Does your scope of work mean what you think it means? The Iowa Court of Appeals tells one prime contractor NO.
It’s not inconceivable that two parties with different incentives may disagree about the meaning of contract language. In subcontracts, scope of work language provides a ripe source of disputes, especially if this important language is hastily written.
Drafting careful and effective scope of work language that meets both parties’ objectives can be a challenge. Prime contractors want to broadly incorporate their obligations under the owners’ contracts to ensure there are no gaps. Subcontractors typically want the opposite: narrow and specific obligations that limit their risk. When a conflict inevitably arises, fear of starting off on the wrong foot or harming relationships can be a convenient but poor excuse for ignoring the conflict instead of confronting it directly and promptly.
A recent case at the Iowa Court of Appeals reminds us that failing to clearly define scope of work at the outset of the project is a bad deal for everybody.
In Iowa, Dueling Interpretations
In Pro Commercial v. K & L Custom Farms, the prime contractor on a 2010 rest area project failed to clarify scope of work with its dirt and grading subcontractor. Instead, after IDOT awarded the project, they apparently made the shortsighted “compromise” of incorporating each party’s differing intentions into the written subcontract:
In accordance with the contract documents, as listed on Attachment “A,” furnish labor, material and equipment complete as described by the following Specification Sections:
Division 1-General Requirements (as applicable to your work); Division 31 Complete, Section 024100.
Supply all labor, material and equipment to provide all dirt work, site clearing, subsoil work, building removal, demolition, misc items per your quote in its entirety per plans and specifications.
Scope of work disputes “erupted almost immediately.” According to the prime contractor, “Division 31 Complete” meant all of the work in Division 31. According to the subcontractor, “per your quote in its entirety” limited the scope of work to only the itemized list in its bid.
Nearly four years later, the prime contractor’s interpretation prevailed at trial. After another year, the subcontractor prevailed on appeal. The Iowa Court of Appeals reasoned that people don’t write meaningless words into contracts, so when these parties signed the contract, they must have intended that the subcontractor would perform only the work itemized in the bid in a manner that conformed to Division 31.
The appellate judges rejected the prime contractor’s argument that “Division 31 Complete” required the subcontractor to perform “all the work described in Division 31.” To illustrate this point, the court quoted Inigo Montoya from The Princess Bride, who said, “You keep using that word. I do not think it means what you think it means.” Inigo believed the word “inconceivable” was being misused (or overused). The Iowa Court of Appeals believed the word “complete” could not possibly mean all of Division 31, since other subcontractors also performed work under that division.
Are the potential conflicts in your scope of work clause only “mostly dead”?
In addition to showing how scope of work conflicts might be resolved, this case underscores the potential cost to both parties who fail to confront these conflicts directly and promptly. After five years, the prime contractor had won at trial and the subcontractor won on appeal. However, disputes like these don’t exactly have “winners” when everyone involved spends considerable time, money, and energy adjudicating a conflict that could have been resolved five years sooner.
Negotiating language that clearly describes subcontractors’ scope of work and satisfies both parties’ expectations may require patience and persistence. Although it may not always result in the subcontract being drafted exactly as you wish, it may save you the drama of a lawsuit and the feeling that you’re climbing the Cliffs of Insanity.
Artwork image used with special permission from Michael Rohner at Michael Rohner Art. We encourage our readers to check out his other amazing work at www.rohnerart.com.
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