As a matter of both legal responsibility and client management, the design professional’s responsibilities on a project will largely be defined by the contract for services. While a design professional may have duties to other parties which arise outside of the contractual relationship (see the Claims in Tort section of “Traps for the Unwary” for more information), the law will begin its analysis of the design professional’s liability by looking at the services the design professional agreed to provide. Moreover, frustrated clients will often turn to the contract as the first step in analyzing who they can hold responsible for a particular issue. Therefore, the terms of the contractual relationship may be the single most important step in the dispute avoidance and resolution process. Yet many design professionals use little more than a fee schedule and a scope of work, or begin work with nothing more than a letter vaguely describing the services to be provided.
Crafting a successful form contract is a process that can take a great deal of time, and even a form contract will likely need to be modified to some extent for each project undertaken. The contracting process is, by its very nature, a negotiation, and it is unlikely that an owner will agree to every term in a form contract proposed by the design professional. It is therefore impossible to give a complete analysis of all the possible issues that may arise during the contracting process. The points discussed below are simply general areas of concern that tend to become important when a dispute over services arises. Please consult your legal counsel for the likely effect of including or removing particular terms in a contract, and for a more comprehensive discussion of the needs of your particular situation.
Scope of Work
One of the most important provisions in the design professional’s written agreement is the scope of work. As noted above, client expectations will often be based on the scope of work, and a vague description can lead to a dispute over the services to be provided. Moreover, in the event of a dispute, having a clearly defined scope of services can help delineate what areas are, and are not, the responsibility of the design professional. Having a clear scope of work in a contract is, of course, only half the battle – providing services outside the scope of work can undo the good work done in the contract drafting and negotiation process (see Traps for the Unwary for more information).
Standard of Care
Occasionally an owner will provide a contract which seeks to modify the standard of care to be provided (e.g., “best practices” or “to the highest standard.”) These should be red flags for the design professional, as a heightened standard of care can make it difficult or impossible to defend a claim. Who’s to say what constitutes a “best practice?” There is no such thing as perfect work, and the design professional should not be asked to provide, or ensure, perfect work. Rather, the services to be provided are those of a reasonably competent architect in a similar position. Contact your counsel for further information on strategies for negotiating these provisions in a way that will allow you to promise quality work without increasing your liability. Note also that agreeing to a higher standard of care in your contract may void your insurance coverage. Again, contact your counsel for more information on this issue.
Indemnity
Simply put, indemnity provisions seek to assign liability to one party for the errors of another. Owners often require design professionals to indemnify them for any claims made against the owner, but arising from the negligence of the design professional. Moreover, design professionals may want to provide for indemnity provisions in their contracts with subcontractors or consultants. Caselaw in North Carolina provides for very specific rules on when indemnity provisions are and are not valid, and an improperly drafted provision may not be effective, leaving you on the hook for the acts of your consultant. Moreover, a design professional must be careful that the contract with the owner does not contain language providing for indemnification without being compensated for this language in negotiating fees. Contact your counsel for more information regarding the extent of indemnification provisions under North Carolina law and for specific language for your contracts. See also the Disputed Work section of this website for more information on the law of indemnification.
Dispute Resolution
Over the past 15 years, more and more contracts have required alternative forms of dispute resolution in the event of litigation, to avoid the expense and delay of the court system. For example, many standard contracts provide that in the event of a dispute, the claim must be submitted to mediation and/or arbitration for resolution. Caselaw provides that arbitration provisions in a written agreement are, in most cases, enforceable, and will routinely dismiss cases brought in court on the basis that the parties agreed to arbitrate their dispute.
Resolving a claim through arbitration vs. a trial by jury is a serious decision. There are significant pros and cons of either approach, and the design professional should carefully consider what means of dispute resolution would be most effective in each contract. For example, arbitrators do not have the powers of a court to grant preliminary relief or to seize assets, or to compel discovery. When contracting with an owner, a design professional is most likely to sue only for unpaid fees, a claim which might better be brought in a court of law rather than in front of an arbitration panel. Yet when contracting with a consultant, the design professional may determine that arbitration provides a better vehicle for resolution of a claim. Your counsel should be able to provide you more information about the differences between arbitration and litigation, and which forum would better serve your interests in a particular case.
Ownership of Documents/Information
Recently, we have observed that many design professionals are being asked to provide CAD files in addition to paper drawings. From an owner’s perspective, this can be a cost-saving measure as the owner can take the CAD files to contractors and other consultants who can then make modifications directly to the file without having to go through the process of submitting revisions to be made to a master set. However, this also means that it can be come much more difficult to determine who made a particular change on a set of plans, as well as creating problems in control over designs. The owner may take your work from one project and sell it on to another party, or use it in another project, without further compensation to the design professional. Licensing issues, trademark and control over data have become new areas of concern that should be addressed at the outset in the contractual negotiation and drafting phase. Your counsel can provide you information on strategies for dealing with this issue. See also the Emerging Trends section of this website for more information on this topic.
Crafting a successful form contract is a process that can take a great deal of time, and even a form contract will likely need to be modified to some extent for each project undertaken. The contracting process is, by its very nature, a negotiation, and it is unlikely that an owner will agree to every term in a form contract proposed by the design professional. It is therefore impossible to give a complete analysis of all the possible issues that may arise during the contracting process. The points discussed below are simply general areas of concern that tend to become important when a dispute over services arises. Please consult your legal counsel for the likely effect of including or removing particular terms in a contract, and for a more comprehensive discussion of the needs of your particular situation.
Scope of Work
One of the most important provisions in the design professional’s written agreement is the scope of work. As noted above, client expectations will often be based on the scope of work, and a vague description can lead to a dispute over the services to be provided. Moreover, in the event of a dispute, having a clearly defined scope of services can help delineate what areas are, and are not, the responsibility of the design professional. Having a clear scope of work in a contract is, of course, only half the battle – providing services outside the scope of work can undo the good work done in the contract drafting and negotiation process (see Traps for the Unwary for more information).
Standard of Care
Occasionally an owner will provide a contract which seeks to modify the standard of care to be provided (e.g., “best practices” or “to the highest standard.”) These should be red flags for the design professional, as a heightened standard of care can make it difficult or impossible to defend a claim. Who’s to say what constitutes a “best practice?” There is no such thing as perfect work, and the design professional should not be asked to provide, or ensure, perfect work. Rather, the services to be provided are those of a reasonably competent architect in a similar position. Contact your counsel for further information on strategies for negotiating these provisions in a way that will allow you to promise quality work without increasing your liability. Note also that agreeing to a higher standard of care in your contract may void your insurance coverage. Again, contact your counsel for more information on this issue.
Indemnity
Simply put, indemnity provisions seek to assign liability to one party for the errors of another. Owners often require design professionals to indemnify them for any claims made against the owner, but arising from the negligence of the design professional. Moreover, design professionals may want to provide for indemnity provisions in their contracts with subcontractors or consultants. Caselaw in North Carolina provides for very specific rules on when indemnity provisions are and are not valid, and an improperly drafted provision may not be effective, leaving you on the hook for the acts of your consultant. Moreover, a design professional must be careful that the contract with the owner does not contain language providing for indemnification without being compensated for this language in negotiating fees. Contact your counsel for more information regarding the extent of indemnification provisions under North Carolina law and for specific language for your contracts. See also the Disputed Work section of this website for more information on the law of indemnification.
Dispute Resolution
Over the past 15 years, more and more contracts have required alternative forms of dispute resolution in the event of litigation, to avoid the expense and delay of the court system. For example, many standard contracts provide that in the event of a dispute, the claim must be submitted to mediation and/or arbitration for resolution. Caselaw provides that arbitration provisions in a written agreement are, in most cases, enforceable, and will routinely dismiss cases brought in court on the basis that the parties agreed to arbitrate their dispute.
Resolving a claim through arbitration vs. a trial by jury is a serious decision. There are significant pros and cons of either approach, and the design professional should carefully consider what means of dispute resolution would be most effective in each contract. For example, arbitrators do not have the powers of a court to grant preliminary relief or to seize assets, or to compel discovery. When contracting with an owner, a design professional is most likely to sue only for unpaid fees, a claim which might better be brought in a court of law rather than in front of an arbitration panel. Yet when contracting with a consultant, the design professional may determine that arbitration provides a better vehicle for resolution of a claim. Your counsel should be able to provide you more information about the differences between arbitration and litigation, and which forum would better serve your interests in a particular case.
Ownership of Documents/Information
Recently, we have observed that many design professionals are being asked to provide CAD files in addition to paper drawings. From an owner’s perspective, this can be a cost-saving measure as the owner can take the CAD files to contractors and other consultants who can then make modifications directly to the file without having to go through the process of submitting revisions to be made to a master set. However, this also means that it can be come much more difficult to determine who made a particular change on a set of plans, as well as creating problems in control over designs. The owner may take your work from one project and sell it on to another party, or use it in another project, without further compensation to the design professional. Licensing issues, trademark and control over data have become new areas of concern that should be addressed at the outset in the contractual negotiation and drafting phase. Your counsel can provide you information on strategies for dealing with this issue. See also the Emerging Trends section of this website for more information on this topic.
