ST9801-CS 980916NICHOLS, JACKSON, DILLARD, HAGER & SMITH, L.L.P.
Attorneys & Counselors at Law
1800 Lincoln Plaza
500 North Akard
Dallas, Texas 75201
(214) 965-9900
Fax (214) 965-0010
E- mail NJDHS ~ NJDHS .com
JOHN F. ROEHM IH
JA8ONC. MARBHALL
J. DAVIDCX)0OIII
ROBERTL I:NLLARD,
H. LOUIS NICHOL8
LAWREI',ICEW.~
OFCOUlIIL
September 16, 1998
Ken Griffin
City Engineer
City of Coppell
255 Parkway Boulevard
P.O. Box 478
Coppe.l.1, Texas 75019
Re: Liability/Indemnity Provision in Freese-Nichols Contract
Dear Mr. Griffin:
You have requested an opinion from this firm regarding the proposed
modification to the Liability provisions (Section 11 at page 6) in the proposed Consulting
Engineer's ContraCt between the City and Freese-Nichols. The' concerns stem from
Freese-Nichols' proposed addition to the Liability clause which relates to the "express
negligence rule adopted by the Texas Supreme Court." In reply, the inclusion of the
proposed language has no effect on the contract,
By virtue of a series of Texas Supreme Court cases, a role of law has developed
which controls the use and effect of releases, indemnity clauses, hold harmless
provisions, and other agreements which attempt to protect a party from the consequences
of its own negligence. A provision in an agreement which attempts to protect a party in
advance from its own negligence (i.e., an indemnity clause or a release) must meet "fair
notice" requirements. These requirements. have two components: 1) the "express
negligence doctrine" and 2) *,he conspicuoushess test. Dresser Indus.trie& Inc. v. Page
Petroleum, Inc., 835 S.W.2d 535 (Tex. 1993)
Under the express negligence doctrine, a party seeking indemnity from the
consequences of its own negligence must express that intent in specific' terms within the
four comers of the contract. Ethyl Corp. v. Daniel Constr. Co., 725 S.W.2d 705
(Tex. 1987). The provision must be sufficiently clear so as to define the parties' intent.
Enserch Corp. v. Parker, 794 S.W.2d 2 (Tex. 1990). Essentially, the contract must simply
contain a relatively clear indemnity or release clause.
The "conspicuousness" component of the fair notice rule requires that .the
contractual provision be sufficiently conspicuous; something must appear on the face of
the contract to attract the attention of a reasonable person when he looks at it. Ling & Co.
Ken Griffin
September 16, 1998
Page 2
v. Trinity Savings, 482 S.W.2d 841 (Tex. 1972). Indemnity and release clauses should not
be printed in fine print on the reverse side of a contract nor hidden under a separate
heading or surrounded by unrelated terms. K & S Oil Well Service, Inc. v. Cabot Corp.,
491 S.W.2d 733 (Tex. Civ. App.--Corpus Christi 1973, writ ref'd n.r.e.). Language is
conspicuous if, for example, it is printed in capital headings, in contrasting type or color,
or within an extremely short document such as a telegram. Dresser, supra, 853 S.W.2d at
p. 511.
Nevertheless, the Texas Supreme Court has expressly held that the "fair notice"
requirements (and the requirements of the express negligence doctrine and the
conspicuousness test) do not apply if the party has actual notice or knowledge of the
indemnity provision. Dresser, supra, 853 S.W.2d at 508 n. 2; Gate v. Dover Corp., 790
S.W.2d 559 (Tex. 1990); see, also, McGehee v. Certainteed Corp., 101 F.3d 1078 (5th
Cir. 1996).
Since the provision sought by Freese-Nichols to be included in Section 11 seeks
to require the engineer to indemnify the City, a violation of the fair notice requirements
could only serve to benefit the engineer. The inclusion of the language requested by
Freese-Nichols operates to the City's advantage. It is inconsistent and puzzling for the
engineer to insist on the inclusion of a contractual provision which effectively waives a
potential defense under the fair notice requirements.
Further, Section 11 of the proposed contract does not seek to protect the City from
the consequences of the City's negligence. By its terms, it expressly imposes liability on
the engineer for the engineer's own negligence and requires indemnification from the
engineer for damages resulting from the engineer's defects, errors or omissionsJ Thus,
although it employs the term "indemnify," the clause is not truly an indemnification
provision which by definition attempts to exculpate the City from the consequences of its
own negligence. The "fair notice" requirements may not apply. Even if the clause were
deemed to be a true indemnification clause, the fair notice requirements will not apply
simply because it is abundantly clear that Freese-Nichols has specific awareness of its
presence and terms: the proposed modification to Section 11 is being proposed by Freese-
Nichols in their fax transmission of September 11, 1998. Thus, the inclusion or exclusion
of the proposed language is entirely inconsequential. The inclusion of the proposed
Section 11 could be modified to expressly require that the engineer indemnify, defend and hoM
harmless the City from and against claims, losses, damages, and injury which may arise under or by virtue
of the performance of the Conlxact, even if such claims, losses, damages or injury arises from the City's
negligence.
Ken Griffin
September 16, 1998
Page 3
language does not expand or limit the engineer's prospective liability or the City's ability
to require the engineer to correct its design errors.
Your final question relates to the effect of making the requested changes and
requiting an official letter stating that the engineer will consider all errors negligent. This
is confusing; negligence is defined as the failure to exercise that degree of care that would
be exercised by an ordinary prudent person under the same or similar circumstances.
Negligence theory imposes a standard of care, the violation of which creates a cause of
action in tort. In the context of professionals, a violation of this negligence standard is
termed malpractice. Negligence theory does not impose a level of performance under a
contract. Generally, the level required under most service contracts is that the contractor
perform in a good and workmanlike manner and in accordance with industry standards.
As a general rule, there are no implied warranties. A provision which states that the
engineer is to consider all errors negligent does not appear to have meaning in the context
of a contract which should already define the scope and level of service and which
already establishes liability for errors.
I trust that the foregoing is responsive to your questions and is useful in your
negotiations. If we can provide further information or assistance, please do not hesitate to
contact us. Thank you for your attention herein.
Sincerely,
NICHOLS, JACKSON, DILLARD,
HAGER& SMITH, L.L.P.
By: '~~~tM.~BeffrEtrn~ (20720)
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