Chapter 3 - § 3.2 • CONTRACT PRINCIPLES AND INTERPRETATION

• Jurisdiction: Colorado

§ 3.2 • CONTRACT PRINCIPLES AND INTERPRETATION

§ 3.2.1-Contract Language

Private construction contracts are generally treated by the law in the same manner as other contracts. Written contracts that are complete and free from ambiguity will be enforced according to their plain language.³

A fundamental principle that guides contractors is that their basic obligations are defined by the construction contract, and absent very special reasons, a contractor is responsible for completing work according to the terms of the contract regardless of the physical or economic conditions in which it finds itself:

The general rule is that a builder must substantially perform his contract according to its terms, and in the absence of contract governing the matter, he will be excused only by acts of God, impossibility of performance, or acts of the other party to the contract, preventing performance. If he wishes to protect himself against the hazards of the soil, the weather, labor, or other uncertain contingencies, he must do so by his contract.⁴

The importance of good contracts thus lies, in part, in the fact that the contractor may find no relief from adverse or changed circumstances or conditions except to the extent it negotiates relief in the contract itself.

Words used in the contract will be enforced in accordance with their plain and generally accepted meaning.⁵ Therefore, as with any contract, the practitioner should be sure that any construction contract, from the simplest bathroom remodeling job to a large commercial development project, is complete and unambiguous. This requires a thorough understanding of the nature of the project, anticipation of potential construction issues that may arise, and an understanding of construction law. An awareness of the construction process, construction methods, and customs and practices of the industry is necessary; knowledge of the involved parties and their personalities is valuable. Time and effort invested at the contract-formation stage can save the tribulations and expense that often occur later when a question or dispute arises.

§ 3.2.2-Contract Interpretation

A construction lawyer should be familiar with certain well-established rules of contract interpretation adopted by the courts that apply in a private construction contract context, as well as the relationship among all the parties to a project.

Coordination of Contract Requirements

A construction project usually involves relationships among various interests, professions, and trades. Such interests can involve those of owners, lenders, insurers, regulatory authorities, architects, engineers, bonding companies, general contractors, subcontractors, suppliers, materialmen, and laborers. The multiplicity of interests and parties, and the construction process itself, provides a fertile area for controversies. Although an ideal construction contract would anticipate and clearly address all matters material to the particular project, in reality, written contracts seldom hold the answer to every question. Moreover, construction projects are virtually never governed by a single contract that spells out the relative rights and responsibilities of all the parties. Instead, there are many two-party contracts that refer to or even incorporate other contracts, and the drafter must be mindful to ensure that all of the obligations are consistent and comprehensive. Consider a simple example: a general contractor promises to construct a building in accordance with plans, specifications, and specific contract terms with the owner. The contractor in turn subcontracts work out to subcontractors, and must ensure that the scope and specification of work within the various subcontracts - as well as such terms as change order requirements, liquidated damage clauses, arbitration provisions, and others - encompasses all the work and provides contract requirements consistent with the prime contract. If the subcontracts allow a subcontractor 21 days to provide notice to the general of a condition that might lead to a...