Introduction

The preference of the CAA is to use the standard RAIC documents for all consulting contracts, perhaps with supplementary conditions negotiated to deal with particular situations. However, there has been a trend in recent years for some clients – particularly in the public sector - to prepare their own contracts for architectural consulting services. These are often quite different from the standard RAIC documents and include terms that depart from standard architectural practice. Architects must analyze such contracts carefully, and be fully aware of the implications of non-standard terms.

 

As a starting point, we offer the following ten principles – things to look for and things to avoid in new contracts. These are based on trends that have emerged in recent years in contracts being offered to architects.

 

These are intended to help architects analyze contracts presented to them and negotiate with clients for fair agreements. The discussion may also help clients to become better informed about industry practices and the implications of their contracts.

 

10 principles to consider

1 Standard of Care 

A common term attempts to hold architects to a higher standard of care than normal. Typically, an architect’s standard of care is measured against the normal practice of architects in the jurisdiction. Some contracts attempt to raise this. This imposes a heavy burden on architects, as there are no measurable criteria to determine whether this higher standard has been met. Further, liability insurers typically provide coverage only for the usual standard of care. By insisting on a higher standard than usual, the client may be cancelling the insurance coverage.

 

What to look for:

Language that affirms the architect’s standard of care according to standard practice – the degree of care and skill ordinarily exercised by other members of the profession in the jurisdiction.

 

What to avoid:

Wording stating that the consultant is “highly competent” or “highly knowledgeable” in the field, or calls on the architect to “perform to the highest standard of practice.”

2 Scope of Responsibility

As prime consultants, architects are responsible for their own work and for coordination of the work of their sub-consultants – usually the S, M and E engineers. They are expressly not liable for the work of others, including consultants hired by the owner directly, such as geotechnical engineers. It would not be fair or reasonable to ask architects to take responsibility for work beyond their control. Again, an insurer would likely deny coverage for this.
What to look for:

Defined scope of responsibility according to standard practice, including only the architect’s work and that of sub-consultants over which he or she has direct control.
What to avoid:

Liability for the client’s other consultants, or for the work of the contractor, such as site safety or schedule.  

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3 Copyright

Under RAIC Document 6 and the federal Copyright Act, architects maintain ownership of copyright in their work. This is necessary to prevent unauthorized reproduction of the work without compensation. However, some contracts have asked architects to surrender their copyright to the client. The reasons are not clear. Clients usually have no intention of reproducing their buildings in other locations, or in allowing anyone else to do so. Architects should resist this trend, except where proper compensation is agreed to.
What to look for:

Confirmation that the architect retains ownership of the copyright in his or her work. Models, renderings, fly-throughs and other media usually become the property of the client, but copyright in the work itself remains with the architect.
What to avoid:

Language that transfers copyright to the client, or any interest in sketches, notes,calculations or other design materials. 

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4 Terms of Compensation

Contracts should specify payment terms, including billing periods, when payments are due, penalties for late payment and remedies for non-payment.
What to look for:

Clear definition of payment terms.
What to avoid:

Non-standard contracts sometimes include terms allowing a client to withhold payment for a variety of reasons, including work deemed (by the client) to be
inadequate and set-offs from other projects. These terms put arbitrary authority in the client’s hands, leaving the architect without recourse to standard dispute settlement methods.  

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5 Scope of Services

It is very important to reach a full and clear agreement on the scope of services to be provided under the contract. With this in place both the architect and client will be able to see when the contract has been completed. If additional services are needed, a clear definition of scope will make it easy to make the distinction between original scope and new services. Both the RAIC Document 6 contract and the CAA Terms of Engagement are useful resources – they have very thorough lists and definitions of the scope of responsibilities on both the architect’s and the client’s side.
What to look for:

Clear definition of scope including standard architectural services, sub-consultant services and additional services.
What to avoid:

Any vague language that puts the definition of the architect’s work in the client’s hands, such as services “adequate to meet the project needs,” or “as required.”

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6 Certification, Guarantees and Warranties

An architect should never promise total accuracy or complete compliance with anything in a project. This is beyond the legally required standard of care. It is also likely beyond the architect’s ability to control (such as part of the building installation), and may be very difficult to achieve. It would incur a substantial additional liability, which the insurer may not cover.
What to look for:

Service to the legally required standard of work within the architect’s scope and control.
What to avoid:

Terms such as “guarantee,” “every,” “ensure,” “state,” or “declare.”

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7 Limitation of Liability

The contract should include a limitation of the architect’s liability to a reasonable, defined amount as agreed between the amount based on the nature and value of the project and the terms of the insurance. As a related matter, the contract should include a waiver for consequential damages – those indirect expenses that a client or third party may incur that are only remotely connected to the architect’s work.
What to look for:

Limitation of the architect’s liability to a defined amount such as the value of the consulting fee or the maximum value of the insurance coverage.
What to avoid:

Any contract without a defined limitation of liability or a consequential damages waiver.

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8 Mediation

Mediation should be the first recourse of the parties to resolve a dispute. It is the least onerous and expensive of the choices – much to be preferred over arbitration or litigation. It keeps communication open between the parties and has a good chance of success.
What to look for:

A well-defined dispute resolution clause that includes mediation as a first step.
What to avoid:

No dispute resolution provisions at all, or one that calls only for arbitration or litigation.

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9 Third-Party Claims

A third-party claimant is one who is not party to the contract (i.e. not the architect or client), but who may have suffered some damage as a result of the project work. Their claims arise through negligence rather than contract, and could be made against the owner, consultant, contractor or all three. If possible, it is preferable to have a provision for the reasonable allocation of responsibility in such a case. The architect should be responsible only for damages reasonably foreseeable as a result of his or her work.
What to look for:

A reasonable, negotiated agreement on allocation of responsibility and liability in the event of a third party claim.
What to avoid:

A contract that does not address the issue.

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10 Termination

One way to avoid disputes is to recognize that they may occur and make provision to deal with them when they do. In the most extreme case, they may result in termination of the contract. This may be initiated by either side, and the causes and procedures should be defined in the contract.
What to look for:

Grounds on both sides for termination of the contract. On the architect’s side these may include client’s breach of material conditions, inability to reach an agreement on additional services or substantially changed conditions. The contract should spell out the process, including notice and opportunity for correction.
What to avoid:

A contract that allows only the client to terminate, or that does not define the process clearly.

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Summary

1 - Standard of Care

2 - Scope of Responsibility

3 - Copyright

4 - Terms of Compensation

5 - Scope of Services

6 - Certification, Guarantees and Warranties

7 - Limitation of Liability

8 - Mediation

9 - Third-Party Claims

10 - Termination

 

 

DISCLAIMER:

These principles are offered for information purposes only. The CAA takes no responsibility for the completeness nor accuracy of these contract elements. We encourage you to seek your own legal counsel whenever you enter into contracts of any kind.