Never "Comply With All Laws"

by Michael Murtaugh
The author is a partner with the law firm of Murtaugh, Miller, Meyer & Nelson, Costa Mesa, California.

One of the most subtle contractual pitfalls threatening design and environmental professionals is the seemingly innocuous provision that services "shall comply with all laws, etc." On its face, this language seems to state nothing more than the obvious; of course construction documents should comply with the applicable laws -- all of them.

A common example of such a provision is as follows:

"The Consultant shall comply with all laws, regulations, ordinances and statutes of any government authority which are applicable to the Agreement or the Consultant’s performance of the Services.

Lender certifications are also notorious for requesting assurances that a project complies with all applicable building codes and zoning ordinances, not to mention every state and federal statute and regulation.

The insidious effect of such provisions is revealed only by an understanding of certain legal principles and practices concerning the establishment of a design or environmental professional's liability for construction document errors and omissions. As a general rule, absent some extraordinary circumstances such as fraud or other intentional wrongdoing, a design or environmental liability can be based on only one legal theory -- professional negligence, commonly known as malpractice. To establish malpractice, it must be proven that the professional fell below the applicable standard of care, by failing to use the care, skill, diligence and judgment ordinarily exercised by reasonably competent like professionals under similar circumstances. This standard can be frustratingly elusive in practice (it is a factual issue to be determined in each case by usually contradictory expert testimony). However, something less than perfection is required; even if it can be said that some code or regulation has not been fully complied with, a finding of malpractice is by no means automatic.

An exception to this general rule (perhaps best referred to as the express warranty exception) can apply where the consultant has promised a specific result -- for example, a promise that construction costs will not exceed a set amount, that governmental approvals will be obtained, or that the construction documents will comply with all laws. Such promises can be binding, and thereby provide a basis for strict (and perhaps uninsurable) liability different from and greater than malpractice.

In addition, a promise to "comply with all laws" can give rise to certain practical vulnerabilities. While not always apparent to laypersons (such as judges and jurors), the sad reality is that the application of the confusing, sometimes arcane, often contradictory and changing requirements imposed by building codes, governmental regulations, state and federal statutes and the like to specific real world situations can require judgment. Even well informed and thoughtful interpretations can be second guessed by plan checkers and construction inspectors, as well as by courts and the construction industry over time -- not to mention by adverse forensic experts whose sometimes strained opinions are almost inevitably couched in terms of the design or environmental professional's "code violations." It is not a fair game to start with, and "comply with all laws" contractual provisions can be used to make an unfair situation fatal.

The best solution to such clauses is to have them deleted. But much of the threat they present can be greatly mitigated by qualifying the offending language to clarify that the design or environmental professional's real obligation is to use properly informed judgment, rather than to assure results. For example, the phrase "shall comply with all laws, regulations, ordinances and statutes " could be changed to "shall in the consultant’s best judgment comply with laws." No magic language is required; the key is to clearly express the intent that "compliance with all laws" is not a guarantee, but a goal.