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Northern Timber Corp. v. Dep't. of Transportation (11/22/96), 927 P 2d 1281
Notice: This opinion is subject to correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the
attention of the Clerk of the Appellate Courts, 303 K Street,
Anchorage, Alaska 99501, telephone (907) 264-0607, fax (907) 264-
THE SUPREME COURT OF THE STATE OF ALASKA
NORTHERN TIMBER CORPORATION, )
an Alaska corporation, ) Supreme Court No. S-6688
Appellant, ) Superior Court No.
) 3AN-93-5732 CI
STATE OF ALASKA, DEPARTMENT ) O P I N I O N
OF TRANSPORTATION AND PUBLIC )
FACILITIES, ) [No. 4436 - November 22, 1996]
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
Glen C. Anderson, Judge.
Appearances: Donna C. Willard, Law Offices of
Donna C. Willard, Anchorage, for Appellant.
William F. Cummings, Assistant Attorney
General, and Bruce M. Botelho, Attorney
General, Juneau, for Appellee.
Before: Rabinowitz, Matthews, Compton, and
Eastaugh, Justices. [Moore, Chief Justice,
Northern Timber Corporation (NTC) and the Alaska
Department of Transportation and Public Facilities (DOT/PF) entered
into a public works contract, part of which required NTC to place,
and later remove, ■surcharge material■ to aid compaction of
underlying soils. DOT/PF required NTC to reuse the removed
material in another part of the project in a way NTC claimed is
contrary to the contract. NTC then filed a contract claim. We
affirm the denial of that claim.
II. FACTS AND PROCEEDINGS
In July 1991 DOT/PF invited bids and published contract
documents for a project to improve the Hoonah Airport. (EN1) Part
of the project required use of a three-stage process to construct
an access road, taxiways, apron, and lease lots. Stage one
required construction of five feet of embankment. (EN2) Stage two
called for placing three to six feet of "surcharge material"on top
of the embankment. The surcharge would remain in place for six to
eight months to load the embankment and induce settlement in the
underlying fill and native material. The surcharge material was to
be the same class of material, known as borrow embankment, to be
used for the embankments. Stage three required the post-settlement
removal of surcharge material down to the subgrade (the finished
grade of the embankment) (EN3) and the placement of an asphalt
concrete paving section on the subgrade.
Contract Addendum No. One, dated August 9, 1991, provided
that "[t]he placement of surcharge material shall be paid for as
Borrow Embankment."(EN4) Section 330.3 paragraph f of the Special
Provisions provided that "[t]he removal of surcharge material shall
be paid for as unclassified excavation."(EN5) Addendum No. One
further stated that "[a]ll unclassified excavation material
suitable for re-use on the project shall be paid for only once as
unclassified excavation. The unclassified excavation material
shall not be paid for again when it is used as another contract
Another part of the project involved improving the
existing runway and required that embankments be built on either
side of the runway with borrow embankment material. These
embankments were to be built with the same class of materials NTC
was to use in the surcharge. The staged construction method was
not prescribed for this part of the project because the runway was
not being built from the ground up and subsidence was not expected.
DOT/PF received five bids. NTC submitted the lowest bid,
for $3,435,027, and was awarded the contract. (EN6) The contract
is dated September 22, 1991. The specified completion date was
October 31, 1992.
At a post-award, pre-construction conference on September
26, 1991, DOT/PF's Project Engineer (Engineer) and NTC disagreed on
interpretation of the contract regarding reuse of any surcharge
material removed above the subgrade following settlement in the
staged construction area. NTC expressed an intention to construct
the runway embankment from "new"material taken from the borrow
pits and to use the removed surcharge as subbase and crushed
aggregate. (EN7) It claimed that the contract allows the
contractor to waste the removed surcharge, and that NTC could
consequently use the removed surcharge at its sole discretion.
DOT/PF asserted that the removed surcharge was usable "unclassified
excavation"which NTC had to use in the borrow section of the
project before importing new borrow materials.
In late November the Engineer advised NTC that NTC's
proposed schedule did not accommodate the use of the surcharge
excavation in the runway embankment, as the contract required. The
Engineer further advised NTC that DOT/PF would not pay for borrow
embankment used as a substitute for suitable surcharge material
excavated above subgrade. Thus, the Engineer prevented NTC from
using the removed surcharge in the manner NTC claimed it had
expected and instead required NTC to use the removed surcharge on
the runway improvement, in the places labeled on Plan Sheet No. 5
as "borrow embankment."(EN8)
NTC pursued an administrative contract claim, and
ultimately claimed $526,819. (The record does not reflect how it
calculated its claim.) The Engineer denied the claim and the
Contracting Officer rejected NTC's appeal. NTC appealed the
Contracting Officer's decision, and the Hearing Officer issued an
extensive decision denying the claim. DOT/PF's deputy commissioner
adopted the Hearing Officer's decision. NTC appealed to the
superior court, which affirmed. NTC now appeals to this court.
NTC reads the contract to have required (or at least
permitted) the contractor to waste (discard) the removed surcharge
material. NTC argues that the contract consequently allowed NTC to
use any removed surcharge material elsewhere in the project (e.g.,
in the paving section, as NTC wished to do). NTC claims the
contract prevented the Engineer from requiring NTC to use the
removed surcharge in the runway embankment. Instead, NTC asserts
the contract permitted NTC to build the runway embankment with
material not taken from the surcharge, thus allowing NTC to begin
building the runway embankment before the end of the surcharge
NTC alternatively argues that the contract was ambiguous,
because both contract readings it proposes (the contract either
required removed surcharge to be wasted, or permitted it to be
wasted at the contractor's option) are more reasonable than the
reading DOT/PF advances (the contract required removed surcharge to
first be used in the runway embankment); NTC reasons that the
contract must therefore be construed against the drafter, DOT/PF.
This appeal turns on whether NTC's interpretation of the
contract is reasonable. (EN10) We conclude that it is not.
A. The Contract Terms
Two particular passages in the contract documents
preclude the reading NTC proposes. The first is Section 330.1, a
construction specification describing excavation and embankment on
the project. It provides:
This item shall consist of excavating,
removing, hauling, satisfactorily placing or
disposing of excavated materials in accordance
with these specifications and in conformity
with the dimensions, typical sections, lines
and grades as shown on the plans or
established by the Engineer.
All suitable material taken from excavation
shall be used in the formation of embankment,
subgrade, and for backfilling as indicated on
the plans or as directed by the Engineer.
When the volume of the excavation exceeds that
required to construct the embankments to the
grades indicated, the excess shall be used to
grade the areas of ultimate development or
wasted as directed. When the volume of
excavation is not sufficient for constructing
the fill to the grades indicated, the
deficiency shall be supplied by the Contractor
from borrow sources shown on the plans or
sources located off of airport property and
meeting approval of the Engineer.
(Emphasis added.) The emphasized sentence provides that "[a]ll
suitable material"taken from excavation "shall be used"in
embankments "as indicated on the plans or as directed by the
Engineer." The surcharge originated as borrow, and was the same
type and grade of material to be used in the runway embankment.
The surcharge would remain "suitable"for use in the runway
embankment after it was removed from the staged construction areas.
It was to be removed by the process of excavation. Section 330.1
thus unambiguously required NTC to reuse the removed surcharge in
the runway embankment if the Engineer directed it to do so.
The other critical passage is found in Addendum No. One.
It modified the Special Provisions, including Section 330.5, which
described the basis of payment for excavation and embankment work.
Section 330.5.a originally concerned the payment for "unclassified
excavation." This category of work applied to removal of the
surcharge. (Section 330.3.f was modified by the Special Provisions
to provide that "The removal of surcharge material shall be paid
for as unclassified excavation.") Addendum No. One modified
Section 330.5.a by adding the following language: "All
unclassified excavation material suitable for re-use on the project
shall be paid for only once as unclassified excavation. The
unclassified excavation material shall not be paid for again when
it is used as another contract item." The removed surcharge was
unclassified excavation material and was suitable for reuse as
another contract item, runway embankment. As modified, Section
330.5.a precluded additional payment when the surcharge was reused.
Read in conjunction, these provisions clearly informed
bidders that the contractor would have to reuse the removed
surcharge in the runway embankment if the Engineer so ordered. The
contract also clearly informed bidders that the contractor would be
paid at borrow embankment rates when it placed the borrow material
in the surcharge and at unclassified excavation rates when it
removed the borrow material from the surcharge, but would not be
paid again if the Engineer required reuse of the surcharge
Such reuse was consistent with the anticipated
construction schedule. Any other use was potentially wasteful.
When he denied NTC's claim, the Engineer noted that "A
reasonably prudent contractor could not make the assumption that
Specifications would allow the wasting of approximately 60,000
cubic yards of excavated material with payment for embankment to
replace this material. His contention that it is waste that he
could use to make processed aggregates cannot be supported by the
contract." (Plan Sheet 3 notes that each cubic yard of borrow
embankment is estimated to equal 1.8 tons. Thus, 60,000 cubic
yards of borrow embankment is equal to 108,000 tons.) The Engineer
also noted that had Addendum No. One not been issued, NTC would
have been paid both for excavating and then borrow embanking the
surcharge material, but that "[t]he addendum was issued and
specifically deleted this double payment."
NTC argues that other provisions in the contract
documents either require or reasonably permit a different
interpretation. The removal of
be paid for as
not be wasted
at the toe of
limits or on
the slope may
wasted off of
(Emphasis added.) According to NTC, this language required that
the removed surcharge be wasted. This language cannot reasonably
be interpreted in that fashion. Removed surcharge needed for the
runway embankment was not waste or excess. Removed surcharge left
over after completion of the runway embankment, and any other
contract items for which it might be suitable for reuse, would be
"excess"and appropriately treated as "waste." In that event,
Section 330.3.f simply specified how it was to be disposed of
without harming the permanent embankments. That section did not
categorize all removed surcharge as waste; its specification of
where ■excess■ surcharge might be wasted is consistent with
treating as ■excess■ only that surcharge material not needed or
usable elsewhere in the project.
B. Plan Sheets No. 5 and No. 3
NTC argues that DOT/PF's direction to construct the
runway embankment with removed surcharge conflicts with Plan Sheets
No. 5 and No. 3. Plan Sheet No. 5 is a drawing of the runway, on
which arrows connect the words "UNCLASSIFIED EXCAVATION"to places
where material was to be removed, and connect the words "BORROW
EMBANKMENT"to places where material was to be added above existing
ground. NTC notes that the drawings do not depict "excess
surcharge"as "unclassified excavation,"and do not depict "excess
surcharge material"or "suitable unclassified excavation"being
used before "BORROW EMBANKMENT"for the runway embankment. Plan
Sheet No. 5 represents that the runway embankment will be
constructed with "BORROW EMBANKMENT."
NTC claims that it prepared its bid based on the material
quantities estimated by DOT/PF. Plan Sheet No. 3 estimates that
93,500 tons of "borrow embankment"would be needed for the
"runway." NTC argues that it based its bid on the assumption that
in improving the runway it would use 93,500 tons of "borrow
embankment,"not removed surcharge. Thus, NTC contends that it
reasonably assumed that the contract specified payment for
furnishing 93,500 tons of borrow embankment for runway embankment
at the unit price of $3.97 per ton, and that NTC's bid for borrow
embankment reflected that assumption.
We view the two Plan Sheets in connection with the
relevant sections of the contract documents. Section 50-04 of the
General Provisions sets the priority for reading the different
contract documents. It states that in cases of conflict between
provisions, the Special Provisions take precedence over Plans,
while the Plans take precedence over the Standard Specifications,
which take precedence over Standard Drawings. (EN11)
In our view, the contract provisions discussed in Part
III.A above are controlling, and clearly required the contractor to
reuse removed surcharge in the runway embankment if so directed by
the Engineer. Assuming there was any inconsistency between these
Plan Sheets and the contract provisions discussed above, those
provisions take precedence. Per Section 50-04, Addendum No. One
takes precedence over the Plan Sheets because the addendum modifies
the Special Provisions. Notwithstanding any inconsistency,
therefore, the contract did not preclude the Engineer from
directing NTC to construct the runway embankment with removed
surcharge material, and did not entitle NTC to relief on its claim.
Further, the Plan Sheets were not inconsistent with the
contract reading compelled by Section 330.1 and Section 330.5.a as
modified by Addendum No. One. The plan sheets did not preclude the
Engineer from directing reuse of the surcharge in the runway, even
though the Plan Sheets themselves did not expressly specify that
The reference on Plan Sheet No. 5 to "borrow embankment"
does not permit or require a conclusion that a contractor could
fail to reuse removed surcharge in the runway embankment. The
surcharge material did not lose its borrow embankment quality when
it was used as surcharge and then removed. Plan Sheet No. 5 was
consistent with the reuse directed by the Engineer.
Plan Sheet No. 3 contained an estimate that 93,500 tons
of borrow embankment would be placed in the runway project (i.e.,
the runway embankment). It also estimated that a total of 390,000
tons of borrow embankment would be placed for the entire project.
NTC argues the contract consequently represented that all 93,500
tons in the runway would be paid for as "borrow embankment." NTC
claims that the Engineer's direction to reuse the surcharge
material meant that none of the 93,500 tons would be paid for as
borrow embankment. According to the decision of the Contracting
Officer, the Design Engineer tabulated the quantities as "final,
in-place"quantities. The Contracting Officer also observed that
NTC's conclusion that the estimated quantity for borrow embankment
includes the surcharge plus the total embankment prism "is
obviously faulty with respect to the lease lot area." We agree.
We also observe that NTC was paid at the borrow embankment rate
when it first provided and placed the material in the surcharge,
including the material potentially available for reuse. In effect,
NTC was paid up front at the borrow embankment rate for material
ultimately destined for the runway embankment. It was paid to
handle the same material again when it excavated the surcharge
material to subgrade and moved it to the runway embankment. Plan
Sheet No. 3 was not inconsistent with this reuse of removed
C. DOT/PF Memoranda
NTC relies on three DOT/PF memoranda to support its
interpretation of the contract. See Western Pioneer, Inc. v.
Harbor Enterprises, Inc., 818 P.2d 654, 657 n.4 (Alaska 1991)
(stating that extrinsic evidence may always be considered to
determine (1) whether a contract is integrated, and (2) the meaning
of a contract). (EN12)
In a pre-bid memorandum apparently reviewing the bidding
documents, Steven Bradford, Construction Section Chief of the
Southeast Region, wrote:
Stage 3 Construction last paragraph, does this
mean surcharge material must be wasted off the
project or can it be used on the runway
Bradford's question indicates potential uncertainty regarding
interpretation of Section 330.3.f. It also predates Addendum No.
One, which modified Section 330.5.a. That modification, in
conjunction with other contract language (particularly Section
330.1) made it clear that the Engineer could direct that removed
surcharge material be incorporated in the runway embankment, and
that removed salvage material could not be wasted.
In a November 13, 1991, post-bid memorandum to Bradford,
Project Engineer Larry Geise stated:
The following is a partial listing of changes
to plan quantities and possible grade problems
field personnel have encountered to date. The
design section has been contacted and is
working with project personnel to resolve any
posible [sic] conflicts.
1) Estimate of Quantities: Runway Borrow "B"
PLAN: 93500 T FIELD ESTIMATE: 0 T.
Embankment placement for runway will be
obtained in large part by useable unclassified
excavation from the surcharge area. The only
payment for borrow will be if subsidence in
surcharge area is high.
. . . .
From what we can determine design did not
compute the surcharge tonnage in the total
amount of borrow required. Borrow shown in
the estimate of quantities is only the amount
needed to complete the fill that is to be left
This memorandum is consistent with DOT/PF's position, and does not
support NTC's claim that the contract either required that the
surcharge be wasted, or permitted it at NTC's option. The
estimates did not include the borrow needed for the surcharge apart
from what was to be left in place. The memorandum is consistent
with DOT/PF's position because it confirmed that the project
contemplated reuse of the removed surcharge. NTC gambled that
there would be little subsidence (and thus, ample surcharge for
other use), and asserts that DOT/PF anticipated substantial
subsidence (and thus, little or no surcharge material available for
use again elsewhere). If there was substantial subsidence, NTC
would have been required to provide borrow from some source other
than surcharge, and would have been paid accordingly.
Bidders had to anticipate the effect of more or less
subsidence because it would affect the amount of unclassified
excavation of surcharge remaining above subgrade.
In a January 9, 1992, memorandum Project Engineer Pete
Addendum One, which states "The placement of
surcharge material shall be paid for as Borrow
Embankment"was included at Construction's
request. The quantity tables were not
modified to show first placement quantities
for each work area. In other words, we did
not show on the plan estimate of quantities
the first placed quantities for the road,
apron, lease lots and taxiways to include the
surcharge material (we give final placement
quantities only and a separate table on sheet
27 for surcharge quantities). If you use
Larry's estimate, Construction is showing an
approximate 37,000 ton overrun (9.5%) which is
within normal estimating values. However,
even though the total estimated quantities are
correct, it was not clear that Borrow "B"
(surcharge) material is first placed on the
apron, taxiway, lease lots and road and then
moved to the runway as unclassified (not
Borrow "B") material.
NTC argues that this is an "unqualified admission"that
DOT/PF "at least perceived the presence of an ambiguity." In
context, these comments are part of a memorandum which almost
exclusively discusses the quantities specified in the estimates.
In context, the memorandum simply notes correctly that the plan
estimate of quantities did not make it clear that surcharge was to
be moved to the runway and paid at unclassified excavation, rather
than borrow embankment, rates. Other contract provisions discussed
in Part III.A above, however, cured the estimates' lack of clarity
on this topic. Read as a whole, and giving proper priority to its
different parts, the contract was sufficiently definite to inform
knowledgeable readers, such as contractors bidding on the project,
that removed surcharge was to be reused and could not be wasted,
and upon reuse was not to be paid for again when used as another
The three DOT/PF memoranda do not establish an ambiguity
which would permit the interpretation NTC proposes.
D. Payment for the Reuse NTC Proposed
Because the Engineer permissibly directed that the
removed surcharge be placed in the runway embankment, Section
330.5.a, as modified by Addendum No. One, applies to NTC's contract
claim. That section is entitled Basis of Payment. It states in
All unclassified excavation material suitable
for re-use on the project shall be paid for
only once as unclassified excavation. The
unclassified excavation material shall not be
paid for again when it is used as another
The contract contemplates that the contractor will reuse suitable
unclassified excavation material. As previously discussed, Section
330.3.f provides that removed surcharge is paid for as unclassified
excavation. As modified by Addendum No. One, Section 330.5.a
provides that NTC could only be paid once for removed surcharge --
when NTC initially removed the surcharge to reach subgrade and not
when it used removed surcharge as another item, in the runway
embankment. Since removed surcharge is denominated unclassified
excavation, and this is the only reasonable label for removed
surcharge if it is not borrow embankment, as NTC insists it is not,
Addendum No. One does not allow NTC to be paid for reusing the
That does not mean, however, that NTC had no remedy.
Section 90-04 of the contract permitted either party to seek price
adjustments as compensation for altered quantities. The Hearing
Officer noted that NTC had indirectly argued that reuse of the
surcharge would result in a variance of a bid quantity for borrow
embankment of more than twenty-five percent and would "thus be a
basis for a claim in itself." The Hearing Officer noted that "[i]f
this is indeed a claim, then Northern Timber should have brought it
as a claim." The superior court also noted that NTC had not made
a variance claim.
Even though NTC made no such claim, Section 90.04
provided NTC a means to remedy at least some of the consequences of
any discrepancy between the clear terms of the contract and NTC's
misunderstanding of those terms.
The contract did not prevent the Engineer from directing
NTC to reuse the removed surcharge in the runway embankment, and
NTC should have anticipated that it would have to do so, and that
it would not be paid at borrow embankment rates when doing so. The
contract cannot reasonably be interpreted to allow a contractor to
waste removed surcharge before completion of other work, notably
the runway embankment, for which the surcharge borrow material was
suitable. We AFFIRM the superior court order affirming the
administrative decision denying NTC's claim.
1. The contract documents consist chiefly of Standard
Specifications (General Contract Provisions) which provide the
basic framework of the contract, project-specific Plan Sheets,
Special Provisions which modify the Standard Specifications, and
Addendum No. One which modifies the Special Provisions.
2. The embankment was the foundation upon which finished paved
surfaces would be laid.
3. For example, if three feet of surcharge material were placed
in a given area, resulting in a one-foot settlement during the
stage two waiting period, the contractor would need to remove two
feet of surcharge material during stage three to reach subgrade.
4. The contract defined "borrow embankment"as follows:
Materials for embankment or borrow embankment
shall be earth, sand, gravel, rock or
combinations thereof, and shall contain no
muck, peat, roots, sod or other deleterious
matter . . . .
. . . .
Borrow shall involve approved material
required for the construction of embankments
or other portions of the work. The Contractor
shall make his own arrangements for obtaining
borrow and shall pay all costs involved.
5. Construction Specification 330.2 defined "unclassified
excavation"as including "all excavation, regardless of the
material encountered, as shown on the plans or as directed by the
6. The total bid price was comprised of fixed-price bid items and
unit-priced items. The borrow embankment unit-priced item
represented more than half the total contract price.
7. NTC stated that it planned to remove the surcharge remaining
after settlement, run it through a crusher and use it for runway,
apron, and lease lot paving section materials. NTC's president,
Roger Schnabel, explained the benefit of processing the removed
surcharge: "By processing the excess surcharge through a crusher
and using it for paving section materials (subbase material, base
material, and aggregate for asphalt concrete paving), we would save
ourselves the costs of excavating, generating and hauling those
materials from a borrow pit."
NTC claimed it expected to be paid for the borrow material to
be used to construct the runway embankment at the rate it bid for
"borrow embankment"in the contract, i.e., $3.97 per ton. The
Engineer estimated pre-bid that 93,500 tons of borrow embankment
would be placed as runway embankment.
8. DOT/PF paid NTC for the initial placement of the surcharge on
the staged areas at the rate NTC bid for borrow material, $3.97 per
ton. DOT/PF later paid NTC to remove this same surcharge material
at the rate NTC bid for "unclassified excavation,"$3.79 per cubic
yard. (Each cubic yard was equivalent to 1.8 tons.) Thus, DOT/PF
paid NTC first to provide and place this material as surcharge,
during the second stage, and paid it again to remove surcharge
material remaining above subgrade, during the third stage; NTC was
not paid a third time when it deposited this same material as
runway embankment. NTC was apparently paid for the subbase and
crushed aggregated courses at the rates it bid.
9. NTC argues that the contract contains an ambiguity that
relates directly to its claim, and that the ambiguity should be
resolved against DOT/PF. See Wessells v. State, Dep't of Highways,
562 P.2d 1042, 1050 (Alaska 1977) ("[A]mbiguities are construed
against the party that supplied and drafted the form (the state)").
10. Because the superior court acted as an intermediate appellate
court, we owe "'no deference . . . to the lower court's decision,
but, rather, independently scrutinize directly the merits of the
administrative determination.'" State, Dep't of Revenue v.
Atlantic Richfield Co., 858 P.2d 307, 308 (Alaska 1993) (alteration
omitted) (quoting Tesoro Alaska Petroleum Co. v. Kenai Pipe Line
Co., 746 P.2d 896, 903 (Alaska 1987)). In this case we must
examine the agency's interpretation of a contract and its bidding
documents. This presents a question of law. We have set forth two
standards of review applicable to questions of law: (1) the
rational basis standard under which the court defers to an agency's
interpretation of its regulations unless it is unreasonable; and
(2) the substitution of judgment standard under which the court
interprets the relevant statutes and regulations independently.
Id. (citing Tesoro, 746 P.2d at 903). We use the rational basis
standard when the questions of law involve agency expertise or
where the agency's specialized knowledge and experience are
particularly probative as to the meaning of the statute. Id.
(citing Union Oil Co. of Cal. v. State, 804 P.2d 62, 64 (Alaska
1990)). Although this case concerns interpretation of construction
bidding documents, and thus potentially implicates DOT/PF's special
expertise and knowledge, the Engineer, Contracting Officer, Hearing
Officer, and Deputy Commissioner do not appear to have invoked that
expertise or knowledge. We therefore apply the substitution of
judgment standard in interpreting the contract documents.
11. Section 50-04, COORDINATION OF PLANS, SPECIFICATIONS AND
SPECIAL PROVISIONS, states:
These specifications, the plans, special
provisions, and all supplementary documents
are essential parts of the contract, and a
requirement occurring in one is as binding as
though occurring in all. They are intended to
be complementary and to describe and provide
for a complete work. In case of discrepancy,
calculated dimensions will govern over scaled
Should other discrepancies appear between any
of the following parts of the contract, a
listed part shall take precedence over all
those listed below it:
1. Special Provisions
3. Standard Specifications
4. Standard Drawings
The Contractor shall take no advantage of any
apparent error or omission in the plans or
specifications. In the event the Contractor
discovers such an error or omission, he shall
immediately notify the Engineer. The Engineer
will then make such corrections and
interpretations as may be deemed necessary for
fulfilling the intent of the contract.
12. In Western Pioneer, we reversed a superior court's application
of the parol evidence rule, and in doing so, summarized the current
status of the rule in Alaska:
The parol evidence rule is implicated when one
party seeks to introduce extrinsic evidence
which varies or contradicts an integrated
contract. Once the rule is triggered, the
parties' reasonable expectations are
determined by applying a three-step test. The
first step is to determine whether the
contract is integrated. The second step is to
determine what the contract means.
Determining the meaning of a contract is
treated as a question of law for the court
except where there is conflicting extrinsic
evidence on which resolution of the contract's
meaning depends. Whether there is conflicting
extrinsic evidence is a question resolved by
the court. Even where there is conflicting
extrinsic evidence the court decides the
question of meaning except where the written
language, when read in context with its
subject matter, is reasonably susceptible to
both asserted meanings. . . . Extrinsic
evidence may always be received in resolving
these first two inquiries. The third step is
to determine whether the prior agreement
conflicts with the integrated writing.
Whether there is conflicting extrinsic
evidence depends on whether the prior
agreement is inconsistent with the
integration. Inconsistency is defined as "the
absence of reasonable harmony in terms of the
language and respective obligations of the
818 P.2d at 657 n.4 (citations omitted).