Contracts are crucial in construction projects. They accurately define everyone’s rights and responsibilities, the scope of work, risk allocation, payment terms and dispute resolution. However, various factors determine whether or not a contract will be effective. One of them is clarity.
An ambiguous contract usually leads to disputes that can negatively impact a construction project. So, what constitutes an ambiguous contract?
Patent and latent ambiguity
Ambiguity in contracts typically falls into two main categories – patent and latent ambiguity.
Patent ambiguity is obvious – directly on the face of the contract. For example, when the scope of work clause states a contractor must “install 50 linear feet of copper pipe,” but the architectural drawings show a run of “150 linear feet of copper pipe.
When one notices contradictory information in a contract, they should inquire. They must ask the project owner or contractor to clarify the matter.
Latent ambiguity is hidden and only becomes apparent when a contract is applied to real-world circumstances. When a project is underway, a contractor, subcontractor, architect or supplier may notice language that initially seemed clear allows multiple interpretations.
Examples of language in a construction contract that can be interpreted differently include industry-standard materials, upgraded paint finish, substantial completion, ready for grading, best efforts and reasonable time.
Moreover, a disconnect between drawings and reality can lead to latent ambiguity. For instance, when a contract states a project requires digging through standard soil and anchoring into solid bedrock at 5 ft. But when digging begins, bedrock is not reached until 12 feet. Or when a contract states the site has soft clay or workable soil, but the contractor discovers solid, unyielding bedrock earlier than anticipated. A differing site condition (DSC) can lead to massive cost overruns and significant delays.
Ambiguity in a construction contract can lead to disputes. If you are facing such an issue, get more information to determine the best way forward.