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The ‘Appendix Clause’ vitiates Contracts

The Appendix Clause vitiates- Sanjesh Lal.jpgImagine that you are in a hospital to you have your appendix (a totally useless organ) removed. You would then visualise the operating room, clean white sheets, warm glow of bright lights, loads of weird metal devices, an anaesthetist, a nurse and an expensive surgeon looking down at you with false smiles, ready to cut you open.

Then suddenly, you have this urge to stop it right there.

You would feel like screaming, “Abort! Abort! Terminate this mission!”

You have suddenly developed an affinity for your appendix and would want to keep it, just in case.

Do you think the surgeon would shake your hand with a smile and say, “It is alright my friend; perhaps we could remove it some other time?”

Well, perhaps not.

The same would apply to design contracts.

What is a Design Contract?

It is an Agreement that is signed with a designer. It could also be verbal.

We all know how words can get twisted or conveniently forgotten, especially when things get nas-tee.

Let us presume that your design contract has to be in de written form.

We would not worry about the terms of the contract here.

I assume that you watch TV to know what to check in a contract.

We are now focusing on a specific part of the contract called ‘Early Termination.’

In simple terms, it means an abrupt end.

The reason can be anything or nothing – the cat ran away, the wife has abandoned, you have decided to become a monk. A genuine reason is not even necessary.

I call this the Appendix Clause.

In contract terminology, this clause could be written as a full chapter.

Or simply as follows:

“…should the contract under this agreement be terminated (for any reason whatsoever), the Designer shall advise the Client accordingly and forward a final account for the work completed. This may include additional fees for early termination. Please note a physical output may not always be available.”

So what does this mean in plain Engliesh?

It means two things: 1. Final Account; even if you are confused, this means ‘Money has to be paid’ 2. Output may not be available. Hmm, now this is harsh. Pay money but no output. Buy an ice cream but just get the cone? Surely, this cannot be legal.

Time is money

What happens when you jump off the operating table?

The surgeon prepares a final account for early termination. It might not be for the full amount but is still a substantial chunk of it. And nobody had even lifted a scalpel.

God, they had not even sanitised their hands.

As for output, he would have given you back your appendix, but in this case, there is nothing to give.

So why should you pay? There could be a number of reasons. Some of them are 1. The surgeon could have been operating on someone else 2. The anaesthetist could have been drugging someone else 3. The nurse could have been stitching someone else. In simple terms, you have wasted everyone’s time.

Time is money.

This money has a special name. It is called ‘Loss of Income.’

The surgery team could have been earning some moola, had you not exited the building. This income is now lost, and it was not their fault.

Check your ‘Appendix’

You should therefore check for the ‘Appendix Clause’ in any contract and be aware that you could be charged a hefty sum for loss of income, even if no real work has been performed. You should also review any work that is underway and ask yourself these questions: Are there termination fees applicable? Am I comfortable with what this means?

If you decide to terminate the contract for any reason, be sure to pay the early termination fee if charged. Or, the next time the scalpel might slip and you could lose your liver, instead of the appendix.

Sanjesh Lal is a Chartered Engineer, Master Builder and Director of Award Winning Design and Build company, Keola Homes Ltd.

Email: sanjesh@keola.co.nz Website: www.keola.co.nz

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