Protecting Your Business

Words: John SwindalWords: John Swindal

The Swindal Group (www.swindalgroup.com) is a full-service construction consulting company providing specialty contractors with practical advice on contract formation, contract review, contract revision, contract negotiation, litigation strategy, document review, general business planning, strategic planning, and contract management strategies. John B. Swindal (jbswindal@swindalgroup.com) is the Managing Director of the Swindal Group.

I hope that everyone out there is beating the heat as we slog through the end of the summer with an eye towards the MCAA MidYear and some cooler weather. The month of August is the time of the year when our national pastime, baseball, takes center stage with college and professional football looming at the end of the month. One of the most beloved baseball movies of all time, Field of Dreams, comes to mind and its famous quote “If you build it, he will come.” In the movie, Kevin Costner’s character Ray builds a baseball field in an Iowa cornfield prompting deceased baseball players to return to life to play baseball on Ray’s diamond. One of the many players that “comes” to play on the diamond is Ray’s father, which allows the estranged pair an opportunity to play a long overdue game of catch. All mason contractors need to be aware that signing a contract without a thorough review of the indemnification clause can lead to an “If you sign it, he will come” situation. In this context, “he” will not be the spirit of Shoeless Joe Jackson but rather a series of uninvited spirits with hands held out including the general contractor, the Owner, other subcontractors and all of the aforementioned parties’ insurance companies and attorneys. Indemnification is largely a creature of statute. As many of us understand and appreciate the lobbies of specialty contractors (and especially masonry contractors) are more powerful in some states than others. It is certainly a good idea to familiarize yourself with the indemnity laws in each state in which your company is performing work. The three different types of indemnity clauses are: broad form indemnity (the most troubling because subcontractor can be held responsible even if negligence of general contractor or Owner is sole cause of incident), intermediate form indemnity (subcontractor can be held responsible UNLESS negligence of Contractor or Owner is the SOLE cause of incident) and limited form indemnity (a party cannot be indemnified for its own negligence in part or in whole). It is always best practice to limit the scope of your own indemnity obligations prior to signing a contract. Most of our clients will simply incorporate language from statutes directly into its subcontracts. In this instance, it is unlikely (though not impossible) that a contractor would abridge the indemnity rights it is statutorily guaranteed. In these instances it is imperative for a masonry contractor to share the indemnification paragraph within a subcontract with its insurance agent to ensure proper insurance is offered in the instance of a claim. If you conduct business in a state that allows broad form indemnity I would also urge the commencement of a dialogue with your local representative(s). As always it is recommended that you speak to qualified local counsel prior to signing any contract or agreement. It is rare to completely remove indemnity exposure from a contract, but it is possible to make sure that when you sign the contract and the general contractor, Owner, and architect with hands open and gloves off that your liability is limited, expected and insured. s but coordinating the work of other trades without a true contractual relationship can be prickly. As mentioned in the January issue, sometimes business circumstances force masonry contractors to take jobs without any revision to a contract. If you find yourself in a position where you sign a contract without revision or careful review, make sure you familiarize yourself with the contents of the schedule portion of the contract. Without careful review of the schedule paragraph(s) it is possible to find your forces working overtime at your own expense, your forces supplemented by others at your own expense, or even a termination of your contract. As with any other contractual commitment whether revised or not, the schedule clause(s) must be understood and managed to ensure project success.

Protecting Your Business

(Nothing contained in this article is intended to convey, constitute or be construed as legal advice.)

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