Setting a Standard for Good Faith and Ethics in Construction Contracts

Trusting that your fellow contracting party will act ethically and in good faith is essential. Aligning the parties’ interests with the project’s success creates the right foundation to build successfully. Setting the right tone and expectations between party relationships is one of the reasons that ConsensusDocs contracts have been used on construction projects worth more than $50 billion but have yet to be the subject of a reported court decision.

In most but not all states, a duty of good faith in contract performance is implied by the courts. Notwithstanding, the very first provision in all ConsensusDocs agreements explicitly states good faith as well as something more substantial by providing the following:

  • Each Party agrees to act on the basis of mutual trust, good faith, and fair dealing and perform in an economical and timely manner. The Parties shall each endeavor to promote harmony and cooperation among all Project participants (emphasis added). See ConsensusDocs 200 §2.1.

The ConsensusDocs Drafters sparingly use loose contractual language like “endeavor.” However, in this case, it is appropriate as a contract provision. There is an aspirational and educational notion here that manifests the parties’ intentions in writing.

Beyond good faith, ConsensusDocs explicitly addresses ethics. This offers constructors a way to distinguish themselves in this area by affirmatively stating their intentions. Section 2.2 of the ConsensusDocs 200 provides:

  • ETHICS Each Party shall perform with integrity. Each shall: (a) avoid conflicts of interest; and (b) promptly disclose to the other Party any conflicts that may arise. Each Party warrants it has not and shall not pay or receive any contingent fees or gratuities to or from the other Party, including its agents, officers, employees, Subcontractors, Subsubcontractors, Suppliers, or Others to secure preferential treatment.

ConsensusDocs sets itself apart by providing something concise and straightforward. Standard language can always be revisited and tailored to something more intricate. For instance, a more complicated protocol to determine what constitutes a “conflict of interest” might be considered.  Another topic for consideration might be additional disclosures and permissions when a “related party” performs work when such item is paid as a cost-of-the-work item. ConsensusDocs standards contracts create a contractual structure and framework that moves the needle on contract negotiations with best practice options.

Additional Resources

Federal Government Contractor: Ethics & Compliance at the AGC bookstore here.

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