The Contractor Release and Waiver of Liability Form Explained

What is a Contractor Release and Waiver of Liability?

When a contractor completes a job for an individual or company, that newly completed work always comes with at least some risk of potential damage-to the newly completed work itself, but also to the property owner’s other surrounding property as well. For example, when a tile contractor finishes laying a new tiled floor in a home, it is always possible that tiles could crack during the floor’s installation, or that the contractor’s delivery people could nick or dent walls while moving tiles into the bathroom where they are to be installed. Similarly, if a custom kitchen cabinetry contractor is having a sub-contractor build the custom bar cabinet, the cabinetry contractor may not want to risk that the sub could drop the cabinet and nick or dent the home’s hardwood floors while delivering and installing the cabinet .
Releases and waivers of liability are standard contractual tools in many business transactions, and contractor releases and waivers of liability are no different. A contractor release and waiver of liability form is a legal tool used to protect contract parties from liability related to risks, and that is exactly what both contractors and hiring parties intend such a release and waiver of liability to do. This form serves to limit risk for a contractor by removing the possibility of being held liable for any sort of damage to property resulting from its contractual work (excluding damage due to gross negligence, or that caused by a third-party), while also serving to protect the property owners’ other property that may be damaged during the contracted work.

Need for a Waiver on a Construction Project

The waiver of liability form is an important document in any construction project. This form is used to manage risk, and set forth the extent of liability for claims or injuries resulting from defects in materials or workmanship or other liabilities that may arise during the course of the construction project. It protects the parties to the contract (including, in many cases, the owner of the project), as well as consultants such as project managers. A Form W is often referred to as a contractor release and waiver of liability form. Typically, Form W is filled out by contractors working for the general contractor on a construction project.
Even where a liability waiver form is signed, there are several limitations to what is waived, and there are certain legal obligations that cannot be waived. For example, you generally cannot waive the liability due to gross negligence, or in other circumstances where the law dictates that the damage liability can’t be waived in order to protect the public. In addition, courts won’t enforce contractual releases that they view as overly broad and unconscionable and, because such waivers are viewed as "contract of adhesion," they are viewed with skepticism when applied in instances in which the party falling victim to the waiver had no ability to negotiate incentives from the other party.

Basics of a Legal Waiver Document

A contractor release and waiver of liability form should include certain information that will help support its enforceability. Key elements to the form may include:

1. Identification of the Parties

The form should make it clear that it is between the contractor and the contractor’s client, rather than the contractor’s employees or, for example, a subcontractor, unless that’s what was intended. It should also be clear that the client is a separate entity.

2. Detailed Scope of Work

If the scope of work is very specific, it can be specified on the form and initialed therefore. If it is general, the form should state the parties may want to consider attaching plans and specifications.

3. Language Acknowledging Risks

The form should include language in which the contractor acknowledges that he or she understands minor hazards may still exist even though due care was taken.

Drafting an Effective Waiver Form

Beyond the template language, a contractor release and waiver of liability form must be crafted with more attention. When creating a waiver that stands up to legal scrutiny, contractors and their counsel should consider the following:
§ Specific Issues with Liability and Risk Associated with the Particular Project: Although a general risk analysis may be helpful for many standard contracts, particular projects can raise specific liability and risk issues that may not otherwise be apparent.
§ Type of Services to be Performed: In particular, if the services to be performed on the particular project include design and/or supervision of construction, specific liability issues may arise.
§ Additional Indemnities: Depending upon the scope of the project and/or the nature of a contractor’s work, specific indemnities may be needed to supplement the standard indemnity clauses.
§ Choice of Law: Many states have laws which limit the types of waivers that may be used by contractors and construction managers and/or which provide persons with professional licenses a certain level of immunity. It is important to consider what state’s law will apply to the contract and whether the law would void, in whole or in part, a waiver of liability or indemnity provisions in a contract.
§ Design Professional Liabilities: A contractor release and waiver of liability form may be used for design-build contracts. In these forms, contractor indemnities in favor of the owner should be carefully examined to determine if any language should be used to limit the liability of a design professional consultant.
§ Coordination with Additional Waivers: The contractor release and waiver of liability form should be coordinated with any other waiver and release forms signed by the same parties, such as for workers compensation and/or liability for injured participants on the jobsite.

Common Errors with Waiver Forms

While waiver forms can be powerful tools in limiting a contractor’s liability, their strength is largely reliant on how time of that form is completed and the language used. Oftentimes, the most common mistakes made by contractors can cause waiver forms to be completely ineffective, which at best means that they have no effect, and at worst means that contractors may be more exposed than if they had never obtained the waiver at all. The following are a few of the most common pitfalls when it comes to waiver forms: Handwriting – Many contractors are so accustomed to collecting similar waivers that they can fill them out completely from memory, even when they are not the same as the prior document. This comes back to haunt contractors when they try to collect on a lien claim because the property owners are often reluctant to pay when the form they are given does not match the form they signed. Company Name – Some contractors will use one name when signing contracts , paperwork, and other relevant details while using a different name on waivers. For some companies, this can easily be remedied by using the same form across all of the documents, but others may use different names for various purposes such as their trade name, their legal entity name, and their tax identification number. When in doubt, it is better to over-inflate the company name than not list the correct information, as waivers are contracts and the parties listed on the waiver may not be clear. Scope of Work – Similarly, it is important for contractors to ensure that their waivers reflect the same scope of work as their subcontracts and purchase orders. Even if a team is ill-equipped to obtain the same language each time, their reliance on one another creates an target for error that could render the waiver ineffective.

Contractor Duties & Rights

Contractor and their employees have certain rights that cannot be set aside and they must be included in a waiver of liability form. Employers have certain responsibilities and rights that must be honored. Violation of those rights can, in and of itself, be grounds for the invalidation of a waiver of liability.
The California Labor Code sets a minimum wage that contractors must receive. Therefore, if a contractor releases an employer from liability associated with non-payment of wages, overtime wages, or meal or break period wages, that waiver does not apply. Further, a contractor cannot waive the employer’s obligation to make certain payments. Calif. Civil Code Section 2856 provides: "A release or waiver does not discharge any claim or right of action arising from future injuries or events that are not yet in existence at the time of the agreement."
Similarly, there is a rebuttable presumption that a release by an employee after the fact is invalid for non-compliance with Cal. Lab. Code Section 206.5 which precludes an employer from having an employee sign away rights to earned compensation. While the presumption is rebuttable, generally speaking, an employer must comply with the statutory requirements in order to obtain a release of liability that will be upheld by a court.
The California Supreme Court has found that when deciding whether to enforce a waiver of liability form, courts must consider the following factors to determine if the waiver is conscionable: "(1) whether the contract relates to an activity of a type that is generally subject to negligence suits for personal injuries, (2) whether the contract is one of adhesion, and (3) whether the release language is couched "in so many words," whether it is conspicuous, whether the importance of the matter to be dispensed with appears bold-face type, and whether there is an opportunity to negotiate the terms." Using these factors, the court in Telles v. Biogen Idec Inc. 2009 WL 910685 *2 (Cal.App.3 Dist.), found that the waiver of liability signed by the contractor was conscionable.
An employer must also be mindful of how the release of liability form is presented to the contractor. Even when the language of a release of liability is clearly conscionable, the manner of presentation can render the release unconscionable. See Telles, supra, citing Tolman v. Morris, 189 Cal.App.3d 987, 993 (1987); Graham v. Scissor-Tail, Inc., 28 Cal.3d 807, 824 (1981); and Bell v. Blue Cross of Southern California, 131 Cal.App.3d 256, 268 (1982).

Examples of Waiver Forms in Action

To illustrate the application of Contractor Release and Waiver of Liability Form agreements, we can look at specific scenarios. In Case Study 1, after the site supervisor for XYZ Construction Company slipped on ice while working outdoors and injured her back in a 2014 accident, she was confident that the organization would defend her in any lawsuits even if the incident was determined to be preventable. Luckily, the company implemented the Contractor Release and Waiver of Liability Form in 2016, making it clear that contractors assume the risk of injury and agree not to sue the company for climbing over an obstacle in icy weather. The company is not responsible for her medical expenses, loss of wages, etc. since she signed this form. She assumed the risk of her decision and after research, the company discovered that no exhaustive measure was taken to make the environment safer for its employees who worked outside. While the issue was clearly one for the insurance claims department, the company had no problem showing that it exercised reasonable care to minimize danger to employees.
Case Study 2 focuses on XYZ Construction’s decision to use the Contractor Release and Waiver of Liability Form in 2011. An overhead beam fell from a newly-constructed warehouse and crushed the leg of Jane Doe, a contractor. She retained legal counsel to sue the company for $250,000 in damages, but the lawyer discovered that her son had unilaterally made the decision to sign the form that stated she assumed the risk of injury. The attorney infers that the management did not require her to have input before she signed the form. The company claims that the form was designed to define the risk and ensure that its management insured that the form would be signed and dated when the contract was initiated. Despite the fact that Jane was unconscious at the time her son signed the form, this case study demonstrates how the absence of a sensible waiver on the part of the employee can have a disastrous result in this sense.
In this case, the manager failed to "insist" on a signed form, while in the previous example, manual vigilance was employed after having a similar incident. One case demonstrates that the Contractor Release and Waiver of Liability Form cannot address the negligent management of the company.
In Case Study 3, the signatory was required to sign. Failure to do so would have resulted in termination of employment. When that level of coercion is successful, the company runs the risk of being found 100% at-fault for the accident, as it did in 2015 when a fellow employee used a hand saw and cut into his leg, resulting in permanent disability. He asks the judge for compensation to cover lost wages, past and future mental anguish, past and future economic losses to family, and past and future medical expenses. The company discovers that even though it has taken reasonable care in its management practices to apply the waiver responsibly, the pressures of making the form a condition of employment can determine whether the form can enjoy the protection and freedom from lawsuits the law intends.

Court Considerations, Incl. Jurisdictional Issues

In the context of contractor releases and waiver of liability forms, there are various legal considerations that contractors should be aware of. For example, in many jurisdictions, if the form is too one-sided, it may be unenforceable. Before distribution of any release or as part of the contract negotiations, a contractor should consider obtaining separate written consent for any liability provisions in the contract. An employee of a general contractor or subcontractor can be liable for the wrongful acts they commit, but contract valification provisions are not likely to save them. In some instances, the law may not permit the waiver of liability, even for grossly negligent conduct in a construction context. When it comes to public works projects , it is essential to know that the enforceability of your release is limited, sometimes to the point of being completely absent.
When it comes to releases and waivers of liability, jurisdictional variations contribute to differences in enforceability. In some states (such as California), liability may not be waived for grossly negligent conduct. In some states (such as Florida and New Jersey), waivers are enforceable even for grossly negligent conduct. Likewise, enforcement of indemnification provisions varies widely from jurisdiction to jurisdiction. Some states impose fiduciary duties on trustees, and thus a broad provision attempting to modify the standard of care may be ineffective.