Take Care in Modifying Construction Industry Form Contracts

All of us are familiar with AIA Form Contracts, particularly AIA document A201, General Conditions of the Contract for Construction. AGC of America also publishes form contracts for use by the industry. One form is sometimes integrated with another, and they must be used together to form the contract. Such is the case with AIA form A201. It is intended to be used in conjunction with an owner-contractor agreement, A101 and A111, as well as, several AIA owner-architect agreements, B141, B151, B161 and B181. Also, AGC and AIA publish form sub-contracts; they too are intended to be used only with certain owner-contractor forms. Often, modification of these form contracts is both desirable and necessary, especially so in Louisiana. However, please be reminded, that substituting a different form(s) for use with standard industry contracts, or modifications to standard industry contracts, can create disputes and raise issues of contract interpretation which you do not want or intend. Such law suits can be costly, and eat away at your profitability, regardless of how the dispute is resolved. Also, one or both of the parties to the contract may find that they are constructively held to have agreed to terms that they did not actually agree to.

The case of J. Caldarera & Company v. Louisiana Stadium and Exposition District, 98-294 (La.App. 5 Cir. 12/16/98), 1998 WL 874903 (La.App. 5 Cir.), is a recent example of such a problem. In that case, the owner, the Stadium and Exposition District, deleted Article 4.5 of A201 concerning arbitration. But, the owner did not delete or modify Article 4.4.4 which specifically stated that the architect's decision on disputes is subject to arbitration. When the dispute arose, the contractor moved the court to require the owner to arbitrate the dispute. The trial court ordered arbitration despite the deletion of Article 4.5. On appeal, the owner argued that by deleting Article 4.5 the parties intended to delete arbitration from the contract entirely. The court of appeals believed this created ambiguity and resolved it in favor of the contractor and against the owner. All doubt is to be resolved in favor of arbitration of disputes because the law favors arbitration as a remedy.

Did the owner and contractor actually intend to arbitrate? You be the judge. To avoid finding yourself in the midst of such a dispute and before another judge, you should carefully consider the effect that modification of a form contract may have to your overall agreement.

In the instructions to A201, AIA warns:

If a combination of AIA documents and non-AIA documents is to be used, particular care must be taken to achieve consistency of language and intent. Certain owners require the use of owner-contractor agreements with general conditions and other contract forms which they prepare. Such forms should be carefully compared with the standard AIA forms for which they are being substituted before execution of an agreement. If there are any significant omissions, additions or variances from the terms of the related standard AIA forms, both legal and insurance counsel should be consulted.

Contractors are well advised to consult with experienced counsel before signing such contracts. The matter is evermore pressing where the contractor amends standard industry subcontract forms. In such cases, doubt may be resolved against the contractor in favor of the subcontractor.

*article courtesy of W.P. Wray, Jr. and Russel W. Wray of Wray & Pierce, LLP, [email protected].