So you have decided to retain an environmental consultant to assist with sampling, cleanup or compliance assistance. Many times businesses have the tendency to review the terms of the proposal itself without paying much attention to the "standard terms & conditions" that are often attached to the proposal. These standard terms & condition make up the consultant’s contract.
There are aspects of any consultant’s contract that are definitely worth reviewing.
The bigger the project, the more risk that the contract terms could become a major issue. Here are some clauses that may appear in a environmental consulting contract that are worth close review:
- Limitations on Liability– Most contracts will place a cap on potential recoverable damages if a claim is made under the contract. Not all such caps are unreasonable. However, I regularly see caps that state the recoverable damages cannot be any greater than the fees paid under the contract. With environmental work, claims related to negligence or breach of the standard of care can result in hundreds of thousand or even millions in damages. Limiting recoverable damages to the fees paid is unreasonable.
- Indemnity– Similar to caps on liability, many contracts include "one way" indemnity clauses. Meaning the client must reimburse for damages the consultant suffers as a result of client’s negligence, but no indemnification is provided it the consultant is negligent.
- Ownership/Use of Document-Many contracts state that any documents prepared by the consultant remain the sole property of the consultant. Such language can be broad enough even to include drawings and sampling. If you pay for the documents, you should have rights to use the documents. It is fair for the consultant to include a disclaimer that reuse without their consent is at the client’s sole risk, but an absolute prohibition on reuse is problematic.
- Payment– Pay close attention to the terms related to payment. It is not uncommon for a consultant to quote a price for services, but the contract terms allow them to exceed the quote without getting prior approval. Also, if you expect the consultant to be paid from grants or a special fund, pay close attention to terms the govern submissions for reimbursement.
- Termination- Standard consultant contract language can try and limit the client’s right to terminate the consultant. Sometimes the language limits a client’s right to terminate only if there is a breach of the agreement. The client should have the right to terminate the contract without cause. If you are unhappy with the consultant’s performance for any reasons, you need the right to get out of the contract.
As an example of recent litigation involving an environmental consulting contract, consider the case involving a clause in a consulting contract that limited the right to bring an action to one year from the date of the contract. Shahin v. I.E.S., Inc., 2013 Mass. App. LEXIS 93 (May 31, 2013) In this case a Massachusetts Appellate Court struck down the contractual provision as unreasonable. The Court noted a contract can place limits on when a claim can be brought, but those limits must be reasonable.
The Court noted that the "discovery rule" should be allowed to operate. Under the discovery rule, a claim is tolled if the claimant didn’t have information, with reasonable due diligence, necessary to bring the suit. In other words, if the client didn’t know they had a claim an issue didn’t appear until two years after the consultant performed their work, the Court found it would be unreasonable to bar such a claim.
Such litigation is an example of how the terms and conditions of an environmental consultant’s contract can potentially have significant impacts.