By Chris Addington, Architect
FARA/AIA/ALA/NCARB
The Addington Partnership, Bakersfield, CA

The architecture profession of today is extremely more complex and different than the past decade. We as professionals are expected to be able to understand our client’s program needs and provide a solution that exemplifies those needs. This process as you know it is called architectural services. The evolution to be able to provide this service has become a quagmire of pitfalls. In the not too distant past, we as architects could depend on a handshake and in some cases just a simple phone call to bind our services with an oral agreement. This may still occur in some client relationships, but in some states, statutes dictate that we must enter into a contractual arrangement in written form, even for donated work. This is not all bad in that the opportunity for misunderstandings have less chance to be a project pitfall.

Why have a contract?

1) A contract allows for you and your client to have a mutual understanding of what each party’s expectations are in the business arrangement. You establish the rules of engagement and can, in most cases, identify the risks involved. During the stage of contract development each party should communicate their perspective on concerns. This, in itself, will help you better understand your client and he better understand your concerns.

2) The rules of engagement need to be identified in a contract. This will be the method by which you provide a service to your client and define his expectations. Do not commit to daily visits to the project site for construction observation when you really intend to do it only weekly. Make sure what you commit to is what you will do and define it precisely in writing. When a contract is silent on issues, a court of law may infer or imply certain terms to deal with issues that are silent. Your goal is to plug as many holes in the dike as you can. This is where a good attorney can save you many hours and potential future liabilities.

3) During the contract development phase you have the opportunity to talk to your client and can determine if you really want to work with this person or firm. Most reasonable clients will work with the architect on clauses if you can convince them that this is in the best interest of the project. We have had potential clients who felt it was more important to shift their liability to the architect and would sacrifice our firm in a heartbeat. These you do not need unless you go in with your eyes open and prepare yourself for litigation. One project, the client’s attorney had the charge to negotiate our agreement and clauses. He was loaded for bear and had so many onerous clauses that we could never agree to the terms. Upon leaving and not agreeing to the terms, I indicated to the attorney to find another architect. I received a call from the client later that day and was able to negotiate a reasonable agreement that was fair to both parties with the client direct who would be the person whom we would be working with.

Contract Pitfalls

1) Many firms have, over the years, developed standard contracts that they use routinely. This is fine, but your agreement could be missing important items or could be worded incautiously or inconsistently. Have a knowledgeable attorney who understands construction periodically review your contracts. Many professional liability insurance carriers will offer to read your contract and offer constructive changes. Our firm has had DPIC review our contracts periodically and have added items based upon their review.

2) When you have your client provide the contract form it so important to have legal opinion before you execute the form. Many client-developed contracts are one-sided and seek to transfer client liability to the architect. Beware some client-developed terms may prevent your professional liability insurance carriers ability to defend you and may even cause a claim to fall outside your coverage. It is standard policy for our firm to have all client-developed contracts approved by our professional liability insurance carrier as well as our firm’s legal representative. In almost every contract, changes have been done to make the agreement equitable to the architect.

3) Oral agreements are risk prone and even more so with the complexity of the civil justice system that governs our business dealings. Many states now require written agreements for architectural services. Check with your attorney and determine what applies to your practice.

4) Many contract clauses are important to you and your professional liability insurance carrier. If your client will not agree to some of these items, maybe it is better that you decline the project rather than pay dearly in the future. A partial list of contract items that should be considered are: Jobsite safety; dispute resolution; attorney fees; delays; scope of services; limitation of liability; construction observation; termination; hazardous materials and statues of repose.

5) Many client-developed agreements have onerous clauses that you must be careful and understand before you execute the agreement. A partial list of these are Insurance; indemnities, ADA compliance; certification requirements; assignments; stop work authority; construction cost and guarantees. If you are not clear on the impact of these clauses in the agreement terms have your attorney advise you of the impacts of the client’s clauses.

What are the elements of a contract?

1) A contract is made of items called contract elements. You, as an architect, propose to provide an offer of services for consideration and the other party agrees to accept your offer.

2) Consideration is the inducement to enter into the contract, which is a promise to do or give something of value to bind the contract. Note the amount of consideration does not have to be substantial, but has to be agreed to by both parties.

3) The contract must be enforceable and be in legal form. It must not be against public policy. It is not uncommon for certain elements of an agreement to be conflict with law. This may indeed cause the entire contract may be deemed void or in some cases only the clauses in question may be struck.

4) Contracts must sure a legal purpose. A contract for illegal activity is not enforceable in courts of law. An example is unlicensed architects claiming to be an architect may find that are unable to enforce their contract because their ability to perform such work is illegal without a license.

5) The parties binding the contract must be empowered to act for their business entities. This is called competent parties and by the way, they must be sane. Usually most contracts have a clause attesting that the persons signing the contract are empowered to act for their businesses.

Now you understand the reason to have a contract, pitfalls of contracts and the elements of a contract. Hopefully this information will make you understand the importance of good quality fair documents. Remember contracts have the purpose to identify the scope of work you propose with your client and what you expect for a fee in return. The rules of engagement are the terms of the contract that deal with conditions as they arise in the enforcement of the contract. Oral contracts should not be used due to inability to enforce unwritten provisions. Your legal council should always be consulted before you execute an agreement not prepared by you as well as you should have your standard agreements reviewed periodically for updates of language and the way you do business.