As someone working in the construction industry, you are no stranger to contracts. But are you aware of all the terms you are agreeing to when you sign on it? Consider this scenario: You sign an agreement incorporating “all applicable building codes and regulations” by reference. Months into the project, a dispute occurred over compliance with a recently updated local energy efficiency code. The client expects adherence to the new code while you base your work on the previous version. Now, you face potential fines and costly reworks.
This costly misunderstanding highlights a crucial aspect of contract law: terms incorporated by reference.
What are “terms incorporated by reference”?
Simply put, these are external documents, standards or regulations that become part of your contract without being explicitly written out in full. For example, your contract might state, “Contractor agrees to comply with all OSHA regulations,” making those regulations part of your agreement.
Why should you care?
Overlooking these incorporated terms can lead to consequences, such as:
- Unexpected obligations: You might find yourself bound to unfamiliar standards or tasks.
- Hidden costs: These unexpected obligations often come with unforeseen expenses.
- Potential legal disputes: Misunderstandings can lead to costly legal battles.
- Project delays: Adhering to unfamiliar standards midway significantly delays projects.
Protect your construction business from these obstacles by reviewing your contract carefully. Pay close attention to the fine print and phrases like “incorporated by reference.” Do not hesitate to clarify, ask for the documents or negotiate when needed before signing the contract.
The bottom line
In the fast-paced world of construction, it is tempting to sign contracts quickly to get projects moving. However, taking the time to understand all terms, especially those incorporated by reference, can save you from costly surprises down the road. This is where seeking professional legal help becomes invaluable. An experienced construction law attorney can thoroughly review contracts, identify potential issues, explain the implications of specific clauses and help negotiate better terms.
Remember, what you do not know can hurt you in contract law. Stay informed, seek legal advice when needed and always ensure that you fully understand what you are agreeing to before you sign. Your business’s financial health and reputation may depend on it.