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You Signed What? Avoiding Costly Mistakes Related to the Use of Project Claim Waivers, Releases

April 05, 2016

Significant and costly disputes concerning the scope, application and enforcement of claim waivers and releases provided in return for progress or final payments are a common occurrence in our industry, perhaps even epidemic. Almost every claim for additional compensation is disputed by an argument that the claim was waived due to the claimant’s execution of a release or waiver form during construction of the project.

Most well-drafted construction agreements require contractors and material suppliers to execute claim waivers or releases in return for progress and final payments. Too often, however, the release or waiver forms are poorly drafted, incorrectly or arbitrarily used, or executed by project personnel who simply do not understand that signing these documents can result in devastating consequences, including forfeiture of valid claims, even those for which contractually compliant notices were previously issued.

Project owners and general contractors, however, rely upon executed claim waivers to manage risk and reduce claim exposure as the Project is constructed. If the forms are poorly drafted or improperly used, they provide no certainty that claims believed waived or resolved will not resurface later in the Project. Moreover, “verbal understandings” or “side agreements” concerning reservation of claims rights are not a valid substitute for well-drafted documents. Such “understandings” are long forgotten years later when the claims become the focus of an arbitration or litigation.

The link below will connect you to an article by William Tinsley, a partner in Phelps Dunbar's Tampa, Florida office practicing in the area of construction law and litigation, recently published by Thomson Reuters in its “Practical Law” publication that provides guidance to construction project participants for drafting unambiguous waiver and release forms and how to utilize these documents to ensure that they are enforced as intended. The article also provides guidance to contractors on how to properly preserve claim rights they did not intend to waive or release when executing these forms and finally, practice tips on how to use the process to effectively update and supplement claims notices.

Click Here to Read the Article as Published by Thomson Reuters in Practical Law