OP-ED: New communications still must fit old legal rules
With the construction season winding down, contractors are going to discover whether or not contractual details were properly communicated. Change orders could be deemed ambiguous or improperly delivered on the one hand (if they were provided and accepted at all). On the other hand, a happy customer may be grateful to have been regularly updated regarding the status of a project. In this vein, many contractors are noticing that old legal rules regarding communications created in the days of pencils and paper do not always reflect reality at construction sites where most project managers now operate with a smart phone or tablet.
Those project managers keep getting younger and more adept with alternative communication devices. A dirty legal secret is that a contract can be changed or entered by text message, email, instant message, or some other new form of communication. Where previous generations of contractors had better ability to control promises that the company makes, communications from company-owned devices are harder to control but still capable of binding a company.
Contractors are beginning to recognize this reality. As but one example of the attention this issue is getting, the annual summer convention of the Oregon Chapter of the Association of General Contractors offered strategies for managing the variances in the ways different generations communicate.
The strategy analysis begins with an understanding of agency law. All companies have agents, which is a legal word for the people who can make commitments or representations that are binding on the company. To determine the identity of a company’s agents, the law considers not only the company’s perspective, but also the perspective of third parties, such as customers or other contractors up and down the chain of construction delivery. If a customer reasonably believes that a company employee has authority to bind the company, the employee is an agent of the company even if the company does not want that to be the case.
As a result, company electronic devices are potential liabilities for the company. Employees should be aware that communications from those devices (text, voice, email, etc.) could carry consequences for the company, regardless of whether the employee’s intent is to legally bind their employer.
Another problem with the proliferation of electronic writings is that, in the event a dispute arises, the writings help to reconstruct the events that led to the dispute. In that sense, accurate and clear writings are helpful; terse text messages or casually worded emails can be worthless, confusing, or (worse) used to misconstrue the events that led to the dispute. So, prolific electronic communications present a risk.
However, the market now expects a greater level of communication from employees at all levels and from all generations. Younger people are not the problem. Electronic devices make communications fast and cheap. The problem is managing the risks associated with increased communication ability.
The first step is clear communication with customers about authority. Most construction contracts contain provisions governing how notices are to be provided. Those notice provisions can identify the individuals with authority to bind the parties, the form the notice must be made (electronic, paper, etc.), and the location where the notice must be sent.
Another step is training less experienced employees from the younger generations. Less experience means weaker judgment. Weaker judgment in this context means a lack of appreciation for dangers associated with lax communications that are incomplete, speculative, or simply wrong. Any such communications can prove dangerous when a dispute arises and parties use writings to support competing versions of the disputed events.
Anyone with a device should be provided training about how a writing can be binding on the company—particularly if there is no contractual protection identifying the individuals who can bind the company. Training and feedback can help younger employees spot issues and communicate correctly to resolve those issues. Training should also help all employees remember that an underused response is, “I don’t know but will find out.” Rapid fire guesses lead to misunderstandings at best and litigation at worst. If a guess is in writing, it may be hard to avoid during litigation.
Finally, contractors should also make sure that their contracts are up-to-date. Do the contracts that are being used contain a notice provision? That is a good start. The next question is whether the notice provision reflects current business realities. Does the contract require that notices are sent by FAX? Do you have a FAX? Technology can make notices much easier to manage and evaluate, but only if the technological uses are consistent with contractual obligations.
Technological and employee evolution requires constant diligence. Many developments can make existing legal rules appear old-fashioned or out-of-touch with common practice. But simple and careful management of new communication methods can help to create an environment that maximizes the benefit of the new devices and old legal rules.
Column first appeared in the Daily Journal of Commerce on September 26, 2017.