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Legal Issues with Material Substitutions

Material substitutions have become increasingly more common as a result of material unavailability. However, there are a variety of things that contractors should do to protect themselves from potential liability once a substitution is made.

Understanding the Contract Provisions

Although laws vary from state to state, most construction projects rely heavily on contract language. A construction contract includes the prime contract, as well as project plans and specifications. Some agreements may specifically call for certain brands and materials to be used, and those details are part of the contract. As a contractor, you are expected to have reviewed the contract, understand all its stipulations, and be prepared to comply with them.

So when your contract explicitly states the brand, make, model, and manufacturer of materials you are expected to use, you must take those instructions seriously. On public projects, these details may also be present in the bid request. These stipulations may be included as a way to ensure the safety of the structure. Or they may coincide with the preferences of the architect or owner. Whatever the reason, contractors, vendors, and suppliers should be willing to use those particular materials before ever signing the contract.

Managing the “or Equal” Clause

It is important to note that some contracts specify that certain materials “or equal” be used on the project. The insertion of these two words makes a huge difference. They allow you to substitute materials as long as they are equal to the original materials specified.

This policy ensures that materials used in public projects allow for a competitive marketplace, and it helps eliminate the possibility of government entities playing favorites with some brands. However, it can be tricky to ensure that a substitute material is, in fact, equal to what was initially requested. When the “or equal” clause exists, a standard is set, but some flexibility is also allowed.

Keep in mind that even when you have a contract with an “or equal” clause, it is crucial that you understand the terms. Do a close reading of the contract language because it may state that you must receive written approval or a change order from the owner or architect before making such a change. There may be other steps you have to take, such as meeting deadlines for substitutions and providing samples of the alternative materials.

What “Equal” Really Means

Over the past several months, supply chain issues have made it challenging to get some materials, so it will not be surprising if you find yourself needing to make substitutions. But before doing so, you must fully understand what leeway the “or equal” clause affords you.

If you were to ask Porsche, there is no equal to that luxury car. And for many owners, there may be no equivalent to the specified materials. There may be similar materials but nothing exactly the same. For example, one manufacturer’s product may have safety, appearance, or performance features that others do not. This difference can lead to disputes with the owner. In addition, if a substitute is made but some aspect of the project fails, resulting in injury or death, the product used may come into question. This scenario can also lead to disputes, with complainants asserting that the alternative “equal” product lacked the quality or integrity of the intended material.

Strategies for Avoiding Litigation

These kinds of disputes can often result in litigation, which can be time-consuming and expensive for everyone involved. As a contractor, you might face questions about your processes, and your reputation can suffer. In addition, some courts have ruled that contractors must pay the necessary costs to use the specified materials instead of the substitutions, which can drastically impact a project’s budget.

To avoid these consequences, follow these guidelines:

• Before signing a contract, be sure you understand what materials are specified and check that you can get them on time.
• After signing, if you cannot acquire the materials and you have an “or equal” clause, use caution. This clause does not allow you to use anything you can get your hands on. If you use something cheaper or substandard, you are putting yourself and the project at risk. Before making any substitution, get written approval from the owner, even if your contract does not require it. And ensure that the substitute material is as close to “equal” as possible.
• If you have any concerns regarding the material provisions or the “or equal” clause, seek legal advice. An experienced construction attorney can help you understand your options and ensure you do not promise a Porsche but then deliver a Gremlin.

Navigating Approvals

Obtain approvals upstream and downstream for the use of substituted products. First, issue a Request for Information (RFI) to the design professional confirming that the substitution is acceptable. Second, receive written confirmation from your customer that the substitution is acceptable. Third, make sure you have cleared the substitution with the roof system manufacturer. Manufacturers will often void a warranty if a different manufacturer’s product is used rather than their own; therefore, obtaining written approval from the technical representative can be beneficial in maintaining the system warranty.

Finally, ensure that the substituted product will still meet design and performance standards including the applicable building and energy codes in your area. A decrease in energy savings or wind uplift capability may result in a claim down the road.

If you have any questions about this topics, feel free to reach out to General Counsel Trent Cotney and use your member benefit to get those questions answered. You can reach him at 866.303.5868 or trent.cotney@arlaw.com

The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

Trent Cotney is a partner and Construction Practice Group Leader at the law firm of Adams and Reese LLP and NRCA General Counsel. For more information, please contact Trent Cotney at trent.cotney@arlaw.com or 813.227.5501.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.