Writing Contracts for Architects

Disclaimers§ THIS PRESENTATION IS NOT INTENDED TO AND

DOES NOT CONSTITUTE LEGAL ADVICE.

§ NO ATTORNEY-CLIENT RELATIONSHIP IS ESTABLISHED AS A RESULT OF THE DISSEMINATION OF THIS PRESENTATION.

§ ANY PERSONS SEEKING LEGAL ADVICE ON THE SUBJECT OF THIS PRESENTATION SHOULD CONSULT THEIR OWN LEGAL COUNSEL.

§ THIS PRESENTATION IS PROTECTED BY U.S. AND INTERNATIONAL COPYRIGHT LAWS. REPRODUCTION, DISTRIBUTION, DISPLAY AND USE OF THE PRESENTATION WITHOUT WRITTEN PERMISSION OF THE AUTHORS IS PROHIBITED.

(After all, we are Attorneys).

PRE-CONTRACT CONSIDERATIONS

A Current and Valid Architectural License is Required to Recover a fee.n Any person acting in the capacity of an Architect but

without the required license is liable for treble damages, not to exceed $10,000, plus costs and attorney’s fees (CCP section 1029.8)

n An unlicensed Architect is not entitled to sue for services rendered, unless the scope of work is included under Business and Professions Code, section 5537 (Medak v. Cox, 12 Cal. App. 3d 70, 77, 90)

Contract Basics

PROFESSIONAL PRACTICE ACTBefore Commencing Work, an Architect Must Have:

n A Written Agreement signed by Client and Architect with professional information (License Number), with:

n A Description of services/scope of work.

n The means of compensation and payment.

n A procedure for termination of the Agreement.

n Note: A client can agree in writing that the Architect can commence work before the Agreement is signed; Services and payment terms can be implied from prior similar projects for the same client.

(Business and Professions Code, section 5536.22(a))n Note: Many Professional Liability policies require

written contracts as a condition of coverage.

PROFESSIONAL PRACTICE ACTSources of Written Contracts

n AIA Forms of Agreementn AIA publishes Contract Documents for most situations (see

2017 AIA Contract Documents list).n AIA standard contract forms are widely used, and considered

by many to be complete and balanced.n AIA standard contract forms have provisions that have been

judicially interpreted and supported by case law.n Even AIA standard contracts must be evaluated to confirm

the Architect’s scope of work and responsibilities.n AIA standard contracts can be modified, sections added or

deleted to better match the intent of the Parties.n Specially Prepared Agreements

n Prepared by Owner (and counsel).n Pay close attention to clauses that favor Owner.

OWNER PREPARED AGREEMENTSRed Flags:

n One Sided Indemnity Provisionsn Requires Indemnification for All Claims except for Owner’s:

n Sole negligence;

n Gross negligence; or

n “To the maximum extent permitted by law”

n Architect’s obligation to defend starts at presentation of claim.

n Architect’s obligation to defend does not depend upon determination of fault by trier of fact.

n Transfer of Architect’s Intellectual Propertyn Client requires ownership of plans.n Client requires ability to assign rights to Architect’s services.

COPYRIGHT ISSUESSection 7 of B101- Owner Architect Agreement covers copyrights and licenses

n What do you do if client demands CAD files? Need language relieving you of liability, charge fee and limit how it’s used (Section 7.3- § 7.3.1- review language-release of liability at first two sentences- “In the event the Owner uses the Instruments of Service without retaining the authors of the Instruments of service…”) If you release the CAD files, important that release contains language that references 7.3.1.

n How do you make sure you get paid before you release any material? Now, they don’t get the license until you get paid. Here is the new language:

“Upon execution of this Agreement, the Architect grants to the Owner a nonexclusive license to use the Architect’s Instruments of Service solely and exclusively for purposes of constructing using, maintaining, altering and adding to the project, provided that the Owner substantially performs its obligations, obligations under this agreement, including prompt payment of all sums when due, under this Agreement. due pursuant to Article 9 and Article 11.”

COPYRIGHT ISSUES

How do you copyright a document? The United States Patent Office now allows copyrights to be filed online:https://eco.copyright.gov/eService_enu/start.swe?SWECmd=Start&SWEHo=eco.copyright.gov

Two easy-to-follow circulars (handouts), Circular 02 and Circular 41, show you how:

“To file a claim to copyright in an architectural work, you must submit the following to the Copyright Office:

(1) a completed application form; (2) a nonrefundable filing fee; and (3) the required “deposit copies” of your work.

You must submit your application through the electronic registration system, and you must use the Office’s Standard Application.”

Description of Services/ Scope of Work

PROFESSIONAL PRACTICE ACTDescription of Services: Define It!AIA Form B101-2017 ARTICLE 1: Initial Information§ 1.1 through § 1.1.12: Scope of Architect’s work

§ Sit down with Owner or Project Manager and ask questions!

n Suggested Additional Clause (see B101, sec. 13.1):This Agreement represents the entire and integrated agreement between the Owner and the Architect and supersedes all prior negotiations, representations or agreements, either written or oral. This Agreement may be amended only by written instrument signed by both Owner and Architect. This Agreement shall be not be construed or interpreted as having been drafted by either Party.

PROFESSIONAL PRACTICE ACT

Description of Services:§ Consulting Services

§ Peer Review§ Land Use, Feasibility§ Entitlements§ Zoning§ LEED Certification

§ Litigation Consulting§ Certificate of Meritorious Cause

§ Requirement for Plaintiff’s counsel to consult with professional in same discipline before lawsuit. (CCP 411.35)

§ Expert Witness on Standard of Professional Care§ Protected by Privilege (Civil Code section 47)

§ Consulting During Construction of Repairs

Customizing Your Contract

PROFESSIONAL PRACTICE ACTCompensation and Payment

n Compensation for Basic Services under Article 3: AIA B101, Article 11n Additional Services:

n Services not set forth in this Article 3 are Supplemental or Additional Services. (AIA B101, Sec. 3.1)

n Specially prepared clauses:n Making revisions to Construction Documents when such revisions are:

n Inconsistent with approvals or instructions previously given by Client, including revisions made necessary by adjustments in Client's program or Project budget;

n Required by the enactment, revised interpretation, jurisdictional differences in interpretation, or revision of codes, zoning or building ordinances, laws or regulations subsequent to the performance of services which are impacted by such, or additional costs caused by delays resulting from such;

n Due to changes required as a result of Client's failure to render decisions in a timely manner;

n Discretionary decisions of building officials or inspectors inconsistent with prior approvals;

n Additional submittals, revisions and corrections required by Client or the public entity or governing body with jurisdiction over the Project if construction of the Project occurs in more than one building phase; and/or

n Repackaging and processing of Documents if permits are required for additional units.

PROFESSIONAL PRACTICE ACT

Compensation and PaymentMore Additional Services

§ Providing services required because of changes in the Project including, but not limited to, size, quality, complexity, plan options, Client's schedule, or the method of bidding or negotiating and contracting for construction.

§ Preparing drawings, details and other documentation, analysis and supporting data, evaluating contractor's proposals, and providing other services in connection with change orders, directives and addenda.

§ Providing services in connection with evaluating substitutions proposed by the contractor or requested by Client and making subsequent revisions to drawings, details and other resulting documentation

§ Providing services in connection with replacement of work damaged by fire, exposed to the elements or other causes and furnishing services required in connection with the replacement of such work.

§ Providing services made necessary by the default or termination of the contractor, by defects or deficiencies in the work of the contractor, or by failure of performance of either Client, contractor or others performing services or providing work on the Project.

§ Providing services in connection with the preparation for, or attendance at, public hearings, homeowner's associations or other meetings, or legal proceedings, except where Architect is a party thereto.

PROFESSIONAL PRACTICE ACT

Compensation and PaymentMore Additional Services

n Preparation of designs and construction documents for buildings or features not specifically contained in the Scope of Basic Services including, but not limited to, recreation buildings, sales offices, cabanas, laundry facilities, carports or remote garages, trash enclosures if not required by local ordinance, patio trellises, fencing, walls, entry gates, detached mailboxes, paving graphics, signage or any other ancillary structure or feature.

n Providing financial feasibility, marketing, site analysis, comparative studies or other such special studies or providing analyses of Client's project requirements in the preparation of a program for Client.

n Providing interior design and other services required for, or in connection with, the selection, procurement, purchasing, receipt, moving or installation of furniture, appliances, plumbing fixtures, flooring, casing, molding, fireplaces, stair rails, door hardware, colors, countertops & backsplashes, cabinetry, tub & shower enclosures, lighting, graphics, signage, accessories, and the like, if not specifically provided for under Scope of Basic Services.

n Providing colored renderings, models or similar presentation drawings if requested by Client.

n Preparation or compilation of as-built or record drawings based on input provided by Client or others.

PROFESSIONAL PRACTICE ACT

Sample Exclusionsn Architect will have no involvement in, or responsibility for, any services not set

forth in Section II, or expressly requested by Client and accepted by Architect pursuant to Section IV. and in particular and without limitation, Architect:

n Will not provide structural engineering, civil engineering, soils engineering, geotechnical services, landscape architectural or irrigation design services, interior design and decorating, Title 24 energy calculations, any hazardous waste or toxic substances engineering, mechanical, electrical, and plumbing engineering drawings for permits and bidding, which will not be included in Architect's work, and will be designed by a consultant, or consultants, retained by Client.

n Client will advise the Architect of its consultants prior to retaining them, however, it is understood and agreed that Architect undertakes, and shall have, no responsibility or legal liability with respect to the services provided by Client's consultants, or for Client's decision to retain or not to retain the services of certain consultants. Architect will coordinate its efforts with Client's consultants as Client retains them for such services, as appropriate. Client is solely responsible for filing documents required for the approval of governmental and quasi-governmental authorities having jurisdiction over the Project.

PROFESSIONAL PRACTICE ACTMore Sample Exclusions

§ Will have no responsibility for any consultant services not provided pursuant to this Agreement, and will coordinate its services with Client's other consultants only for the limited purpose of minimizing conflicts.

§ Will not serve as, supervise, or have any responsibility for any contractor, and in particular will not have control, or charge of and will not be responsible for construction means, methods, techniques, sequences or procedures, including, without limitation, excavation and erection procedures; safety precautions and programs in connection with the project; and/or the timeliness or quality of contract performance or for the acts or omissions of any contractors or any other person performing any of the work of the Project or the failure of any of them to perform work in accordance with the Construction Documents.

§ Will not conduct inspections, or have any responsibility, for the determination of the date of Substantial Completion or the date of Final Completion, nor have any responsibility for the issuance of any certificates thereof.

§ Will not be responsible for the accuracy or completeness of data and/or design work provided to Architect by Client, other design professionals, or other reasonably reliable sources.

§ Will not guarantee construction costs or other estimates.

PROFESSIONAL PRACTICE ACT

Course of Construction Services

n Construction Contract Administration (AIA B201)n Contract administration services are rendered at the owner’s

discretion and are outlined in the owner-architect construction agreement.

n Different owner-architect-contractor agreements require different levels of services on the architect’s part.

n The architect’s core responsibility during this phase is to help the Owner receive the project as specified in the approved construction documents.

n Services include: Pre-construction meetings, Visits to the site at intervals appropriate to the stage of construction to observe construction, Submittals. RFI’s, Change orders, Payment applications.

PROFESSIONAL PRACTICE ACT

Course of Construction Services

n Construction Management Services (AIA B132-2009)§ The construction manager is responsible for coordinating

the work of multiple prime construction contracts and for overseeing quality control.

§ Services include:§ Coordinate bidding and preparation of construction

contracts§ Supervise construction work§ Preparation of time schedules.§ Preparation of budgets and cost estimates.§ Daily on-site representation by the architect.§ Advice to Owner on the time and cost consequences

of construction decisions.§ Overseeing project closeout.

PROFESSIONAL PRACTICE ACTCourse of Construction Services

n Construction Administration and Project Management Forms:

n AIA “G” series of documents

n The Project Manager oversees a specific construction project for the client from the planning stages though completion.

n The Project Manager typically becomes contractually bound to provide labor and materials for the project and to complete construction

n The Project Manager typically assumes control over the construction work through direct contracts with the subcontractors.

PROFESSIONAL PRACTICE ACTTermination: B101, § 9.1

§ If the Owner fails to make payments to the Architect in accordance with this Agreement, such failure shall be considered substantial nonperformance and cause for termination or, at the Architect’s option, cause for suspension of performance of services under this Agreement. If the Architect elects to suspend services, the Architect shall give seven days’ written notice to the Owner before suspending services. In the event of a suspension of services, the Architect shall have no liability to the Owner for delay or damage caused the Owner because of such suspension of services. Before resuming services, the Architect shall be paid all sums due prior to suspension and any expenses incurred in the interruption and resumption of the Architect’s services. The Architect’s fees for the remaining services and the time schedules shall be equitably adjusted.

Additional Clause:

§ The equitable adjustment to the Architect's compensation as required by this Agreement shall include all reasonable costs incurred by the Architect on account of termination or suspension of the Project, for preparation of documents for storage, maintaining space and equipment pending resumption, orderly demobilization of staff, maintaining employees on a less-than-full-time basis, terminating employment of personnel because of termination or suspension, rehiring former employees or new employees because of resumption, reacquainting employees with the Project upon resumption and making revisions to comply with Project requirements at the time of resumption.

Form of Business

FORM OF BUSINESSProfessional Negligence:

“A duty to exercise the degree of learning and skill ordinarily possessed by a reputable design professional practicing in the same or similar locality and under similar circumstances.”

Failure to meet this standard is professional negligence.Professional Corporation

Architectural firms in California, as professional corporations, have no shield against liability except as to trade creditors (office supplies, rent, etc.). However, contract provisions restricting the Owner’s recovery can and should be used whenever possible.

Sample clause to limit exposure to individuals:It is intended by the parties to this Agreement that the Architect’s services in connection

with the Project shall not subject the Architect’s individual employees, officers, or directors to any personal legal exposure for the risks associated with this project. Therefore, in consideration of the fee charged, and notwithstanding anything to the contrary contained herein, the Owner agrees that as the Owner’s sole and exclusive remedy, any claim, demand or suit shall be directed and/or asserted only against Watergate Associates, Inc., a California corporation, and not against Richard M. Nixon or any Architect’s employees, officers, directors, or principals.

Statutes of Limitations for Architects

STATUTES OF LIMITATION§ Purpose

§ Legislative determination to cut off stale claims.

§ Ten Years after Completion: Construction Latent Defects.§ Does not apply to Bodily Injury resulting from latent defects.

§ Four Years after Completion: Construction Patent Defects.

§ Four Years after Breach: Breach of Written Contract.

§ Three Years after discovery: Property Damage.

§ Two Years after injury: Bodily Injury.

§ Brisbane case: Parties agreement (under prior AIA form) reduced the statute of limitations.

LIMITATIONS OF LIABILITY

LIMITATIONS OF LIABILITYPurpose:

The goal is to reduce your overall exposure, no matter how great the court judgment or loss. If you have liability limitation clauses in your contract, your lawyer can enforce them before you go to trial to limit your exposure.

They come in two varieties:n Limiting the overall exposure to the amount of proceeds of insurance policies, or:n Limiting to a definite dollar amount (say, amount of your overall fee or a fixed figure of

$100,000.00, whichever is greater) Enforceable in California under Markborough.

§ Mutual waiver of Consequential Damages.§ § 8.1.3 The Architect and Owner waive consequential damages for claims,

disputes or other matters in question arising out of or relating to this Agreement. This mutual waiver is applicable, without limitation, to all consequential damages due to either party’s termination of this Agreement, except as specifically provided in Section 9.7.

§ Limit of Recovery to Available Insurance.§ § 8.1.2 To the extent damages are covered by property insurance, the Owner

and Architect waive all rights against each other and against the contractors, consultants, agents and employees of the other for damages, except such rights as they may have to the proceeds of such insurance as set forth in AIA Document A201–2017, General Conditions of the Contract for Construction.

INSURANCE BASICS FOR ARCHITECTS

INSURANCE FOR ARCHITECTS§ Benefits of Insurance

§ Business Decision: E & O coverage is the primary shield against professional liability claims.

§ Insurance may be required by Project documents.§ Professional Liability Insurance (E&O)

§ Provides Defense (Attorney fees) and Indemnity (funds settlement or judgment) for professional liability claims

§ Claims made, Limits diminish by claims expenses.

§ Comprehensive General Liability Insurance (CGL)§ Provides defense and indemnity for property damage, bodily injury

claims not arising out of your professional services§ Triggered by Occurrence, Limits usually not diminished.

§ Employment Practices Insurance (EPL)§ Provides defense and indemnity for employees’ claims related to some

aspects of employment (i.e. hostile workplace, wrongful termination).§ Limits commonly diminished by claims expenses.

§ Workers’ Compensation Insurance (WC)§ Program for employees injured on the job.

INSURANCE FOR ARCHITECTS

§ Additional Insured Endorsements: Many Different Forms§ Provides Insurance Coverage as if You owned the Policy.§ A.I. Endorsements be required by Contract Documents.

§ Certificate of Insurance with A.I. recital is not sufficient –separate Endorsement issued by Insurer is required.§ May be satisfied by AI requirement clause in contract under a

“Blanket” contractual Endorsement to policy.

§ A.I. Endorsement may be limited to Ongoing Operations (i.e. injuries and damages during construction).

§ A.I .Endorsement may include Completed Operations but limited to injuries or damages arising from work of Named Insured.

§ Adding Owner of Architect’s E&O policy is prohibited.

Owner Prepared Contracts

Owner Prepared ContractsFeatures of Contracts with Tech Companies:

Ownership of Project Documents:n All Work Product, including Instruments of Service, become the Owner’s

PropertyIndemnification/ Defense Costs for Third Party Claims

n Consultant’s share of Owner’s defense costs allocated at end of case based upon percentage of fault, if any.

Attorney’s Fees and Costs in Direct Disputen Each side to bear own attorney’s fees and costs.

Confidentiality and Protection of Trade Secretsn Detailed, but not overly burdensome.

Dispute Resolutionn Meeting of Executives, assisted by Mediator is requested by either party.n No mandatory arbitration of class action waiver provisions.

Insurancen Common requirements:

n E&O: $5 m coverage; 5 year post-completion.n Owner named as A.I. on CGL policy. n Endorsement re Consultant’s CGL Policy primary to Owner’s Insurance, which is

considered excess and non-contributing.n ASK YOUR INSURANCE BROKER TO CONFIRM COVERAGE TYPES AND

AMOUNTS

Contact Information

Paul J. Weinberg, Esq.Law Offices of Paul Joseph Weinberg5 Park PlazaSuite 1500Irvine, CA 92614t. 949-553-0500e. office@pjwmediation.com

Mark K. Worthge, Esq.Litchfield Cavo, LLP251 South Lake Ave.Suite 750Pasadena, CA 91101t. 626-683-1100e. worthge@litchfieldcavo.com