Rebecca A. Bowman, Esq., P.E.
I’ve heard it said that any piece of real estate has three important characteristics: Location, location, and location. Similarly, a contract has three important characteristics: Documentation, documentation, and documentation.
I’ve had several cases lately that would not even have been disputes if the relationship was properly documented. I decided that it was a good time to address this issue.
In the first case, a construction specification included a required that the lights be dimmable and that existing wiring be utilized. The supplier provided fixtures that were, indeed, dimmable. However, it turned out that the “existing wiring” was not what the electrical engineer assumed it would be, such that the fixtures, although dimming capable, could not actually be dimmed. The client reluctantly paid a change notice, but the engineer had to eat a bunch of fees to avoid a problem. There are actually two documentation problems in this situation. First, what does “dimmable” mean?” And, second, there was an unstated (and unchecked) assumption about the condition of the wiring.
If a light fixture is capable of being dimmed with appropriate wiring, is the fixture non-compliant if the appropriate wiring is not installed (or in this case, pre-existing)? Anytime that a word could have two different implications, those implications should be explored and addressed. With respect to the second issue, the assumption, whose responsibility was it to verify the wiring situation. The architect could have checked, the engineer could have checked, or the contractor could have checked. None of them did – until it came time to install and hook up with new, dimming-capable fixtures. Yes, the contractor should have verified the site conditions, but the site walk-through lasted 90 minutes with more than thirty contractors and covered more than 500 pages of specification. Furthermore, even if the contractors had noted the issues, I’m not certain that access was actually available – no ladders, etc. The architect should have checked before issuing the specification, but I’m not certain that the architect would have recognized the issue from a visual inspection. The electrical engineer, though, specified the reuse of existing wiring. As far as I’m concerned, that makes him (it was a “him,” I’m not making gender assumptions) responsible for making certain what the state of existing wiring actually was. In addition, the electrical engineer was clearly responsible for understanding the difference between a fixture that is dimming-capable and a system that can actually result in the output from the fixture being dimmed. Proper documentation would have avoided the dispute entirely – and avoided an unhappy client and the engineer’s loss of fees.
Let’s look at another case I’ve had recently: a company had a group of independent contractors working as its distribution network. The offer letters promised negotiations about transferring ownership interest to the salesmen. While there were verbal negotiations, there was no documentation. Now the company has been sold to a third party and those contractors are out in the cold. Documentation of the agreement would have been critical protection for the independent contractors. On the other side of the table, the new owner assumed that confidentiality and non-compete agreements were in place with those independent contractors. There is even some evidence that they were told as much by the selling owner. However, there were not. Consequently, those independent contractors are free to contact all of the buyers to whom they represented the company’s products and solicit their business away from the new owner, who isn’t happy. Whose responsibility was it to verify those agreements? Should the seller have disclosed that there were no such agreements? Should the buyer have demanded production of the agreements? Should the existence of those agreements have been a prerequisite to the sale? I’m fairly certain that the buyer wishes they had been. Again, appropriate documentation would have prevented the dispute entirely.
In another case, a contractor relationship had a commission formula, and the owner had control over the payment process. The owner had not been paying according to the specified formula. Suddenly, the owner imposed a new, substitute contract on the contractors, which reflected the payment methodology the owner had been using all along. Upon receipt of the new, substitute contract, the contractors, in comparing the two contracts, realized that the owner had not previously been paying them appropriately. Many filed complaints. Four years later, those lawsuits are settling, one by one. The contractors are vindicated, but their vindications are mostly hollow: They have spent four years in a constant state of agitation and they have had to pay their attorneys as much as or more than the settlement amounts. The only, bitter comfort is that the owner is paying both the settlements and his attorney.
In all three of these cases, the issues involved assumptions, failure to verify assumptions, and the painful consequences of those failures. Ask yourself EVERY SINGLE TIME: Are you making assumptions about situations? How can you document those assumptions? How can you verify the accuracy of those assumptions? Without these steps you are in a Risky Business.
Rebecca A. Bowman, Esq., P.E. is the principal of a woman-owned business in civil engineering, dispute resolution, real estate, and legal services. She is experienced in boundary law issues, engineering design and forensic analysis, construction/project management, dispute resolution, real estate, and small business start-ups. She is a registered professional engineer and a certified arbitrator, mediator, and Christian conciliator. Mrs. Bowman writes a column for the PE Reporter, “Risky Business”. She is frequent CPE lecturer (law and engineering) for a variety of providers. She received her B.S. degree in civil engineering, from the University of North Dakota, her M.B.A. degree from Oklahoma University and her J.D. degree from Duquesne University. Mrs. Bowman is involved with the National Society of Professional Engineers, the American Arbitration Association, the Institute for Christian Conciliation, the Financial Industry Regulatory Authority, and the American Bar Association. She volunteers with Legal Aid, Family Promise, the Pregnancy Resource Center of the South Hills, MATHCOUNTS, and Pennsylvania History Day. She received the 2014 PSPE President’s Distinguished Service Award.