In our last article, we provided an overview of Building Information Modeling (“BIM”) and the new Integrated Project Delivery Contract (“IPD Contract”) needed to realize its full potential. This article will take a closer look at the differences between the release and waiver provisions of the traditional CCDC Contracts and those found within the new CCDC 30 – IPD Contract.
The first difference with the IPD Contract waiver and release provisions is the number of parties that are bound by them. The driving idea behind IPD Contracts is to include all major parties to the project so that risks and rewards can be shared. At a minimum, this means including the contractor, the client and the advisor. However, the express intention is to include any other main party. Such a reach has the effect of transforming the IPD Contract into a true partnership.
Since traditional CCDC Contracts do not attempt to include all parties to the project, the waivers provided for in these contracts apply only between the owner and the contractor, offering these parties very limited protection. This situation is impervious to any other potential relationship, such as that with consultants and subcontractors, among others. This creates the possibility of different liabilities arising between the owner, contractor and any third party who remains subject to the contract.
Another key feature of the waiver and release provisions of an IPD Contract is the narrower range of claims which parties to the contract may make against one another. For traditional CCDC Contracts, most of the claims that occur prior to substantial performance are not subject to any waiver. The traditional CCDC Contracts contain very detailed and specific release provisions that are intended not so much to outright exclude liability but rather to regulate the information that must be shared in order to be able to advance a claim. This has the consequence of putting the parties to the project in a constant state of doubt as to their potential liability.
The IPD Contract, on the other hand, provides for a general waiver between the parties which is subject only to the following exceptions:
- claims arising from a party’s willful default;
- claims arising from any express warranty obligations of the parties or an obligation to provide third-party warranties under the Contract Documents;
- claims for payment of amounts due under the Contract by any party to the Contract against any other party;
- claims attributable to any violations or alleged violations of any intellectual property right, including infringement or an alleged infringement of a patent or copyright, or violations or alleged violations of any trademark or licences;
- claims for failure to provide insurance coverage specified in the Contract Documents;
- claims for which indemnification under policies of insurance specified in the Contract Documents is available, to the extent such insurance proceeds are available;
- claims by third parties; or
- claims for damages resulting from substantial defects or deficiencies in the Design or the Work which were not known, or reasonably could not have been discovered, prior to the end of the Warranty Phase. “Substantial defects or deficiencies” mean those defects or deficiencies in the Work which affect the Work to such an extent or in such a manner that a significant part or the whole of the Work is unfit for the purpose intended by the Contract Documents.
The IPD Contract thus takes away claims that are covered by the risk pool provisions of the Contract. Most notable among the waived claims are claims arising from delay in the project or cost overruns. Parties also cannot subrogate with respect to insurance benefits paid. The parties to the IPD Contract agree to share the risks and rewards arising from efficiency gains or losses and therefore waive any causes of action arising from such claims against one another.
It is therefore impossible, notwithstanding the exceptions, to advance the types of claims which typically result in the most substantial types of damages. The intention behind this is to create an atmosphere conducive to the free sharing of information throughout the project and to minimize the parties’ fears regarding their potential liability. This means that if a party is falling behind schedule or encountering other difficulties with the performance of the work, they do not have to fear alerting the other parties right away and have less incentive to assign blame and position themselves for litigation. This is conducive to constructive problem solving and collaboration because, regardless of where the blame lies, all will share in the benefit of finding a speedy and effective solution or in the loss if they fail to do so.
One of the major differences between traditional CCDC Contracts and the IPD Contract resides in the waiver and release provisions. The approach used in the traditional CCDC Contracts is designed to delineate only the tasks and responsibilities of the parties to a contract, and leave out other parties to the construction project. On the other hand, the IPD Contract seeks to create a spirit of collaboration by including all parties to the project and by significantly limiting claims these parties may make against one another. This has the effect of creating a partnership between multiple parties. Because of the greater complexity involved, it is advised that parties contemplating such arrangements seek legal advice regarding the potential risks and benefits for their particular enterprise.