Agreements and AIA Document Program PDF

C H A P T E R 17 PA R T 4 : C O N T R A C T S A N D A G R E E M E N T S Agreements and AIA Document Program 17.1 Agreements with Owners Alan B. Stover, Esq., AIA The architect’s agreement with the client should reflect the goals and expectations of both parties and establish the conditions under...

C H A P T E R 17 PA R T 4 : C O N T R A C T S A N D A G R E E M E N T S Agreements and AIA Document Program 17.1 Agreements with Owners Alan B. Stover, Esq., AIA The architect’s agreement with the client should reflect the goals and expectations of both parties and establish the conditions under which services will be rendered. O ther Handbook articles deal with defining the scope of a project and the professional services it will require, the compensation that is needed to support the needed level of services, and techniques for negotiating agreements. The importance of managing risk in an architecture practice is reviewed in Chapter 16, Risk Management. All of these concerns come together in the contract that the architect enters into with the client. The AIA has traditionally used the term “agreement” in the titles of its professional services contracts and for the “front-end” document in a construction contract (the owner-contractor agreement form) that establishes the scope, time for completion, and method of payment, separate from the general terms and conditions of the contract. However, there is no special legal significance to AIA’s choice of terminology Alan Stover, an architect and practicing attorney, directed the AIA Contract Documents program during the 1970s and later served as the AIA’s General Counsel. He is the principal author of The American Institute of Architects Official Guide to the 2007 AIA Contract Documents (Wiley, 2009). 1040 in the titles of its documents. An executed professional services agreement form is, in fact, a contract. PREREQUI SI TES FOR, AND BAS IC T E R M S OF, A L EGAL C ONTRA C T In order for a business relationship to be recognized as a contract enforceable by law, it must meet some basic tests, and the terms of the contract must be sufficiently clear that the performance required of the parties can be determined. Legal Prerequisites Mutual Agreement: A “Meeting of the Minds” There must be a mutual agreement between the parties as to the essential terms of the contract. This agreement is normally reached through the process of offer and acceptance, and results in a “meeting of the minds.” The negotiation process may involve many offers and counteroffers before the terms of the contract are settled on. Until both parties have agreed upon the identical terms, there is no agreement. Any terms raised during negotiations that have not been agreed upon do not become a part of the contract. ▶ Negotiating Agreement (15.3) discusses negotiation as a problem-solving skill that can be learned and mastered. Consideration PA R T 4 : C O N T R A C T S A N D A G R E E M E N T S A contract does not legally exist unless there is an exchange of values—what lawyers call “consideration.” This is what distinguishes a contract from a gift. Each party must give something of legal value to the other: either a benefit conferred on the other, or a detriment incurred. Mutual promises are recognized as having legal value. In the normal situation, the architect promises to provide services, and the client promises to pay the architect’s compensation. Past consideration or a preexisting obligation does not qualify as consideration. An agreement made by a client that the client will pay the architect’s past-due invoices in exchange for some additional services would “fail for lack of consideration”—even if the architect expressly agreed to the arrangement. Capacity Capacity is the legal ability of the parties to enter into a contract. While classic issues of age, mental incapacity, and incapacity due to the influence of drugs or alcohol rarely arise in contracts for architectural services, conviction of a felony may put someone under a disability, particularly in contracting with the federal, state, or local government. The Consolidated Appropriations Act of 2012 prohibits certain federal agencies from contracting with any corporation that has been convicted of a felony within the past 24 months. Companies can be debarred or suspended by government agencies for fraud, waste, mismanagement, or even for being delinquent in their tax payments. Legal Purpose If the underlying purpose of the contract is illegal, or if the contract requires the performance of an illegal act, the contract is void from the outset. This could come into play if the architect has agreed to provide services for a project in a state or jurisdiction in which the architect is not licensed. The courts will not facilitate the performance of an illegal act by enforcing the contract, and the unlicensed architect could be left without legal recourse to collect any unpaid fees. Contractual Intent The parties to a contract must have the mutual intent of entering into a binding legal agreement on the terms specified. This mutual intent may not be present because of a mutual mistake of fact, or where there has been the misrepresentation of a material 17.1 Agreements with Owners 1041 fact or outright fraud, or because of the use of undue influence, or physical or economic duress. There is a difference between hard bargaining and economic duress. An architect may enter into an economically disadvantageous contract because the economy is bad and there are no other commissions to be had. The client who takes advantage of the architect’s financial distress may be a sharp operator, but is not putting the architect under economic duress. Necessity for a Writing ▶ See the backgrounder Copyright Law for Architects (5.1) for a detailed discussion of intellectual property and copyrights. Only certain types of contracts are required to be in writing under what is called the Statute of Frauds, and this only affects the enforceability, not the underlying validity, of a contract. Examples include contracts for an interest in real estate (including the sale or lease of property), contracts that by their terms cannot be performed within a year, financial guarantees, and contracts between merchants under the Uniform Commercial Code for goods valued at $500 or more. Of particular interest to design professionals, under the copyright laws any transfer of an interest in a copyright (such as the copyright in a set of drawings that the architect has prepared) must be in writing. Ownership of the drawings, even in an electronic form, is separate and distinct from the architect’s ownership of the copyright that is embodied in them. Thus, a transfer of the drawings to another party such as the client does not result in a transfer of the copyright: That must be covered by a specific written agreement. Essential Terms, Express and Implied PA R T 4 : C O N T R A C T S A N D A G R E E M E N T S The terms of an agreement must be sufficiently definite in order for it to rise to the level of a contract. Essential terms include the subject matter of the contract such as the services to be performed, the time for performance, and the price to be paid for those services. In the absence of any of these terms, the contract may “fail for indefiniteness,” severely limiting the remedies that an architect might have. Ser vices to Be Provided Is it enough for an architect to agree simply to design a client’s house and still have an enforceable contract? Probably not, given the complexity of modern design and construction. In order to provide the necessary specificity, it will be important to describe the project, including such things as its location, building and construction type, approximate size or capacity, quality, and estimated cost. Services may be intangible in nature and abstract in their definition, and even when they are described in some detail, it is important to also define the deliverables that will result. In doing so, the architect should be careful to make it clear that the architect is providing and the client is purchasing services, not drawings. Since 1865, the AIA has taken care to define drawings as “instruments of service.” Compensation Compensation is an essential term of any contract. Without it, the contract can “fail for indefiniteness.” There are limited circumstances in which a court may supply a missing term of such importance. If the agreement is silent on the subject of compensation, a court may be able to supply an implied term of “reasonable compensation.” What is reasonable might be measured by the price that a client has previously paid the architect for similar services, or by what the architect normally charges for such services, or by what architects in the community normally charge or are paid for similar services. Obviously, it is better to have a specific agreement than to have to rely on others to determine what one deserves to be paid. Time of Performance The time of performance is an essential term of any agreement. If the time term is not specified, courts may sometimes find that there is an implied agreement that 1042 Agreements and AIA Document Program performance (such as when payments are due) will take place within a “reasonable time.” The timing of architectural services often depends on external factors over which the architect has no control, particularly the time required for the periodic client approvals needed for the architect to proceed and building code review and approval of the construction documents. While it may not be practicable to include a schedule in the contract, a provision addressing the time for the performance and completion of the architect’s services should be a part of every contract. The architect must be careful that any provisions on time of performance take into account delays caused by the client and external factors. Express Terms PA R T 4 : C O N T R A C T S A N D A G R E E M E N T S Express terms of a contract are those that have been specifically agreed upon, whether verbally or in writing. Courts generally require that certain undertakings be express, such as an agreement to indemnify another party. An architect may tell the client during negotiations that schematic design studies will be completed within 60 days. If the agreement is not in writing, the 60-day commitment is nevertheless an express term of the agreement. However, when and if the agreement is reduced to writing, it is important that all terms be included in the written contract, which generally supersedes any prior oral or written understandings or agreements. Most courts will not allow such “extrinsic” evidence to vary or add to the terms of a written agreement that appears to be complete and unambiguous on its face. The terms of the contract will be interpreted based on the reasonable meaning of the words that were used by the parties, or by common usage in their line of business, or by the conduct or course of dealing of the parties themselves. If the architect agrees to design a commercial retail space in a shopping center as a “vanilla shell” and agrees to produce a “permit-ready set” of drawings, these terms will have meanings that can be defined with fair certainty. Difficulties arise when commonly used words such as “estimate” and “inspection” have special meanings of which the client may not be aware. Implied Terms and the Architect’s Standard of Care Implied terms in a contract are not specifically mentioned and have to be inferred. They include terms that are a necessary consequence of what the parties have undertaken to do. For example, under the professional standard of care, the architect has a duty under the building code to comply with the design requirements of that code, and it can be implied in a contract for architectural services that the architect will fulfill that duty. Whether the violation of a building code provision related to design is considered to be evidence of negligence in itself (negligence “per se”) or merely as evidence of negligence varies among jurisdictions. While the architect’s contract specifies what the architect will do, the manner in which the architect’s services are performed is generally determined by the professional standard of care. Architectural agreements have historically been silent on the architect’s responsibility for code compliance and for the adequacy of its construction documents. It went without saying that the architect was obligated to fulfill these responsibilities under the architect’s professional standard of care. A few cases have held that architects impliedly warrant that their services have been performed in accordance with the professional standard of care. Since the 1970s, more sophisticated owners have insisted on including express terms in the architect’s contract. Some of these terms have the effect of imposing a higher standard of care, and must be scrutinized carefully because they may go beyond what is covered under the architect’s professional liability insurance. The current AIA agreement forms address clients’ desire for more specificity by including a statement of a standard of care that is consistent with the law. ▶ Risk Management Strategies (16.1) further addresses standard-of-care issues and how to know and manage the risks inherent in architecture practice. 17.1 Agreements with Owners 1043 TYPES OF AG RE E ME N T Agreements between architects and their clients can take many forms. Oral Agreements Oral or “handshake” agreements should be avoided except for the simplest, shortest, and least costly undertakings on behalf of a known and trusted client. While they may fulfill the legal necessities of a contract, oral agreements usually leave too many things unsaid: Movie mogul Samuel Goldwyn is reputed to have said that “verbal agreements aren’t worth the paper they are written on.” Some state laws—particularly consumer protection laws—require that certain types of agreement be in writing. This can extend to agreements for architectural design services. The biggest problem with verbal agreements is proving what terms were actually agreed upon. By the time a misunderstanding develops into a legal dispute, the parties may have vastly different recollections of what was agreed to—such as whether there was an understanding that the building would not exceed a certain cost. When the architect is put in the position of working under a verbal contract, even if it is based upon a detailed proposal or contract form that the client has neglected to sign and return, it will serve the architect to confirm the terms of any verbal agreement in writing as soon as possible, and before beginning performance. Letter Agreements PA R T 4 : C O N T R A C T S A N D A G R E E M E N T S Letter agreements are sometimes used to confirm a prior informal verbal agreement, perhaps with the addition of a few terms not previously discussed. They may fulfill the legal necessities of a contract if they cover (1) the services to be provided, (2) the price to be paid, and (3) the time of performance, and provide for the client to return a signed copy confirming the client’s acceptance. Like oral agreements, however, letter agreements often leave out too many things, and if the client does not countersign with its acceptance, the letter may not prove the terms that were actually agreed upon. One variation on the letter agreement is the detailed proposal letter that an architect may submit to a client. This approach is commonplace in all types and sizes of firms. Architects’ proposal letters typically describe the project, the scope of services, and the proposed compensation, all in some detail, but all too often omit many of the “boilerplate” terms and conditions such as are found in the standard AIA agreement forms. To remedy that omission, a proposal should incorporate by reference or attach an AIA form or other terms and conditions document. If a client responds to the architect’s proposal with any change in the terms, this is legally considered to be a rejection of the architect’s proposal and a counteroffer. This exchange of offers and counteroffers may continue for several rounds before a final agreement is reached. The architect should take care to see that all of the terms of the agreement are restated in the final exchange. If a letter agreement is subsequently replaced with a formal written contract, the contract’s “integration clause” should note that it specifically supersedes the prior letter agreement. This will avoid having two potentially inconsistent contracts operating simultaneously. What if a client responds to a proposal by asking the architect to proceed with the services as outlined, but without making a firm commitment to the price or other terms or returning a countersigned copy? If the proposal (or an attached AIA agreement form) is never signed by the client, the oral authorization to proceed may be the only contract there is, and it will be subject to all of the same difficulties encountered with oral agreements. The written proposal or AIA form will only be evidence of what the agreement is, not definitive proof. 1044 Agreements and AIA Document Program One way to address the possibility that a client may not countersign and return the written proposal is to provide in the proposal for the manner in which it may be accepted by the client: in effect, by creating a “self-executing” proposal. The architect could do so (with the assistance of an attorney) by including a statement in the proposal that the terms of the proposal (and/or the attached AIA agreement form) can be accepted by the client’s giving authorization for the architect to proceed with the services described in the proposal. AIA’s Owner-Architect Agreement for a Residential or Small Commercial Project, AIA Document B105™–2007, has been designed as a substitute for a simple letter agreement on smaller projects. Formal Written Contracts Formal written contracts identify the parties to the contract, describe the scope of the project and services to be provided, the architect’s compensation, and the time of performance, and indicate the parties’ acceptance by their written signatures. They often include additional terms and conditions. Contracting parties should take pains to see that their written contract is a complete expression of their agreement. Any conditions or contingencies should be spelled out in the written contract. When a contract is in writing and appears to be complete and unambiguous on its face, the courts are reluctant to look beyond the written words. Standard AIA forms of agreement for architectural services were first introduced in 1917. Today, the AIA publishes many different forms of owner-architect agreement. Although these “B-series” documents share many of the same provisions, each addresses a particular range of circumstances. The various architectural services agreement forms are found in coordinated families of documents. AIA’s standard forms of agreement are based on general principles of law prevailing in the United States. However, variations in state and local laws may affect the form and substance of agreements, particularly consumer protection laws that may affect contracts with residential clients. The architect should be aware of the laws in every jurisdiction in which the architect practices. Variation in both statutory and case law among jurisdictions is one reason why architects should consult an attorney about using, completing, or modifying a standard form. There are many advantages of using AIA standard forms, for both parties: ▶ The AIA Documents Program (17.5) discusses the range of standard form agreements included in the AIA Contract Documents. • The forms describe the services typically provided by the architect in some detail, and in terms that have been widely used in the industry; they also describe the client’s responsibilities. • AIA forms cover the situations, conditions, and contingencies that are most frequently encountered, such as the need for additional services, what happens when the building as designed will cost more than was originally anticipated, and the client’s rights to use the work product of the architect. • They describe not only the extent, but many of the limitations of the architect’s services, responsibilities, and authority, so as to avoid major misunderstandings. • AIA agreement forms are carefully coordinated with other contracts and forms that will be used on the project. • Great care is taken to see that the forms are objectively reasonable and fair, and that they will be legally enforceable by all parties. The documents have a long history of acceptance by the courts. Some clients may express a reluctance to use a standard printed form for fear that it may be one-sided in favor of the architect. The best way to overcome such a fear will be to engage the prospective client in a review of the specific terms of the agreement to identify any provisions that are of particular concern. 17.1 Agreements with Owners 1045 PA R T 4 : C O N T R A C T S A N D A G R E E M E N T S Standard AIA Contracts SPECIAL C ON S I D E RATIO N S Any agreement for architectural services will need to take into account some special considerations, including the following. Nature of the Owner, Their Capabilities, and Successors Individual Clients PA R T 4 : C O N T R A C T S A N D A G R E E M E N T S Individual clients building for themselves or a small business (as opposed to business entities or institutional clients with building programs) rarely have much experience with architects or building construction, and so may have expectations that differ from normal industry practice. For instance, a client may need to understand that an architect expects to be paid for its services whether or not the client decides to proceed with construction. It is extremely important that an agreement be reached regarding any construction cost limitations. “Design creep” can easily take the construction cost of a project beyond what the client expected to spend, and the architect must be prepared to keep rein on the client’s expectations. Likewise, the client will need to understand that “schedule creep” must be controlled, as it can delay a project beyond the anticipated construction commencement or completion date. Individuals sometimes mix their business and personal affairs. If there is a business use involved, the individual may own the business outright or be part of a business entity such as a partnership. It is important to determine whether the client is the individual or the business entity. Care must also be taken when dealing with married couples or partners in civil unions. A client’s spouse or domestic partner may not be bound by an agreement entered into solely by the client. Most projects involve improvements to real property. In order for the architect to secure its lien rights (if available), the architect should check to see that the client is in fact the sole legal owner of the property. Individual clients building for their own use may fall under the protection of certain state and local consumer protection, new-home, or home-improvement laws and regulations. AIA Document B105™–2007 is a form of agreement that may be appropriate for small residential projects. Small Businesses Small businesses may take many different forms, from individual proprietorships to partnerships, limited liability corporations, and business corporations. A business may be “trading as” or “doing business as” using another name. Some of these forms of business will give the individual limited liability for the debts and obligations of the business. It is important for the architect to know exactly who the client is, and to determine the client’s fiscal responsibility. The architect should also check the state corporations or franchise tax office to determine that the business has a legal existence and is in good standing with the state. AIA Document B104™–2007 is a form of agreement that may be appropriate for small to midsize projects that are of limited scope and complexity. Corporate Clients Corporations, limited partnerships, limited liability companies, and other business entities such as real estate investment trusts operate through individuals, but not all corporate or entity employees have the authority to make binding commitments. It is important to know the capacity of the individual(s) with whom one is dealing. Unless that individual is the corporate president or CEO with clear authority to commit the organization, the architect should determine just what the individual’s authority is. It is not uncommon for the owner’s project manager, to whom the architect reports, to be employed by an entity different from that with which the architect has contracted (making the individual an 1046 Agreements and AIA Document Program agent of the client). It is far better for the architect to be able to rely on actual authority, stated in the contract, than on the apparent authority of an agent of the client. In addition, the architect should also determine what relationship the client corporation has to the real property that is to be improved. The actual owner of the property may be a “shell” corporation with no unencumbered assets; it could be a wholly owned subsidiary; or a separate corporation controlled by or under common control by the client. The client may want the contract to be with one entity, but have the architect report to people in another company. These corporate interrelationships need to be sorted out. Most corporate projects are constructed for the company’s own use and occupancy for an indefinite time into the future. Thus, the company may be more interested in sustainable design, the comfort and convenience of its employees, higher quality of construction, increased energy efficiency, and longer-term savings in operating costs than in a lower initial cost of construction. A corporate client may also offer the architect an opportunity to provide extensive additional services, such as interior design. AIA Documents B101™–2007 and B103™–2007 are forms of agreement that may be appropriate for larger and more complex projects. Nonprofit Organizations and Institutional Clients PA R T 4 : C O N T R A C T S A N D A G R E E M E N T S Nonprofit organizations and institutional clients such as educational and health care institutions usually have a corporate organizational structure; however, they differ from business corporations in their outlook. Because these organizations are less oriented to making a profit than providing a service, the construction of a building may not be viewed as an investment that must have a measurable return. These organizations may be much more receptive to making expenditures for sustainable design and measures that require an extended amortization period. Many nonprofit organizations work on extremely tight budgets. They may expect their professional service providers to contribute part of their services or work at reduced rates. AIA Document B101™–2007 may be an appropriate contract to use for typical institutional building projects. AIA Document B106™–2010 has been developed for those situations in which an architect is performing services on a pro bono basis. A version of B101™–2007 for use on sustainable projects, B101™–2007 SP, is also available, complementing other newly published AIA documents for sustainable projects. Public Sector Clients and Publicly Funded Clients Contracting with a public sector client differs in many respects from the private sector. Architects seeking to work for the public sector should first be aware of the selection procedures utilized by an agency. One paramount principle of government contracting is that an agency generally cannot legally contract for services without a specific legislative and/or budgetary authorization. Only certain designated officials have the authority to enter into contracts; contracts are invariably written, but often on an inflexible, non-negotiable government form that may or may not be up to date or appropriate for architectural services. There are many rules and regulations that may be incorporated into a contract or that will apply independent of the contract, such as accounting rules that may affect the architect’s entire practice. The architect is obligated to be aware of and comply with these regulations whether or not they have been brought to the architect’s attention. Government contracts can be extremely difficult to modify, such as to authorize the performance of or pay for additional services that may have been required of the architect. Some public sector forms of contract have borrowed liberally from prior editions of AIA Contract Documents. Some AIA components have worked with public sector entities to develop adaptations of the AIA forms that meet their specific contracting requirements but remain consistent with current architectural practices, services, and expectations. 17.1 Agreements with Owners 1047 Contracts with clients whose funds are provided by public sources such as grants or loans will also involve restrictions and regulations with which the architect must be familiar. Users may consider the specialized scope of service forms in the B200 series of documents for defining the scope of services to be provided in a public sector contract. AIA Document B108™–2010 has been designed for use on certain federally funded or federally insured building projects. Developers PA R T 4 : C O N T R A C T S A N D A G R E E M E N T S ▶ See Owner-Generated Agreements (17.3) for further information about how to evaluate terms in such agreements. Contracting with a real estate developer is different in many respects from the average business client who is building on its own behalf. Professional developers are usually very familiar with the market for design services and construction. They often have a very definite idea of the services that they want, and how much they are willing to pay for them. While some developers have begun to see the value in having a LEED-certified building, many speculative builders may still be driven by the desire for a project that has the lowest possible initial cost—and this includes their architectural services. Developers are among the client types who prefer to use their own form of contract, and the terms they seek to impose on the architect can be very one-sided. Many developers and their attorneys now use the AIA Contract Documents software as a starting point for their agreements, so some of the language in a developer’s agreement form may be familiar to the architect. However, the presence of familiar language may be deceptive, as the language changes may be subtle and the modifications (particularly deletions) may be extensive, substantially changing a document’s legal effects. Engaging a knowledgeable attorney may be necessary in order to negotiate a contract with acceptable risks. Typically the owner of the property to be developed is a single-purpose entity that only exists on paper and has no other assets other than the property, which is already fully encumbered by a development or construction loan. It is important for the architect to ascertain just what the relationship is between the developer and the client who signs the contract. Because the project may be highly leveraged and offer no source of financial recovery for the architect, it is important that during the course of the project, the architect keeps current with its billings and keeps the client current on its payments. Services that have not been billed or fees that are in arrears may be very difficult to collect if the developer or the project encounters financial problems. One consideration that should be kept in mind is that the project may be one such as a condominium apartment building that the client will be turning over to one or more new owners after it is completed. This may expose the architect to potential claims from many subsequent purchasers for alleged deficiencies in design and construction. AIA Documents B107™–2010 and B109™–2010 are forms of agreement that may be appropriate for use with developers of single-family residential projects and larger, mixed-use developments, respectively. In addition, AIA Document B509™–2010 provides supplementary conditions that may be used to modify B109 for use in residential condominium construction projects. ▶ Contractor-Led Design-Build Design-Build Companies (9.4) further discusses arrangements in which the contractor holds the prime contract with the owner. Another class of client that the architect finds far different from others is the designbuilder. In this situation, the architect no longer has a direct relationship with the ultimate client, and the architect may be working under a detailed set of design criteria developed by the owner or its bridging consultant. The architect’s design decisions may be subject to a higher level of scrutiny for their impact on overall building costs. Decisions on finishes, materials, and equipment selection may be made by the designbuilder rather than the architect. Finally, the architect may have a much diminished role in construction administration, perhaps limited to reviewing subcontractors’ shop drawings, responding to requests for information (RFIs), and providing other services only on an as-needed basis. 1048 Agreements and AIA Document Program Since the emergence of design-build in the 1980s, the AIA has promoted measures that help ensure that the architect will continue to have a meaningful and ethically proper role in the design-build process, even when serving as a consultant to a designbuilder. AIA Document B143™–2004 is a contract specifically designed for use between the design-builder and the architect. If the design-builder is not using AIA forms for its agreement with the owner, B143™–2004 can be used as a reference to evaluate the form of agreement that the design-builder proposes that the architect use. Nature and Extent of the Architect’s Under taking The Baseline: “Full” Traditional Ser vices A client that has a definite need, knows its requirements, and has a budget and the means to pay for a project is in a good position to enter into a contract such as AIA Documents B101™–2007, B103™–2007, or B109™–2010, each of which will provide for a “full” scope of services that includes the traditional “Basic Services” plus “Additional Services” that may range from programming and site selection through postoccupancy evaluation. The architect may be able to assemble a project team for the duration of the project and provide the services more efficiently than on a piecemeal basis. The higher degree of certainty in such a project may allow the architect to structure a definitive compensation package. Feasibility and Design Studies PA R T 4 : C O N T R A C T S A N D A G R E E M E N T S A contract for preliminary services such as feasibility and conceptual design studies will be most appropriate when the client is not entirely sure of its needs, its desires, or its finances. These types of services may be more open-ended, and it may be most appropriate to charge for them on an hourly or similar basis. It may be appropriate to contract for such services under the terms and conditions of AIA Document B102™–2007, with the scope of services found in B203™–2007, the scope of services document for Site Evaluation and Planning. Another example is AIA Document B142™–2004, the agreement form under which an architect will define the scope of a design-build project for the owner. Procurement and Construction Phase Ser vices The architect who has an involvement in the bidding and negotiation phase is more likely to see that a construction contract incorporating AIA Document A201™–2007 is used. The AIA general conditions includes provisions affecting the architect’s interests, such as notice of perceived errors or inconsistencies in the contract documents, insurance, indemnity, and waiver of subrogation provisions. Without any involvement during bidding, the architect will have no influence over the documentation that is used for the construction contract. The construction phase services of A201 are incorporated by reference into AIA owner/architect agreements. If A201 is not used, the architect’s construction phase services written there establish a reasonable basis for the architect’s compensation during the construction phase. Some owners, particularly those with ongoing building programs, have the knowledge, experience, and personnel to manage the bidding and construction process and to take on much of the contract administration by themselves. Other owners will have hired construction managers to manage construction procurement and administration. In such cases, the architect’s role during procurement may be limited to advising on the acceptance of various alternates, and during construction, to reviewing and approving submittals and making recommendations for (as opposed to certifying) payments to the contractor. See AIA Document B132™–2009, the agreement form that has been designed for use on construction management projects. Unfortunately, there are also owners who lack construction procurement or administration capabilities, but do not appreciate the value of an architect’s services during construction. Architects who contract to provide design services only should consider obtaining legal advice to protect their interests, which may be affected by what may happen during the course of construction. 17.1 Agreements with Owners 1049 The Architect as Subconsultant ▶ See Project Team Agreements (17.2) for a detailed discussion of consultant agreements. Architects are not always the lead on a project with a direct contract with the owner. When the architect is in a subsidiary position, such as a subconsultant to an engineering firm on a project that has a high engineering component, the architect may not have a choice of which form of agreement to use. Because the architect will be assuming part of the prime consultant’s responsibilities, and usually is subject to a “flowdown” of rights and responsibilities, it is important that the architect is provided with a copy of the prime consultant’s agreement. Of particular importance will be any unusual allocations of risk in the prime agreement such as indemnity clauses, dispute resolution, and provisions requiring redesign in case of cost overruns. As a subconsultant, the architect will need to know who is responsible for coordinating the work of the architect with that of the prime consultant, with other subconsultants, and with other prime consultants working for the owner. As a subconsultant, the payment provisions of the contract need to be examined carefully. Will the architect be paid promptly for its services when billed? Will payment be made within a reasonable time after the owner has paid the prime consultant (“pay when paid”)? Or will the architect be expected to bear the risk of nonpayment by the client (“pay if paid”)? The Architect as a Team Member PA R T 4 : C O N T R A C T S A N D A G R E E M E N T S “Teaming” is a popular term in marketing but is extremely vague in describing legal responsibilities. In some forms of project delivery, such as design-build and integrated project delivery (IPD), the architect may be assuming legal obligations that extend not only to the ultimate client or project owner, but also to other team members. For instance, as a partner in a joint venture, the architect may have fiduciary responsibilities to its partners that go beyond the duties one would have to a client or consultant. ▶ Project Delivery Methods Overview (9.1) provides a broad discussion of project delivery options and trends. 1050 The Deliver y Method The various construction delivery methods (i.e., conventional design-bid-build, costplus work, contracting with separate primes, fast-tracking or phased construction, construction management with a CM-adviser or CM-constructor, design-build, and integrated project delivery) will affect the design documentation that will be provided by the architect, as well as the scope and extent of the architect’s construction phase services. If the client has determined what the delivery method will be at the time the owner-architect agreement is negotiated, that should be set forth in the written agreement, and appropriate modifications may need to be made in the architect’s services and construction phase responsibilities. The architect’s design and construction phase services, as described in AIA Document B101™–2007, anticipates that the project will be procured and constructed in a conventional manner—a fixed-price contract with a single general contractor. This should be regarded not as a commitment by the client that it will use that process, but as the basis on which the architect prices its construction administration services. Review of alternative methods of delivery is a service that the architect provides under the standard AIA forms. If the owner determines that something other than a conventional delivery approach will be used, the architect will need to initiate a change in the agreement to reflect the approach chosen. For instance, if the owner intends to contract on a cost-plus basis, the architect may have substantially more construction administration work to do, particularly in reviewing the contractor’s documentation of expenditures and calculating allowable overhead and profit. Similarly, if construction will proceed on the basis of a thirdparty professional construction manager managing multiple separate prime construction contracts, the architect may be required to create multiple bid packages of construction documents for different trades. This may require substantially more effort than a single set of construction documents intended for a general contractor. Agreements and AIA Document Program In such a case the architect may also have more limited construction phase responsibilities. The terms of the owner-architect and owner-CM agreement will need to be coordinated closely. If the use of a cost-plus or multiple separate contracts can be anticipated at the time the contract for architectural services is entered into, or if the owner has preselected a contractor or construction manager with whom the architect will be working, these factors should be included in the agreement and appropriate forms selected and modifications made. If it is known that the owner wants to include the services of a construction manager as adviser, the architect may want to start with the AIA’s Construction Manager as Advisor forms. L EGA L AN D RISK MANAGEMEN T C O NS ID E R ATI ON S Risk Management and Allocation The professional services agreement is the primary vehicle for allocating risks between the client and architect. Some of the ways that this can be done are as follows. ▶ Risk Management Strategies (16.1) addresses the range of risks that architects encounter— and the strategies to manage them. Architect’s Disclaimers of Responsibility and Liability PA R T 4 : C O N T R A C T S A N D A G R E E M E N T S Sometimes it may be easy for a person to read too much into an undertaking described in a contract. Disclaimers are used in contracts to secure a mutual understanding of the limitations of the architect’s authority and responsibility. For instance, the preparation of cost estimates by the architect is fundamentally different from a contractor’s undertaking in pricing a project for bidding purposes, and yet the contractor may use the same term—“estimate.” Perhaps the single most frequent cause of disputes between architects and their clients over the past 150 years (if not over centuries) arises when bids are received that far exceed the architect’s estimates. The client may feel that the architect’s services have been of no value, and refuses to make payment for the services rendered, especially when the project has to be abandoned or radically reduced in scope. In order to avoid misunderstandings, it is important that architects make it clear that they are not guaranteeing the cost of construction or warranting that costs will not exceed the architect’s estimate. Beyond that, the agreement should address what happens if bids exceed the client’s budget or the architect’s estimate. Clients and members of the public may have unrealistic expectations as to the extent of the architect’s control over the contractor during the construction process, and the extent of the architect’s responsibility for the acts or failures to act of the contractor and its subordinates. The architect’s review of shop drawings and other submittals has a limited purpose. Likewise, the architect’s certifications of a contractor’s applications for payment may be misconstrued. These undertakings by the architect are limited by carefully worded disclaimers in the AIA owner-architect agreements and construction contract forms in order to distinguish between the responsibility of the actor (contractor) and the reviewer (architect). Limitations of Liability One method of risk allocation that has become increasingly common over the last 40 years is the contractual limitation of liability. Such a provision may be an agreement by the client to limit any claim against the architect to an amount not to exceed the architect’s fee or some other sum, or the amount of available insurance coverage. The purpose of such a limitation is to make it clear how much potential risk the architect is prepared to shoulder for the fee it is to receive. Such provisions are often upheld, particularly when it is demonstrated that the limitation is part of an overall risk management agreement that the parties have reached. Because limitations of liability alter the normal legal consequences, courts scrutinize them carefully, and they may be subject to state law requirements. Architects are well advised to seek legal assistance in drafting such a provision. 17.1 Agreements with Owners 1051