Contract Clause Question 2

[swazimatt]

We have a standard engagement contract (for consultants) that has the following clause:
In providing the Services, the Consultant must use the degree of skill, care and diligence reasonably expected of a
professional consultant providing services similar to the Services.

and one of our clients wants to change it to the following:
In providing the Services, the Services will be performed: with all reasonable
care, skill and diligence; using techniques of a high quality and standard and in accordance with best
industry practices

I have argued against the replacement as it seems too open ended/vague and have been accused of being too cautious etc. I have explained that I subscribe to and always strive to meet the proposed clause, but cannot put our insurance against it.
Curious to hear others thoughts on this.
To achieve a middle ground i have asked them to provide some definitions to go with the clause, but nothing yet

 

[dik]

The proposed is far more inclusive and more 'open ended'. 'Care and diligence reasonably expected' can be established in court within some reasonable limits.

-----*****-----
So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

 

[FMJalink]

Hi swazimatt,
To my opinion the original statement is too much in the direction of the consultant and not in the direction to the services to be performed by the consultant. You want "good" services from the consultant, which also requires a "good" consultant. I like therefor the second phrasing better than the original one, but do find that the second phrasing should modified demanding "good" services and state the expected capabilities and attitude of the consultant.

 

[Pinwards]

I think your original version is closer to the "standard of care" required for engineers, assuming the "consultants" you are contracting are for other engineering services. The 2nd version has more superlatives, like "high quality" and "best industry practices" that seem to exceed the usual standard of care and may be harder to enforce.

This article from NSPE (part of #2) gives more information on Standard of Care and cites the EJCDC standard contract: “the standard of care for all professional engineering and related services performed or furnished by Engineer under this Agreement will be the care and skill ordinarily used by members of the subject profession practicing under similar circumstances at the same time and in the same locality. Engineer makes no warranties, express or implied, under this Agreement or otherwise, in connection with any services performed or furnished by Engineer.”

https://www.nspe.org/resources/pe-magazine/may-2018/focusing-the-fundamentals

#

 

[bimr]

IMHO I think you are splitting hairs.

You don't mention whether this is a $50,000 or $50,000,000 Contract. In general, if you are comfortable with the scope of work, the Contract is a minor formality and it isn't worth the time and effort to go back and forth discussing it. Having said that, the Scope of Work is more important than the particular wording that you are questioning.

This is the wording that is used here:

"The standard of care for all professional engineering and related services performed or furnished by Engineer under this Agreement will be the care and skill ordinarily used by members of the subject profession practicing under similar circumstances at the same time and in the same locality. Engineer makes no warranties, express or implied, under this Agreement or otherwise, in connection with Engineer’s services. Subject to the foregoing standard of care, Engineer and its consultants may use or rely upon design elements and information ordinarily or customarily furnished by others, including, but not limited to, specialty contractors, manufacturers, suppliers, and the publishers of technical standards."

 

[swazimatt]

@bimr I agree with your statement regarding contract value and this is currently a small report and the risk is low, however the client has a lot more land to develop and if we accept it in this case (based on value) we will be expected to accept it on future work with them where it will become more of an issue. Who decides what is high quality and what are best practice.

But you do raise a very valid point, we could possibly accept the clause if we make the scope very specific to what we will do. If we say that "our company provides the best standards of work to a high standard" are we actually providing the definition and benchmark to meet their clause? There is no competition or grading that defines this within the industry, so how can it be refuted?

 

[bimr]

Generally, there are only 2 or 3 contract conditions that shouldn't be accepted.

You never want to accept "liquated damages" or "time is of the essence" obligations. Both of those contract obligations may put you out of business or end of costing you big money.

 

[dik]

@bimr... this is a bigger one, and should be resisted for all projects.

-----*****-----
So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

 

[1503-44]

First option.
Rest is overthought storm in a teacup, which will probably result in more unnecessary inconvenience for you and just irritate the client when he has to devote time to addressing even more nonspecific conditions and details.

If you want to change it, let your lawyer tell you why and how.

--Einstein gave the same test to students every year. When asked why he would do something like that, "Because the answers had changed."

 

[LittleInch]

"High Quality" and "Best Industry Practice" are very difficult things to judge and determine in a court, which is only where this would potentially end up.

But if you're confident that this is what you do, then I don't see the point of making a fuss unless it increases your insurance premium.

As Bimr says, there are a few that you really really want to avoid. These are not them.

Remember - More details = better answers
Also: If you get a response it's polite to respond to it.

 

[swazimatt]

Thanks for all the comments. To round this out i had a discussion with the companies lawyer and they said that using the proposed clause would void our insurance.
And to add to this, the extent of the cover is not related to the fee. (it is in real life though, I am sure you would draw the line when legal fees start exceeding the design fees!)

update, as i go t in trouble from the lawyer for using the word "void" Her exact words were: "I have since spoken with our insurance advisor. He confirmed that we would not be covered by our professional indemnity insurance for any liability that arose as a result of adopting the requested amendment to clause 3 since it goes beyond the common law obligation that is covered by insurance – per the existing clause 3 of the ACENZ (industry approved) contract. Therefore clause 3 must remain in its current form, for insurance reasons."
and the insurance clauses:

reviewing one of our subconsultant's contracts they use very similar wording:

 

[dik]

[quote="High Quality" and "Best Industry Practice" are very difficult things to judge and determine in a court][/quote]

I don't agree. It may be difficult to establish this in a conversation, but in court you can fairly easily get a ruling about what constitutes "accordance with best industry practices", including examples. The Judge decides. It's happened on 2 or 3 of the court cases, I've been involved with.

-----*****-----
So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

 

[bimr]

There is also a well known phrase regarding the legal system.

“Don't tell me what the law is, tell me who the judge is.” The relevance of that quote lingers for a reason. I am amazed that people assume that judges know what the law is. Judges don't go to school to study in depth what is actually written in the law. There is no curriculum on how to be a judge. Many judges are elected and you may not have to be an attorney to be a judge. A good attorney should bring what the law actually is to the attention of the judge.

In the United States right now, the Supreme court consists of politicians in robes just making things up as they go. Historically, there have been enough horrible supreme court decisions to fill a book. Dred Scott (1857) held that African Americans, whether free men or slaves, could not be considered American citizens. In an 8-1 decision in 1883, the Supreme Court interpreted the Fourteenth Amendment so narrowly that it struck down the Civil Rights Act of 1875, arguing that it could not regulate private businesses. Lochner v. New York (1905) struck down a New York law limiting bakery work hours to 10 hours a day, finding an implicit "liberty of contract" in the Due Process Clause. Buck v. Bell (1927): "Eugenics? Yes, please!" the Court declared in this terrible decision. In an 8-1 decision written by Justice Oliver Wendell Holmes, the Court upheld the forced sterilization of those with intellectual disabilities "for the protection and health of the state." And on and on......

The EJCDC standard contract that Pinwards and I have posted above is commonly used here. The EJCDC has met the test of time and there is probably no good reason to change the text from how it is written. You and your attorney should consider using the EJCDC text.

And to repeat what I mentioned above, there are just 2 or 3 things that are really important and will cost you your firm. The issue that you are discussing isn't one of them.

 

[dik]

It's pretty sad...

-----*****-----
So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

 

[swazimatt]

And to repeat what I mentioned above, there are just 2 or 3 things that are really important and will cost you your firm. The issue that you are discussing isn't one of them.

@bimr how can us doing work without PI cover not be putting our firm at unnecessary risk, you have no idea how good or bad of an engineer I am LOL. As i said the current contract is low risk but there is about 30Ha of future land development in the near future where they will insist on the same clause and it is very easy to get into an argument when a road pavement fails (our fault or otherwise),especially as your post states it is dependent on the judge

 

[bimr]

That's why you should have a good project manager. It's not like you are going to wake up like Rip Van Winkel 2 or 3 years later and find that you an insurmountable problem.

You should be having regular project meetings and documenting the meetings. Your client should be reviewing your work as you move along. If there are changes in the scope of work, the change orders should be approved in a timely manner.

Where projects get in trouble is when people ignore problems until the project ends and then a squabble breaks out. I remember we had a middle east contract guy who was famous for resolving contracts. He would start reading boorishly the contracts and scope line by line. The people on the other mostly just gave up rather than deal with this guy.

Engineers should only accept projects that they are comfortable with and know they have the knowledge to complete. If you follow that concept and use a project manager, then the minor contracts terms you asked about are pointless.