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Why a sample contract?
Members of our section are frequently consulted on disputes over the wording of contracts between environmental engineers and their clients. Some contracts are just badly drafted, so it's hard to know what they mean. Others are clearly drafted, but don't describe what the client was promised. Some deprive clients of virtually all meaningful remedies for shoddy work.
When a client hires a professional to do a highly important job, and pays for that job, they expect to be able to rely on the result. This is particularly important when large amounts of money are at stake. But under many engineering consulting contracts, the consequences of an engineer's negligence fall almost entirely on the client.
One common problem is limitation of liability clauses. Many engineering firms limit their liability to the lesser of $25,000 or $50,000 or their fees, whichever is less, no matter how badly they perform. For many contaminated sites in the GTA, $50,000 is not a meaningful amount of money; it is rarely enough to complete the work that the client had already paid for.
Powerful clients, like banks and the federal government, simply won't sign these sorts of contracts. But individuals and small to medium sized businesses often do. It creates injustice, and it creates litigation. Hiring an engineer is not simply a question of filling out a standard form. It involves a serious decision on the allocation of risk, which the parties should realize they are making.
For this reason, we struck a committee of the Ontario Bar Association and the Association of Consulting Engineers, to develop a model environmental consulting contract that lawyers, engineers, and their clients could use. As a result of a great deal of hard work over 18 months, we have reached general agreement on such a contract, enclosed. The model contract requires the parties to discuss and agree on critical risk allocation issues, such as limitations of liability, insurance, the cost of extras such as surface treatment restoration, etc. If clients want extra liability protection, such as extra insurance or higher liability limits, they may have to pay higher premiums to get it. Any paragraph that is entitled “mutual indemnity” must actually be mutual, instead of the usual one-sided language.
The sample contract has now been reviewed and approved by the Ontario Bar Association, and is posted on the OBA website for use by any of our members. We have requested the Association of Consulting Engineers of Ontario to post it on their website as well. While there is no guarantee that any or all Ontario environmental engineering firms will agree to use this contract instead of their existing standard forms, we anticipate that the model contract will inform and facilitate discussions on appropriate contractual terms between engineers and their clients.
