E-communication on contracts holds risks

THE YOUNGER YOUR workforce is, the better the odds that it was taught in school to communicate electronically. These workers tend to assume that e-mailing is always the preferable, and certainly the easier, way to communicate. The challenge for the construction industry is that our protocols and rules were written back in the last century (or earlier), and a disconnect frequently occurs between what

THE YOUNGER YOUR workforce is, the better the odds that it was taught in school to communicate electronically. These workers tend to assume that e-mailing is always the preferable, and certainly the easier, way to communicate.

The challenge for the construction industry is that our protocols and rules were written back in the last century (or earlier), and a disconnect frequently occurs between what we say we require and what is actually going on. This spells "R-I-S-K" for the business owner.

Contractual notices. The rise of blogs, chat rooms and instant messaging has sent paper letter-writing the way of the dodo bird, travel agent and pay phone. Yet all standard-form contracts still require notices to be "in writing" and provide for notices to be either "hand-delivered," sent by mail, or — in rare cases — by overnight carrier or fax. In reality, many contractors, suppliers, owners, designers and government officials now routinely communicate-with one another by e-mail. There are several problems with this:

  • Non-binding notice. If the contract you signed requires notice by mail or hand-delivery, you may have waived your rights by not following the contract. While you may be able to convince a judge to overlook the breach of the contract's terms, do you want to pay a lawyer to fight such a battle?
  • Confirmation of delivery. Notices don't do much good if they are never received. U.S. courts have created a rule that will generally presume delivery of letters placed in the U.S. Postal Service, but there is no such presumption that an e-mail will ever arrive. Thus, the burden will be on the sender to prove actual delivery.
  • Unattended mailboxes or unread emails. If you have agreed (explicitly or tacitly) to be bound by electronic notices, you better be darn sure that the person who is supposed to get the notice still works for you and has an active e-mail address that is not too full of messages to receive the notices. Will that mailbox be monitored while that person is on vacation or out sick?
  • Unintended recipients or contents. While putting a letter in the wrong envelope can cause embarrassment (or worse), the risk of sending the wrong information to the right people or the right information to the wrong people is a daily occurrence with e-mail.

People have a habit of hitting the "reply all" button without thought, and of allowing "address prompt" features of their software to fill in a similar, but incorrect, address. They also forward prior messages with their replies, many of which contain contents that the recipient should not see. When I review documents for lawsuits, I now expect to see thoughtless disclosures of proprietary information as the rule, not the exception.

Businesses need to train their employees, and enforce the rules with serious sanctions, to get through to the employees that sloppy or improper use of e-mail is a hanging offense.

Electronic bidding. More and more public and large private owners are going the route of electronic bidding. The bidding documents will be posted online, bid bonds will be submitted electronically and the actual bids will be received in the same fashion. Some of the systems require passwords that must be obtained in advance, making last-minute bids harder to submit. In virtually every system, the sender bears all responsibility for a failure in transmission. There is virtually no law yet to tell us how some of these issues will be handled.

Subcontractor bids submitted electronically raise most of these same concerns, without as many rules to govern their interpretation. Because of the low costs of electronic communication, it is possible for many more vendors to send unsolicited quotes and harder for the contractor receiving them to investigate the sender and validate the quote and terms in time for bid submission.

If the contractor soliciting subcontractor bids specifies that they are to be submitted electronically, is that contractor bearing responsibility for transmission or receipt problems within the recipient's system?

Electronic submission of data. For many projects, all design documents are furnished, submitted, exchanged, corrected and approved electronically. The standard general conditions in EJCDC C-700 (2002) states, however: "Copies of data furnished by Owner or Engineer to Contractor or Contractor to Owner or Engineer that may be relied upon are limited to the printed copies (also known as hard copies). Files in electronic media format of text, data, graphics or other types are furnished only for the convenience of the receiving party. ... If there is a discrepancy ... the hard copies govern."

The result is that the entire burden of any errors in the electronic documents will fall on the contractor or subcontractor, as the American Subcontractors Association notes in its whitepaper, "Electronic Data Exchange in Construction."

ASA notes that it, along with AGC and Associated Specialty Contractors, have published the "Guideline on Exchanging Documents and Data in Electronic Form," www.constructionguidelines.org

Contractors, subcontractors and vendors would be wise to obtain and read these publications.

Susan McGreevy is a partner at Husch & Eppenberger, Kansas City, Mo., telephone 816/421-4800, e-mail to [email protected]

TAGS: Law