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Transparency in Contract Revisions

Posted By Mr. Ethics, Thursday, March 20, 2014
Updated: Wednesday, April 23, 2014

Dear Mr. Ethics,

We use AIA contract documents with all our owners and subs.  We always modify the documents to get better terms for us.  For example, we insert a “paid when paid” clause; broader indemnification; and a lien waiver provision.  We never let the owner or sub know we modified the document.  Now one of our younger employees has voiced ethical concerns about not letting the other party know about the changes we make.  What is your opinion?
Very truly yours, Business is Business

Dear Business,
There exists an obligation that a party entering into an agreement knows the terms and conditions of the agreement.  There is no obligation for a party to tell the other party about the terms and conditions.  Therefore, I do not think you have acted improperly in not pointing out where you have changed the agreement.   However, ethics suggests that it you want an open and transparent relationship with the party you are contracting with, and then you should advise them of the changes you have made to the standard AIA agreement.  Disclosure may not be required but I think it is the best course of action.
Regards, Mr. Ethics

Tags:  AIC Contracts  Mr. Ethics 

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