'Incorporation by Reference' May be Your Friend

Contractors are, for the most part, a trusting lot. If left alone by lawyers, they would probably not use written contracts at all, preferring to take people at their word to honor their commitments. Along with learning the hard way that they should always put things in writing, they have to be careful about what not to put in writing. What I am talking about is all those extra provisions that somehow

Contractors are, for the most part, a trusting lot. If left alone by lawyers, they would probably not use written contracts at all, preferring to take people at their word to honor their commitments.

Along with learning the hard way that they should always put things in writing, they have to be careful about what not to put in writing. What I am talking about is all those extra provisions that somehow get “incorporated by reference” into a contract —provisions that you never read and which may change your agreement a lot.

Courts used to have trouble holding a contractor responsible for complying with a term that wasn’t actually in the contract, but those days are pretty much over. If you knowingly sign a subcontract, for example, that incorporates by reference the terms of the general contractor’s agreement with an owner, or terms of a loan agreement, you can be bound to obey them (unless you ask for a copy of them and your request is refused. Courts have a hard time enforcing secret terms).

Most contractors know that these kinds of terms will be “passed through” to them and accept the fact that they will be stuck with them.

Another area of concern that I don’t see owners, contractors or designers paying enough attention to is the “alphabet soup” of industry standards that get thrown in frequently in “boilerplate” technical specifications. Some of these standards end up being tough on you but others can be your friends. They fall into different categories:

Local code compliance. Contract terms generally will require the contractor to comply with BOCA, UPC or whatever code has been adopted by a locality, including the local government’s rules.

These are generally not a problem, as long as you are aware of exactly which edition of the code has been adopted (frequently, the contract documents don’t specify). It is not unusual for one town to have adopted a more recent version of the code than the town next door, and a contractor not accustomed to doing work in that municipality can find itself with a much more expensive installation.

Quasi-governmental standards. Many standards such as those promulgated by the American Society of Testing and Materials or Underwriters Laboratories are considered strict and, in most cases, factual, quantifiable standards that contractors can pretty readily use. Either a product meets the criteria or it does not.

Industry association standards. When we get to industry association standards, however, we can be talking about a much, much broader range of “standards.” I just pulled a project manual out of a file I am working on for a typical school project.

The concrete section, §3300, requires compliance with 12 different American Concrete Institute provisions (some entire publications and some specific standards), and one from the American Association of State Highway and Transportation Officials (aside from the 35 references to ASTM standards).

Structural Steel §5120 incorporated three specific American Institute of Steel Constructors citations, four American Welding Society and three SSPC paint standards, and then added the entire AISC “Code of Standard Practices for Steel Buildings and Bridges,” (aside from the 33 references to ASTM standards).

Roof Accessories §7720 refers the contractor to SMACNA and NRCA details, ASTM, AWPA standards, an NAAMM manual and an AAMA finish standard.

And I hadn’t even gotten to the mechanical or plumbing specs yet!

My point, which was brought home to me and many, many other lawyers and their clients in a recent lawsuit, is that very few people ever read, in their entirety, all these other standards, specs and guidelines that they specify and agree to. If they did, they would find that much of what is in these documents will surprise them. I am not talking about language that says “space fasteners no more than 24-in. apart” when the designer for your job wants them 18-in. apart. That’s easy to fix.

What I am talking about is all the quality control and oversight language built into these documents, much of which was written by industry representatives, that places the burden on the owner or designer to give clear direction to the contractor. In fact, many of these boilerplate standards relieve the contractor of responsibility by, for example, requiring inspections by an owner’s representative, disclosures of prior operating conditions or suggestions for future operating conditions.

If you take the time to read through the entirety of these standards, you could be surprised to find that they help you in your battle to make an owner be reasonable.

There is not enough space in this magazine, let alone this column, for me to give you details of what I am referring to, but when you are lying on a beach this summer, I bet that you could make your company more profitable by reading the “Preambles,” “Introductions” and especially the “Quality Control” portions of these codes. You could well find the ammunition you need to convince a customer that you have done all that is required of you - and that the customer had agreed to assist you too.

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