Be Vigilant in Ensuring That Your Contracts Clearly Reflect Your Intention

BE VIGILANT IN ENSURING THAT YOUR CONTRACTS CLEARLY REFLECT YOUR INTENTION

By: Larry R. Leiby, Esq. and Robert S. Tanner, Esq.

About the Author: Larry Leiby, Esq. was the founder and first chairman of the Florida Bar Construction Law Committee in 1976. He is the author of the Florida Construction Law Manual. He is Board Certified in Construction Law and was on the Construction Law Certification Committee that creates and grades the tests for construction law board certification. He was awarded the lifetime achievement award by the Florida Bar Construction Law Committee and teaches construction law at the Florida International University College of Law. He can be reached at leiby@mkpalaw.com. For more information, please visit www.mkpalaw.com.

When you agree to a contract that is ambiguous, you are agreeing that someone else has the power to determine what you - or the other party to the contract - intended. Unsurprisingly, giving someone else the power to determine your contractual intent can be expensive.

In L&H Construction Company, Inc. v. Circle Redmont, Inc., Case No. 5D09-3450 (Fla. 5 th DCA Feb. 4, 2011), L&H ("Contractor") negotiated a subcontract with Redmont ("Subcontractor") for a cast-iron staircase and plank glass flooring system. Initially, Subcontractor submitted two proposals, both of which provided that Subcontractor would "engineer, fabricate and install" the staircase and system. The proposals included a schedule for progress payments, which schedule included a milestone for "Completion of Installation." Contractor asked Subcontractor for a lower price. Subcontractor responded by deleting installation costs such that the proposals covered engineering and fabrication but did not include installation. Correspondingly, the revised proposals included a revised payment schedule that required payment upon "Supervision of Installation" instead of "Completion of Installation."

Contractor asked Subcontractor to combine the proposals and to include the installation costs. Subcontractor's revised proposal stated that Subcontractor would "engineer, fabricate and install" but the progress payment schedule remained unchanged; that is, final payment was due upon "Supervision of Installation." Contractor issued its standard subcontract to Subcontractor, which incorporated the scope of work and payment schedule from Subcontractor's final proposal. However, the subcontract also stated that the final payment was "Due upon Completion." When Subcontractor signed the subcontract, it added a handwritten notation that said: "Conditionally accepted in accordance with terms and conditions of [Subcontractor's] proposal/order . . . all terms and conditions contrary thereto or not included therein are expressly rejected."

Without further discussion, Contractor notified receipt of the subcontract and issued the initial progress payment. Subcontractor performed to some extent and a dispute arose between the parties. Contractor claimed that Subcontractor was required to install; Subcontractor asserted it was only required to supervise installation. The trial judge found that Subcontractor's final proposal constituted the governing agreement between the parties. The appellate court upheld that finding, noting that, although Contractor did not sign that proposal, it clearly accepted it by paying the first three progress payments called for under the proposal.

Furthermore, the appellate court upheld the trial court's finding that the word "install" in the subcontract was a result of mutual mistake or was a scrivener's error. In contract law, a mutual mistake occurs when the parties actually agree upon one thing but the written instrument says something different. Because the proposal stated that Subcontractor was to install, while at the same time it said that Subcontractor was entitled to final payment upon Supervision of installation, an ambiguity existed. Due to the existence of the central ambiguity, the law permitted the trial court to take evidence on what the parties intended rather than simply enforce a clear and unambiguous contract. Relying upon evidence presented by Subcontractor, the trial court determined that the parties had actually agreed that Subcontractor was not required to install. The appellate court upheld that ruling, too.

The lesson is clear. Be vigilant in ensuring that your contracts clearly reflect your intentions.