That said, I believe there are the big four to be aware of:  1) scope of license; 2) support, aka updates/modifications; 3) security; and 4) limitation of liability.  This article and the three to follow will expand on these four concepts.  First, understanding the scope of your license and usage rights.

PART 1 – SCOPE OF LICENSE

Licenses come in all shapes and sizes.  The license can…
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  1. Educate Yourself About the Project. If you are working with an owner that is new to you or if you are a subcontractor working with a general contractor with whom you have not worked previously, ask others about their reputation. Before venturing into a relationship, investigate the project’s financing and the reputation of those holding the purse strings.
  2. Condition Your Bid. Condition your bid on fair contract terms. This need not be limited to boilerplate exclusions and clarifications. Instead use the bid process as an opportunity to set the stage for contract negotiating.
  3. Read Your Contract Before Signing It. Even if the contract appears to be a standard AIA or Consensus Doc, read it. Scrutinize it. Make sure you understand it and make efforts to negotiate those terms that ask you to take on unbalanced risk.
  4. This Means Read All of the Contract Documents. Read all exhibits as closely – if not more closely – than the contract itself. Exhibits can include lien waiver forms, broad indemnity agreements and change order forms that release various rights otherwise set forth in the contract. If you are a subcontractor, ask for and review the prime contract as most subcontracts incorporate the prime contract, plans, specifications and all addenda thereto.
  5. Be on the Lookout for Risk-Shifting Clauses. As part of your risk management practice, develop a list of contract provisions that have caused you problems on past projects. Examples include: pay-if-paid vs. pay-when-paid clauses, overbroad indemnity clauses that ask you to indemnify against the indemnitee’s own negligence or to indemnify direct rather than third-party claims, no damages for delay clauses where the delay was caused by the owner, etc.


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The breathless growth of Portland’s housing market has nurtured a growing income opportunity to developers who purchase homes for renovation and resale; so-called “house flippers.” Such homes not only provide potential profit for developers, but also provide turnkey renovations for home purchasers and improved aesthetics for surrounding neighborhoods. However, misconceptions about the flipping and sale process can spark disputes between developers and their eventual purchasers. Most of these troubles can be avoided through better contracting and more candid communication on both sides. The following are recommended steps toward reducing the risk of future problems, from the perspectives of purchasers and developers.

  1. Purchasers

Recently flipped homes offer the best of both worlds: old-home charm with new-home fit and finish. But that blessing is also a curse, because new renovations can mask undiscovered problems. Too many purchasers see beautiful finishes and promptly neglect the potential for hidden old-home problems. The purchase process – when done right – is more complicated for a flipped home than a new home. Several pieces of advice will help.

The first and best piece of advice is to know your contract. In the recent case of Shell v. The Schollander Companies, Inc., 358 OR 552 (2016), discussed below in a post by David Delmar, an owner sued for construction defects in a home she purchased when new. However, because hers was a contract for sale rather than a contract for construction, a different time limit applied. This distinction between a construction contract and a sale contract is far more critical with a flipped home. Purchasers tend to perceive the seller’s renovations as something akin to new construction and believe that new construction standards should apply. This is not necessarily true; a typical sale contract contains no obligation to perform construction services according to any particular standard. Moreover, the “as-is” clause could prevent a purchaser from asserting certain claims later.
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Written contracts generally provide a very stable method of making promises enforceable. Reducing all promises to a single self-contained writing reduces surprises and provides a single yardstick to measure compliance. Unfortunately, many contracts today – especially construction contracts – tend to be composites; assemblages of different documents into a single contract. We’ll call this a “Compound Contract” for ease of reference. Compound Contracts have the benefit of avoiding excessive cut-and-paste work, but also have a nasty potential side effect: parties may not know what is in their contract. Thus, contractors and owners are sometimes surprised when they seek to enforce certain promises, only to learn that those promises were altered by attachments to the main contract form.

Perhaps the simplest form of Compound Contract is a one-page invoice or bid with a statement at the bottom that says, “subject to terms and conditions on reverse side.” Flip the document over, and you’ll find a clump of fine print, which may add contour, nuance, or red tape to what was otherwise a clear exchange of money for goods or services.

The more complicated Compound Contract may have “terms and conditions” from numerous other documents intended to be attached to the contract itself, and all of which alter the parties’ promises in ways large and small. Today’s Compound Contracts can be several inches thick, making substantive review difficult.
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After having successfully recovered, borrowed, or assessed funds for the repair of damaged buildings, an owner, property manager, or homeowners association (I’ll use the term “Owner” in this piece for brevity) must shift gears, and determine how most wisely to spend those funds.  The Owner may not have experience with significant construction projects, and likely must rely on outside expertise for management of reconstruction.

  1. Continuation with Forensic Consultants

If the Owner engaged a forensic analyst to study the damage, continuing a relationship with that analyst through the construction project usually makes sense. The analyst can be hired to continue assistance in a number of capacities: convert its recommended repairs to formal construction drawings, review and administer construction through completion, or provide peer review and comment on the work of others. The Owner should confirm with the analyst up front whether it has that capacity and expertise to perform these functions, and meet with the personnel at the firm who would be assigned such duties.
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Statutes of limitation cut off rights to bring a lawsuit after a designated time period, regardless of the strength of your case or how much you’ve been injured. The length of these time periods can vary by the type of claim being brought, and the starting date can vary also. The “discovery rule” – which delays the starting point for periods of limitation until the injured party discovers the cause of action – has the greatest potential impact on this starting date. Oregon law has been unstable regarding application of the discovery rule to claims for breach of contract. Although we appear to be reaching a point of greater certainty on this issue, more refinement may yet be required.

Oregon’s Discovery Rule Generally

Discovery rules in Oregon arise
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