Harrison Law - February 2020

Level With Me By JeremyWyatt

Keeping Warm: 3 Contract Clauses That Boil My Blood Even in Winter

that a drywall subcontractor that signed a broad-form indemnity clause would be responsible for protecting the general contractor from flooding damage to a project’s drywall installation, even if the general contractor caused the flooding. Essentially, a broad-form indemnity clause requires a subcontractor to act like an insurance company, paying out for losses for which it was not otherwise responsible. When presented with a broad-form indemnity clause, the right thing to do is draw a line in the sand and demand limited indemnity. Otherwise, you can be responsible for anything that goes wrong. Project delays regularly cause subcontractors to incur additional, unanticipated costs, such as unanticipated general conditions, equipment rental, or labor costs, including demobilization and remobilization costs. In addition to those direct costs, subcontractors can suffer lost opportunities (as their project team cannot work other projects while it waits for the delayed project to continue) and losses to its home office finances (as the delayed job likely was meant to provide partial funding for the subcontractor’s home office). In fairness, the party responsible for a project being delayed should also be responsible for the additional costs caused by the delay. Unfortunately, many modern construction subcontracts contain a “no damages for delay” clause that essentially states that a subcontractor is not entitled to any damages arising out of delay and, instead, No Damages for Delay

When I review contracts for clients, I turn my phone off and lock my computer; I like to have the space to focus. But that doesn’t mean my office stays quiet. Reading the insidious clauses that worm their way into contracts, I sometimes exclaim, “You’ve got to be kidding me!” or “Not in a million years!” Sometimes I even come up with some choice words that can’t be reprinted in a polite publication. Here are three clauses that boil my blood (and what you can do to avoid losing big when you encounter them). Indemnity is a concept found in many contracts. It means that one party (the “indemnitor”) will protect another party (the “indemnitee”) against some kind of harm, usually against “claims,” like lawsuits. By indemnifying a general contractor, for example, a subcontractor assumes the general contractor’s risk to the extent of the indemnity. Indemnity comes in several flavors, starting with the blandest and most limited, where the indemnitor protects the indemnitee only from claims and damages caused solely by the indemnitor’s wrongdoing. For example, a drywall subcontractor under this limited form of indemnity would be responsible to protect the indemnitee only from harm actually and wrongfully caused by the drywall subcontractor. On the other side of the spectrum, however, is broad-form indemnity. Under this kind of indemnity clause, the subcontract- indemnitor must protect the general contractor from claims and damage, even if the general contractor is solely responsible for the damage. On a construction project, this could mean, for example, Broad-Form Indemnity

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jwyatt@harrisonlawgroup.com

www.HarrisonLawGroup.com

(410) 832-0000

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