CONTRACT CLAUSES EGR 4050

JOHN W. TULAC

Attorney at Law, Professor Emeritus

Copyright 2018

ANALYSIS OF THE CLAUSES

These are clauses that engineers may encounter in contracts drafted by potential clients

Your job is to read each clause and determine whether it is good for you, bad for you, or ugly for you

You will need to take your time with some of these clauses; some are not easy to read or understand

Welcome to the real world

BEST EFFORTS CLAUSE

Professional shall use her best efforts in the performance of all her duties under this Agreement for professional services

BEST PRACTICES CLAUSE

Engineer warrants and represents that it engages at all times in best practices for the performance of its services set forth in this Agreement.

MOST FAVORED CLAUSE

The price for the services is and will continue to be the lowest price charged by Engineer for the same or substantially similar services. If at any time during the term of this Agreement, Engineer offers or sells the same or substantially similar products to a third party at a lower price than the price set forth herein, Engineer will immediately notify Client and reduce the price for the applicable deliverables to such lower price on any pending and future services.

TIME CLAUSES

Time is of the essence.

Time Clauses

Schedule of Services - OK

Timeline Exhibit - OK

“Deadline” or “Deadlines” - Not OK

Description of purpose of schedule, timeline, deadline, etc.

Often necessary, but potentially dangerous

STANDARD OF CARE CLAUSE

THREE SIMPLE INDEMNITY CLAUSES

Engineer agrees to hold harmless and indemnify Client from any and all liability, including cost of defense, arising out of performance of the services described herein.

 

Engineer agrees to hold harmless and indemnify Client from any and all liability, including cost of defense, arising out of Engineer’s negligence, whether it be sole or in concert with others, in connection with performance of the services described herein.

Engineer agrees to hold harmless and indemnify Client from and against liability arising out of Engineer’s negligent performance of services.

MUTUAL INDEMNITY CLAUSE

The Consultant agrees, to the fullest extent permitted by law, to indemnify and hold harmless the Client, its officers, directors and employees (collectively, Client) against all damages, liabilities or costs, including reasonable attorneys’ fees and defense costs, to the extent caused by the Consultants negligent performance of professional services under this Agreement and that of its subconsultants or anyone for whom the Consultant is legally liable.

The Client agrees, to the fullest extent permitted by law, to indemnity and hold harmless the Consultant, its officers, directors, employees and subconsultants (collectively, Consultant) against all damages, liabilities or costs, including reasonable attorneys’ fees and defense costs, to the extent caused by the Client’s negligent acts in connection with the Project and the acts of its contractors, subcontractors or consultants or anyone for whom the Client is legally liable.

Neither the Client nor the Consultant shall be obligated to indemnify the other party in any manner whatsoever for the other party’s negligence.

DAMAGES CLAUSE

The term Damages shall mean any and all damages, liabilities, obligations, penalties, fines, judgments, claims, deficiencies, losses, costs, expenses and assessments (including without limitation income and other taxes, interest, penalties and attorneys and accountants fees and disbursements).

DAMAGES CLAUSE

UNLESS OTHERWISE EXPRESSLY HEREIN PROVIDED, EACH PARTY’S LIABILITY TO THE OTHER PARTIES UNDER THIS AGREEMENT SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED, NO PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, WHETHER IN CONTRACT, IN TORT, UNDER ANY INDEMNITY PROVISION, OR OTHERWISE.

DAMAGES CLAUSE

Neither party shall be responsible for consequential, indirect, special or punitive damages.

DAMAGES CLAUSE

Each of the Parties is liable to the other for any direct damages arising out of or relating to its performance or failure to perform under this Agreement. Except for a Party’s breach of Article 10 (Indemnities) or Article 8 (Confidentiality), in no event will either Party be liable to the other for damages due to a breach of this Agreement in excess of the amount of the Service Fees paid by Company to Service Provider over the last twelve (12) months.

DAMAGES CLAUSE

The Parties shall be entitled to all remedies or damages available to them in equity or at law under the Uniform Commercial Code.

CHANGE ORDER

In the event that Service Provider is requested or required to perform services that are outside the scope of this Agreement, such services and a compensation schedule therefore must be mutually agreed upon by the parties in a written change order (Change Order) prior to the provision of said services. The Change Order constitutes an amendment to the applicable Work Order and the services set forth therein shall be deemed to be Services part of such Work Order.

TERMINATION CLAUSE

7.           Term and Termination.

 

7.1           Term. Unless earlier terminated as set forth below, the term of this Agreement shall begin on the Effective Date and shall continue until December 31, 2017 (“Initial Term”), and shall thereafter automatically renew for subsequent one (1) year terms, unless notice of termination is given not less than six (6) months prior to the end of the Initial Term or annual renewal term.

TERMINATION CLAUSE

7.2           Termination for Convenience. Either party may terminate this Agreement upon written notice to other party and such termination shall be effective six (6) months after the date such notice is received by the non-terminating party. After termination, ENGINEER shall still provide maintenance services at its normal hourly rates for a period of two (2) years as measured from the Effective Date and ENGINEER agrees to use its good faith efforts to provide such services on a timely basis, but the response times in the Software Maintenance Procedures attached hereto shall not apply after the date this Agreement terminates.

TERMINATION CLAUSE

7.3           Termination for Breach. Either party may terminate this Agreement upon written notice if the other party breaches any material obligation under this Agreement or the Purchase and Sale Agreement For Software entered into concurrently herewith and fails to cure such breach within thirty (30) days after receiving written notice of the breach. Such notice shall specify the nature of the breach in reasonable detail. Should ENGINEER terminate this Agreement for COMPANY’s breach, the terms of Section 7.2 (with respect to reimbursement of costs and Additional Compensation) shall apply.

TERMINATION CLAUSE

7.4           Effect of Termination. Upon termination of this Agreement for any reason, any amounts owed to ENGINEER under this Agreement before such termination, or if such termination is by ENGINEER for a material breach by COMPANY an amount not less than the Minimum Monthly Fee for not less than six (6) months after notice of termination is given resulting in such termination, will be due and payable within thirty (30) days of such termination, and each party shall promptly return to the other party or destroy all Confidential Information of such other party in such party’s possession or control and certify in writing to such other party that it has fully complied with these requirements. If a breach is the failure by COMPANY to timely pay fees due under this Agreement or the Purchase and Sale Agreement For Software upon five (5) days’ written notice ENGINEER may suspend working on any Project and providing maintenance and support until payment has been received.

WORK PRODUCT

        8.1    Work Product.    All tangible items prepared by Engineer, including but not limited to all drawings, specifications, calculations, data, notes and other materials and documents, including electronic data furnished by Engineer to Client and to Subcontractors under this Agreement ("Work Product") shall be instruments of service, and Engineer shall retain the ownership and property interests therein, including the copyrights thereto. 

INSURANCE

Single Limit

Aggregate Limit

Types

Professional

Commercial, including Fire

Automobile

Workers Compensation

Questions 1 – 5 are True/False. Mark A for True and B for False.

1.

In C++, the variables total and ToTaL are NOT considered to be the same variable.

A) True B) False

2.

The body of a while loop is only executed if the loop condition is false.

A) True B) False

3.

Pseudocode is considered a “high level” programming language.

A) True B) False

4.

An expression containing the operator && is true only if both its operands are true.

A) True B) False

5.

else if statements are tested sequentially until a match occurs.

A) True B) False

 

Questions 6 – 15 are Multiple Choice and worth 1 point each.

6.

Which of the following is a valid constant declaration?

A) const FRED int = 5; B) int const FRED = 5; C) int FRED const = 5; D) const int FRED = 5; E) FRED const int = 5;

7.

const, while, if, and int are examples of:

A) reserved (key) words B) identifiers C) variables D) compiler directives E) program comments

8.

Which of the following is a valid C++ assignment statement?

A) x = q – (y * z); B) y + z = x; C) y = b * c D) x = (x + (y z); E) x = a b;

9.

The formula:

  https://sunyocc.sln.suny.edu/AngelUploads/QuestionData/eb31830c-33c7-4022-b4c0-d00adc52787a/formula.png#{25FC23A4-F3AB-4F29-AD13-AD7E258BA27B}  

can be represented in C++ as:

A) x = a – b / c – d; B) x = a – b / (c – d); C) x = (a – b) / (c – d); D) x = (a – b) / c – d; E) (a – b) / (c – d) = x;

10.

Which of the following is a valid variable name?

A) 2ndName B) %Last_Name C) year03 D) @Month E) #55

11.

Which library must be included to enable keyboard input?

A) iomanip B) cstdlib C) input D) iostream E) kbdin

12.

Which of the following is an invalid variable name?

A) Part time B) part_time C) full_time_job D) FullTime E) _Parttime

13.

Which library must be included to enable formatted output?

A) output B) scrnout C) format D) cstdlib E) iomanip

14.

Which of the following is an invalid variable name?

A) _64 B) 64_ C) Sum_ D) _S_u_m_ E) _Sum

15.

What is the comment section at the beginning of a program that gives information about the author and the program called?

A) prologue B) prelude C) heading D) preliminaries E) foreword

Questions 16 – 19 are Matching and worth 1 point each.

A. sentinel          B. running total          C. cin          D. condition          E. counter

16.

A __________ is evaluated to true or false each time an if statement is encountered in code.

A) sentinel B) running total C) cin D) condition E) counter

17.

A while loop that is controlled by the user ends with a __________ value.

A) sentinel B) running total C) cin D) condition E) counter

18.

A while loop that runs a pre-determined number of times is controlled by a __________.

A) sentinel B) running total C) cin D) condition E) counter

19.

A variable that accumulates the sum of numbers entered by the user is accumulating a __________.

A) sentinel B) running total C) cin D) condition E) counter

 

For Questions 20 – 24, determine the logical value of the comparison. Mark A for True and B for False.

 

Assume that a=10, b=6, c=10, and d=8.

20.

a == b

A) True B) False

21.

c < d

A) True B) False

22.

c == a

A) True B) False

23.

a >= c || b >= d

A) True B) False

24.

(c < b && d < b) || (a != c)

A) True B) False

 

Trace through the following Code:

25.

for (i = 3; i <= 6; i++) {            cout << "*"; }

A) * B) ** C) *** D) **** E) 3 4 5 6

Consider the following code for Questions 26 and 27:

int count = 10;

int num = 4;

do

{

      if ((count % 2) == 1)

      {

           num += 3;

      }

      else

      {

           num -= 2;

      }

      count--;

}

while (count > 5);

26.

What is the value of count after the following code is executed? This question is worth 2 points.

A) 1 B) 10 C) 5 D) 4 E) 2

27.

What is the value of num after the following code is executed? This question is worth 2 points.

A) 1 B) 10 C) 5 D) 4 E) 2

 

For Questions 28 – 30, determine the result of each expression.

28.

3 * 3 + 3 / 3 – 3 % 3

A) 0 B) 10 C) 1 D) 4 E) 3

29.

6 * (8 – 12 / 2) + 9 / 3

A) 1 B) 10 C) 5 D) 4 E) 15

30.

(8 – 3) % 2 + 12 / 4

A) 1 B) 10 C) 5 D) 4 E) 15

CONTRACT CLAUSES FOR

PROFESSIONAL ENGINEERING SERVICES

JOHN W. TULAC

Attorney at Law

Copyright 2014, 2020

CONTRACTS AND RISK

Risk analysis is the bridge between tort law and contract law

Contracts help us prevent, manage, and mitigate risks that we identify and assess

Contracts allow us to allocate risks and responsibilities for or consequences of risk

Contracts may or may not help us deal with risks that we do not identify and assess

CONTRACT CLAUSES

How an engineer views a contract

Scope of work OK

Time of performance OK

Price OK

Terms and Conditions UGH!

Terms and Conditions are important

Like accounting principles. What the balance sheet giveth, the footnotes taketh away.

So yes, you have to read the whole thing ALL THE TIME!

HOW TO READ AND ANALYZE A CONTRACT

What is the contract subject matter & purpose?

Are the rights and obligations of each party clearly stated?

Does the contract clearly detail what each party must do and when each thing must be done?

Are risks (and “what ifs”) addressed?

Is it reasonably balanced?

Do the parties (not just the lawyers) understand it?

Use a checklist or outline approach

PRECISION COUNTS

Remember these two questions?

What does it mean to be a design professional?

What does it mean to me to be a design professional?

Precision versus accuracy in contract language

Ambiguities create uncertainty and risk and sometimes opportunity

STANDARD OF CARE

It’s the law.

It doesn’t need to be stated in the contract

STANDARD OF CARE

It’s the law.

It doesn’t need to be stated in the contract

Owners will put it in the contract anyhow

STANDARD OF CARE

It’s the law.

It doesn’t need to be stated in the contract

Owners will put it in the contract anyhow

AND THEY WILL SCREW IT UP!!!!!

STANDARD OF CARE

It’s better to leave it out

It is possible for you to agree by contract to a higher standard of care

If it must be in the contract at least make sure it is accurate

AVOID!

Absolutes

Exculpatory clauses (for the owner)

Construction contract language

Sale of goods language

Guarantees or warranties of work

Distinguish representations of fact

Representations of fact are powerful in contracts

DAMAGES

Remedy for breach of contract is damages

Not specific performance or other equitable relief

Measure of damages

Compensatory (usual measure)

Consequential (beware!)

COMPENSATORY DAMAGES

General measure of damages

Difference between what is promised and what is performed under the contract if performance is less than what is promised

Breach of contract

Substantial performance

Opportunity to cure the breach

CONSEQUENTIAL DAMAGES

Damages beyond the price of the contract itself

Example: penalty on another contract or lost profits

Dangerous

Must be agreed upon in the contract

Generally, must be bargained for in advance

Can be hidden in plain view

TIME IS OF THE ESSENCE

An often included clause, short and “sweet”

WHAT DOES IT MEAN?

TIME IS OF THE ESSENCE

It means time is important

As an aside

For the design professional, it also means that time is money

Expedited work can support a higher price

If a party does not perform on time, it means that there is a breach of contract

HOWEVER…

TIME IS OF THE ESSENCE

Most of the time, mere delay in performance does not amount to serious breach of contract

By itself, this sentence doesn’t mean much

If the objective reason why time is important is not included, then mere delay, absent more, is not in and of itself always material breach

Why is time important?

Example: Restock versus reception

One is important and has consequences; the other doesn’t

IF TIME IS TRULY IMPORTANT

THAT IS, OF THE ESSENCE

Then, it must be bargained for

The party that must perform on time must know of its importance, the consequences of delay, and the willingness to be liable in damages for the consequences of delay,

AND, IT MUST BE IN WRITING

No surprise, this can get contentious

DAMAGES

Do not agree to damages resulting from things you cannot control

Do not, as a general rule agree to consequential damages

If you must, set limits; get something in return

Liquidated damages

Who should bear the risks? Who’s making the big money? Hint: It isn’t the design professional

No punitive damages

INDEMNITY

Easy concept

Ridiculously and unnecessarily difficult clauses

Indemnity is an agreement by two or more parties to a contract allocating responsibility to pay for damages to third parties arising out of the contract (including torts committed in the performance of the contract)

A third party is someone not a party to the contract

INDEMNITY

Contract allocation of liability for damages

Can be allocated regardless of fault

Owners frequently overreach

So do general contractors

Gravity

Do not agree to indemnify for something outside your control or responsibility

Set limits; get concessions

INSURANCE CLAUSES

Necessary to the contract

Insurance companies can help. Really!

Different coverages

Single

Aggregate

Appropriate limits

Who should pay?

CHANGE ORDERS

K.I.S.S.

Follow the procedures

Changes must always in writing

Don’t get suckered into doing work now and documenting the change later

Give something, get something

A FEW MORE THINGS

Waivers

Termination of contract

Form contracts

Have your own standard contract

THE DESIGN PROFESSIONAL’S PERFECT CONTRACT

All liability is negligence based

Direct (compensatory) damages only

A maximum limit on design professional’s liability

No variation on the legal standard of care

No warranties or guarantees

Reasonable time

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