1、THEAUTOMATIONLEGAL REFERENCEA guide to legal risk in the automation,robotics and process industries THEAUTOMATIONLEGAL REFERENCEA guide to legal risk in the automation,robotics and process industries Mark VoigtmannIllustrated by Aaron ReiterNoticeThe information presented in this publication is for
2、the general education of the reader. Because neither the author(s) nor the publisher has any control over the use of the information by the reader, both the author(s) and the publisher disclaim any and all liability of any kind arising out of such use. The reader is expected to exercise sound profes
3、sional judgment in using any of the information presented in a particular application.Additionally, neither the author(s) nor the publisher has investigated or considered the effect of any patents on the ability of the reader to use any of the information in a particular application. The reader is r
4、esponsible for reviewing any possible patents that may affect any particular use of the information presented.Any references to commercial products in the work are cited as examples only. Neither the author(s) nor the publisher endorses any referenced commercial product. Any trademarks or tradenames
5、 referenced belong to the respective owner of the mark or name. Neither the author(s) nor the publisher makes any representation regarding the availability of any referenced commercial product at any time. The manufacturers instructions on use of any commercial product must be followed at all times,
6、 even if in conflict with the information in this publication.Copyright 2013 International Society of Automation (ISA)All rights reserved. Printed in the United States of America. 10 9 8 7 6 5 4 3 2ISBN: 978-0-876640-08-1No part of this work may be reproduced, stored in a retrieval system, or transm
7、itted in any formor by any means, electronic, mechanical, photocopying, recording or otherwise, without theprior written permission of the publisher.ISA67 Alexander DriveP.O. Box 12277Research Triangle Park, NC 27709Library of Congress Cataloging-in-Publication Data in processThis book is intended a
8、s a general guide to legal risk in theautomation realm and should not be relied upon as advice forany particular situation. The law applicable to any given circum-stance can be nuanced. Please consult counsel.viiTable of ContentsList of Figures ixPreface xiChapter 1 Automation Projects and Legal Ris
9、k 1Chapter 2 Project Delivery Methods 9Chapter 3 Proposals and Purchase Orders 13TIP: Beautiful Proposals and Toxic Purchase Orders 16Chapter 4 Scope of Work 19CHECKLIST: Five Reasons to Watch Out for “Incorporated” Contracts 22CHECKLIST: Five Ways of Knowing the Real Scope of Work 23Chapter 5 The “
10、Dirty Dozen” Contract Clauses 25CHECKLIST: The Three Most Important “Missing” Contract Terms 31CHECKLIST: 10 Reasons Not to Agree to Indemnify 32Chapter 6 The Other “Ugly Eight” Contract Clauses 33CHECKLIST: Five Things You Should Know about Warranties 37TIP: Should FAT and SAT Be Mentioned in Contr
11、act Documentation? 38Chapter 7 Negotiating Automation Contracts 39TIP: Is a Letter of Intent Binding? 42THE CSIA RIDER 43Chapter 8 Specifications 47TIP: The Power of Performance Specs 49TIP: What If the Specs or Plans Are Defective? 50TIP: The Pitfalls of Owner-Specified Equipment 51Chapter 9 Intell
12、ectual Property 53CHECKLIST: Six Questions to Ask when Setting Automation License Royalties 58Chapter 10 Automation Standards 59Chapter 11 Professional Licensing 65CHECKLIST: Nine Realities of Professional Licensing for Automation Companies 67TIP: How Licensing Works in the U.S. 68TIP: How Licensing
13、 Works Internationally 68The Automation Legal ReferenceviiiChapter 12 “Green” Considerations 69CHECKLIST: Six Reasons Automation Companies Need to Speak Green 74Chapter 13 Changes and Other Mid-Project Communications 75TIP: Paying Attention to Fine Print at the End of a Project 78TIP: Managing Chang
14、es on Automation Projects 79TIP: Do Too Many Changes Open Up an Entire Automation Project to Renegotiation? 80Chapter 14 Dispute Resolution 81CHECKLIST: Four Types of Proceedings 90CHECKLIST: Three Indispensable Inquiries to Make Before Litigating 91CHECKLIST: Eight Rules for Resolving Contract Disp
15、utes 92TIP: Beware of Making False Claims 93Chapter 15 Negligence 95CHECKLIST: Three Critical Ways to “Manage” Negligence 99TIP: Who Is Responsible for Functional Safety? 100Chapter 16 Insurance 103CHECKLIST: Nine Additional Insurance Coverages and Concepts Worth Knowing 109Chapter 17 Liens, Bonds a
16、nd Other Remedies 113CHECKLIST: Six Remedies Other than Liens or Bonds 120Chapter 18 Maintenance and Service Agreements 121TIP: Making Clear that Perfection Is Not Possible 125Chapter 19 Legalities for Tough Economic Times 127CHECKLIST: Four Legal “Gut Checks” for Automation Providers during Tough T
17、imes 129Chapter 20 Auditing Legal Health 131Chapter 21 Working with Attorneys 135CHECKLIST: 10 Additional Tips for Getting More Value Out of Your Lawyer 137Glossary 139Index 155About the Author 159ixList of FiguresFigure 1Design-Bid-Build and Design-Build. 11Figure 2Determining the Scope of Work for
18、 a Project Can Be Like Opening Nesting Dolls. 21Figure 3The Dirty Dozen Contract Clauses. 25Figure 4The Ugly Eight Contract Clauses. 34Figure 5Frequency of Words (by Size) in Responses to Informal Automation Standards Survey. 60Figure 7Categorization of Some Automation Standards. 63Figure 6The Spect
19、rum of Automation Standards. 63Figure 8Three Types of “Green” Certification. 70Figure 9The American Civil Discovery Process. 83Figure 10The Key Ingredients in Litigation Soup. 84Figure 11Types of Motions in American Civil Litigation. 87Figure 12Liability for Negligence and Breach of Contract Can Ove
20、rlap. 96Figure 13The “Umbrella” of Insurance Coverage. 105Figure 14The Logic of the Subcontractor Exception. 107Figure 15A Two-Company Payment Dispute. 113Figure 16A Two-Company Payment Dispute with a Lien Claim Added. 115Figure 17A Two-Company Payment Dispute with a Payment Bond Claim Added. 118Fig
21、ure 18Strengths and Weaknesses of Maintenance Agreement Types from Automation Provider Perspective. 122Figure 19Response Boundaries According to Severity Level. 125Figure 20The “Healthy Company” Documents. 133xiPrefaceThis book springs from years of writing and speaking about legal risk affectingaut
22、omation projects. Most of the subject matters were first explored in articleswritten for industry publications (most notably in my “Legalities” column inControl Engineering magazine), in speeches before organizations (most fre-quently the Control System Integrators Association, but also the Internat
23、ionalSociety of Automation and World Batch Forum) and in newsletters written forclients.I have a passion for trying to explain complex topics in simple terms. This per-haps is a reflection of my decade as a journalist before becoming a lawyer, butit is also a necessity in the automation world. Here,
24、 lack of communication is atwo-way problem. Not only do most lawyers have little or no understanding ofwhat automation companies do (mention the word “software” and many willpolitely look for the exit), but I also have seen all too many engineers (and,frankly, automation company executives) attempt
25、to navigate their waythrough legal hazards in what can only be described as a “penny wise butpound foolish” mannersaving a few thousand on legal fees on the front endonly to see a company-killing problem arise as a result of that inattention.This book is for both audiences. For automation industry i
26、nsiders, my hope isthat the writing is clear enough to permit the understanding of some veryimportant risk management concepts without the inconvenience of going tolaw school. For lawyers with clients in the automation industry, I am hopefulthis book has value as a sort of “checklist of intersection
27、s” between the paral-lel universes of automation and law (although lawyers will quickly note thisdoes not remotely resemble a legal treatiseI met my goal of not using a sin-gle legal citation). It could be argued that I come to the automation field as a matter of pedi-gree. My father spent his caree
28、r as an engineer, then plant manager, thenexecutive for Eaton Corporation, and as a child, I spent many hours exploringthe Eaton manufacturing facility in Batavia, Illinois. Back in those days, andeven much later (I worked my first summer job at another Eaton plant closeThe Automation Legal Referenc
29、exiiby), I gave no thought to how such facilities and the systems within themcame to be constructed, let alone all of the things that could go wrong. Of course, those were relatively simple places compared to todays automatedfacilities. As best as I can recall, the childhood plants I visited back th
30、en con-sisted only of a series of workers arrayed at workbenches operating indepen-dent machines. The automated systems I write about in this book are bothmore and less than thatmore, in that they are infinitely more efficient andproductive (sometimes with robots working tirelessly in the place of p
31、eople);less, in that they are also infinitely more fragile due to the fact that any oneintegrated component can effectively shut down many others.Given that fragility, the legal risks awaiting those who venture out in the auto-mation world are by no means small. Although reading this book will not e
32、lim-inate those risks, I hope it will at least demystify themso that each newproject is begun with open eyes.1Chapter 1Automation Projects and Legal RiskAt first glance, the legal risks facing the automation industry would appear todefy categorization. Are such projects about instrumentation? Are th
33、ey aboutservices? The answers to these questions are varied. One common way tospeak of automation projects is to say that they involve “delivery” of equip-ment; another is to characterize them as the “sale” of a product. Yet anotheris to speak in terms of the “installation” of industrial computers o
34、r the “devel-opment” of software. While all these classifications are more or less accurate(not to mention applied with some frequency), none of these fully capturesthe essence of this type of endeavorand therefore none points to the opti-mum means of managing legal risk. The best way to approach ri
35、sk management in automation is to treat suchprojects as a very specialized type of construction project. Not only does thisapproach permit examining these projects in a somewhat more dynamic andsequential (as opposed to static and scattered) way, it makes it possible toapply a very useful and well-e
36、stablished vocabularyeven if it is a vocabularymore traditionally reserved for projects involving pouring concrete and erect-ing curtain wall. Yet there may be something of an industry bias against this approach. Even inthe most greenfield of projects, it is not unusual to see a bright line imposedb
37、etween the construction side of the project and the MRO (maintenance,repair and operations) sideoften including parallel lines of authority andcompletely different personnel. Leaving aside for a moment the incongruity ofthe “M” and “R” parts of the MRO acronym in the greenfield context (i.e.,because
38、 the maintenance and repair activities in a greenfield project wouldseem to be few in number), the split does provoke a question that is worthasking: are the risks that much different? The answer is “No.” The risks in bothare imposed by contract. The Automation Legal Reference2Speaking the Language
39、of ContractRealizing that automation projects must navigate the world of constructioncontracts does not exactly require a leap of faith. So why do automation prac-titioners frequently deny this fact? One reason is the lingo. “We dont have acontractwe just have this purchase order,” is what more than
40、 one controlsystem integrator has told me. Yet as any first-year law student quickly learns,an exchange of proposal and purchase order is not the opposite of a con-tractit is just another type of contract. In other words, it is a member of thesame family as a thirty-page, single-spaced document with
41、 formal signatureblocks on the last page. But here is perhaps the most difficult part to understand: very few automationcompanies recognize the fact that the legal expense of unraveling a disputeinvolving the type of contract reflected in a simple purchase order is oftenmuch greater than for a contr
42、act with 30 pages of lawyer-speak. Why is such adispute more expensive? The reason is so obvious that it tends to be com-pletely overlooked. In the proposal and purchase order realm, the legal rela-tionships, obligations and rights of both parties are much less clearly defined.So when a dispute erup
43、ts, you will be paying your lawyer to assert what youmeant to say instead of what you did say. That takes more timeand time, ofcourse, is money.The good news is that legal risk in automation projects can be successfullymanaged by using the language of contracts at the front end. Now for thebad news:
44、 there are two distinct vocabularies (lets call them “dialects”) in thisarea that must be mastered to maximize project success. The Dialect of the Traditional Construction ContractThe first dialect to be mastered is that of the traditional construction contract.This dialectwhich speaks of change ord
45、ers and indemnity and “liquidateddamages”is important for two reasons. First, it is the dialect nearly everyoneelse on the project will be speaking (and therefore it is an advisable way ofcommunicating with those persons). Second, it is a very old dialect, with agreat many useful terms with applicat
46、ion to automation projects. Among thetraditional construction contract terms of maximum importance (each ofwhich will be explored in greater detail in the coming chapters of this book)are the following:Chapter 1 Automation Projects and Legal Risk3 Integration, Incorporation by Reference, Order of Pr
47、iority and DragnetClauses. These terms refer to one of the most fundamentaland (ironi-cally) neglectedquestions of all. What scope of work was agreed upon?What happens when one part of the contract disagrees with another?What happens when agreement on a particular point is unclear? Change Order Clau
48、ses. What are the options when scope is arguablyadded to or subtracted from the project? Can these changes be unilater-ally imposed? Payment and Pay-When-Paid Clauses. How does payment work? Whatconditions must be met for payment to be made? Does it matter if othersare not paid? Liquidated Damages,
49、Force Majeure and No-Damages for Delay Clauses.What are the risks and options when the project takes longer thanexpected? Does it matter whether the delay was extraordinary or routine?What if there is a suspension of all activity? Does it matter whether it wasan “act of God” or that someone was responsible? Limitation of Liability and Consequential Damages Clauses. If something onthe project goes wrong, are there limits to the potential legal liabilities?Could one of the participants held responsible for the lost profits of
