The cost of one-sided contracts: The strength of thoughtful blog postings

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construction law carolinas blog

 

Gregory Shelton
Gregory Shelton

Gregory Shelton’s Construction Law Carolinas blog might lose points in the Best Construction Blog competition for lack of blogging frequency, but I think he makes up for the somewhat irregular and infrequent posting schedule with the quality of his writing. His latest posting dates back to November, but he discusses an issue that is timeless and certainly is relevant everywhere, not just in North and South Carolina. In “One sided contracts and their limitations,” Shelton observes there how legal practice draws towards the centre of fairness — and that one-sided contracts are risky, not just to the contracting parties receiving the short-end of the stick. He writes:

For the owner hiring a contractor, or a contractor hiring a sub, the success of the project depends upon the competence, integrity, and skill of those actually performing the work. Do you really want to hire someone who will sign a contract appointing your own vice president of operations as arbitrator in the event of a dispute? Or agreeing to pay half the contract balance as liquidated damages upon asserting a defense to your claim in court? Or granting you sole and unfettered discretion to determine the price of change orders? How strapped for cash must a party be to sign away such rights? One the other side of the equation, having the legal right to rake a desperate or unsophisticated subcontractor over the legal coals isn’t worth all that much when the project blows up. All too often, decision makers at reputable and established companies tell me that they will not bid certain work because the other party’s contract is ridiculously one-sided and offered on a “take it or leave it” basis. Market forces at work.

Shelton points out that courts will often rule one-sided contracts as unenforceable, that clauses designed to give an unfair advantage to one party can sometimes be twisted and inverted, causing opposite the intended effects, and that human nature and the judiciary don’t like unfairness and will often make things right. On the other hand, he wisely points out that accepting a one-sided contract as a victim sets yourself up for failure, as well.  If you are stupid enough to accept a bad deal, you might well end up with one. Unfair contract provisions are certainly a universal issue. One of the main functions of local contractors’ associations in Canada is to address unfair contracting language. Individual contractors may lack the power to overcome the large organizations and project management firms drafting onerous terms, but as a group (and using an independently-hired representative as their negotiator), they can work to achieve changes in one-sided contracting policies. And, as Shelton indicates, the reputable and successful contractors can simply elect not to bid the job — either resulting in much higher costs or (probably worse) the “low bid” from a desperate and incompetent contract “wins”, but everyone loses when the job falls of the rails. Shelton has provided some timeless advice in his blog. You can vote for your favorite construction blog(s) until 5 p.m. on April 1. You can vote for as many blogs as you wish — but only once.

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