Law and Practice for Architects

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Law and Practice forArchitects

Bob Greenstreet

Karen Greenstreet

Brian Schermer

AMSTERDAM • BOSTON • HEIDELBERG • LONDON • NEW YORK • OXFORD

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Architectural Press is an imprint of Elsevier

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Architectural PressAn imprint of ElsevierLinacre House, Jordan Hill, Oxford OX2 8DP30 Corporate Drive, Burlington MA 01803

First published 2005

Copyright © 2005, Robert Greenstreet, Karen Greenstreet and Brian Schermer.All rights reserved

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Contents

List of AIA documents viiPreface ix

Chapter 1 The architect and the law 1Chapter 2 The building industry 15Chapter 3 The architect in practice 29Chapter 4 Law and the design phase 47Chapter 5 Contract formation 61Chapter 6 The construction phase 83Chapter 7 Completion 101Chapter 8 Dispute resolution 113

Glossary of common legal terms 127Index 129

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List of AIA documents

B141-1997: Standard Form of Agreement between Owner and Architect 35A310 Bid Bond 72G715 Supplemental Attachment 73A312 Performance Bond and Payment Bond 75G711 Architect’s Field Report 90G710 Architect’s Supplemental Instructions 91G701-2001 Change Order 95G702 Application and Certificate for Payment 96G706 Contractor’s Affidavit of Payment of Debts and Claims 105G706A Contractor’s Affidavit of Release of Liens 106G707 Consent of Surety to Final Payment 107G704-2000 Certificate of Substantial Completion 108

All forms reproduced by kind permission of The American Institute of Architects, www.aia.org.

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Preface

Many architects cringe when discussing issues related to the law and practice procedures because theyassociate these with an almost Pavlovian response to disputes, wrangling with lawyers, and threats totheir livelihood. The authors of this book, however, feel that such a reaction is largely unwarranted. Farfrom being a source of threat and fear, knowledge of law and practice provides a welcome measure ofsecurity and certainty.

In everyday practice, the architect spends considerable time carrying out various administrative tasksand dealing with problems and situations arising from the design and construction of each new buildingproject. In order to do this effectively, a basic knowledge of all the relevant procedures involved is neces-sary, coupled with an understanding of the broader legal and professional issues at stake.

Law and Practice for Architects provides a comprehensive, concise, and simplified source of practicalinformation, giving the reader a basic legal overview of the wider principles affecting the profession, andconcentrating on the more specific procedural aspects of the architect’s duties. In addition, it contains aseries of checklists, diagrams, and standard forms which provide a quick and easy reference source.

Each section of the book culminates with a short commentary on the architect’s responsibilities enti-tled ‘Practice Overview,’ based on a series of articles published in the architectural journal ProgressiveArchitecture by Bob Greenstreet. Each is followed by a Question and Answer page, addressing commonproblems or issues likely to be encountered at each stage of the design and construction process. Neitherthe Practice Overview nor the Q & A sections are intended to provide a specific answer to a problem, aseach practice situation would, in reality, merit its own unique handling. Rather, they are meant to con-vey an attitude appropriate to successful practice management.

The most recent AIA standard forms for design, construction and construction management havebeen referred to extensively throughout the text. Many of the forms reproduced in the book are pub-lished by the American Institute of Architects. While their use is by no means mandatory, they are use-ful in providing a consistency of understanding on each project between the various parties, and aretherefore recommended where appropriate.

Law and Practice for Architects offers only an introductory framework of information, as a detailedanalysis of all relevant aspects of the subject could not possibly be crammed into so few pages. Many ele-ments of law vary from state to state and, in some cases, from city to city, so it is important that readersuse the text as a basic overview of the subject, checking for more detailed information where appropri-ate. For example, for out-of-state practice it may be prudent to investigate such information as licensing,codes, lien law, partnership laws, etc., before providing professional services. Similarly, it is not the inten-tion of the authors to provide a legal service in the publication of this book, but to offer an introduction tolegal and practical matters concerning architecture. Legal assistance is strongly advised where appropriate.

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1The architect and the law

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3THE LAW

Sources of Law

The United States’ judicial system developedoriginally from English common law, and isaimed at preserving the fabric of society. It isembodied in:

● Federal and state constitutions● Statutes● Common law● Regulations of administrative agencies

In addition, equitable doctrines, which allowfor flexibility in decision making, are sometimesinvoked.

Federal and State Constitutions

The US Constitution represents the supreme lawof the nation, laying down rules which bind allaspects of government. Much of its content,notably the Bill of Rights, derives from conceptswhich emerged through the common law.

The Constitution is the highest source of US lawand neither judge nor legislature may ignore orcontravene its principles. Within the Constitution,however, the states have authority delegated tothem to regulate public health, safety, and welfarein the form of building codes and regulations.

In addition, individual states have their ownconstitutions which are largely based upon thenational model.

Statutes

Statutes are written laws officially passed by fed-eral and state legislatures. Federal laws applynationally, whereas state laws are only relevant tothe state in which they are passed, and can varythroughout the country on the same subject (forexample, professional licensure).

Common Law

The basic “rules” of society have emerged throughthe common law which demands that judgesdecide each new case on the basis of past decisionsof the superior court. The principle of stare decisis(to stand by past decisions) is not a completelyrigid concept: a judge may distinguish a new casefrom its predecessors in certain circumstances,thereby creating a new precedent. This enablesthe common law to grow and adapt according tothe changing values and needs of society.

Where a conflict arises between a common lawdecision and a statute, the latter always prevails.Often an undesirable common law rule is disposedof by the passing of a statute.

Regulations of Administrative Agencies

Administrative agencies are often empowered tomake and enforce regulations which have theforce of law.

Equity

The concept of equity allows for additional pro-cedures and remedies to be granted in court pro-ceedings. It provides a measure of fairness notalways available under rigid statute or commonlaw. For example, if an owner avoids payment onthe basis of a legitimate contractual technicality,the architect might claim based on the principleof unjust enrichment.

Classification of Law

Law pertaining to the practice of architecture canbe classified into four basic categories:

1. Criminal law2. Civil law3. Civil rights law4. Administrative law

Criminal Law

Acts committed against society or the public goodby individuals which are proscribed by federal orstate laws are generally classified as crimes (e.g.,murder, theft, etc.). Lesser crimes are called mis-demeanors, whereas more serious offenses areknown as felonies. Some states prohibit profes-sional licensing for individuals with a criminalrecord.

Society

Person Person

Figure 1.1

Civil Law

Civil law is private law dealing with the rights andobligations of individuals and corporations intheir dealings with each other. Areas coveredunder this category include:

● Succession● Family Law● Contract● Property● Tort

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For the professional design practitioner, themost relevant branches of civil law are:

a. Contract lawb. Tort

Contract Law This concerns the legally bindingrights and obligations of parties who have madean agreement for a specific purpose (see page 63).

Tort A tort is literally a “wrong” done by oneindividual (or corporation) to another for which aremedy (e.g., compensation, injunction, etc.) maybe sought in the courts. Examples of specifictorts are:

● Negligence (see page 6)● Trespass (see page 50)● Nuisance (see page 50)● Defamation (see page 28)

It is possible for a case to fall under both con-tract and tort simultaneously (for example, wherea negligent act results in a breach of contract). Inthese circumstances, it is often easier to sue on thecontract rather than attempt to prove the tort.

Civil Rights Law

Civil rights legislation, such as the Americanswith Disabilities Act, protects individuals againstdiscrimination based on physical disability.Specific design guidelines and regulations ensureaccess to public accommodation. Federal fairhousing statutes and some state legislation ensurethe accessibility to, and adaptability of, certaintypes of housing.

Administrative Law

Legislation at the federal, state and local levelsestablishes and enhances building codes and

regulations. These are designed to protect thehealth, safety, and welfare of the public. Architectsmay be held liable for their violation, which maypossibly affect their licenses.

THE COURTS

The United States has two hierarchies of courts:

1. Federal2. State

At the head of both hierarchies is the USSupreme Court.

Federal Courts

Cases are heard in federal courts when a federalquestion is involved or when a dispute arisesbetween parties from different states. In manycases federal jurisdiction is concurrent with statejurisdiction, but in certain matters the federalcourts have exclusive authority. Examples include:

● Patent and copyright● Actions in which the US Government is a party● Cases involving federal criminal statutes

Federal trial courts are located throughout theUnited States. Each case begins at the districtlevel, with the possibility of appeal to the relevantCourt of Appeals and finally to the US SupremeCourt. Criminal and civil matters are heard in allfederal courts, although certain specialized courtsexist for specific issues (examples include the Courtof Claims, Court of Customs and Patent Appeals).

State Courts

State courts are limited in jurisdiction accordingto their location and the type of case involved.Generally, each state has at least two levels of trialcourts. Criminal matters are heard at all levels,but frequently the lowest state courts are onlyauthorized to deal with misdemeanors.

Similarly, civil cases are heard throughout thesystem, but the lower courts are restricted in theirjurisdiction, often on the basis of the financialamount claimed.4

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Employment

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US Supreme Court

US Court of Appeals

US District Courts

Figure 1.3

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limit for small claims varies from state to state(but $5,000 is a common figure). In some states,professional representation is prohibited in thesecourts.

The United States Supreme Court

The US Supreme Court has original jurisdictionin cases involving disputes between states. Inaddition, it is the final court of appeal, but it willonly hear cases it considers to be significant andwhich have originated in the state or federal courts.

Out-of-State Claims

Owing to federal due process requirements, somematters may be complicated if the parties are resi-dent in different states. Many states have enactedlong-arm statutes to enable suits to be broughtagainst defendants resident in other states.

Standard of Proof

When a matter is decided in the courts, allega-tions must be proved. The standard of proof incriminal proceedings is very high: the prosecutionmust prove its case against the accused “beyond areasonable doubt.” In civil matters, parties needonly prove their allegations to the degree thatthe court will accept them on a “balance ofprobabilities.”

Other methods are available for the resolutionof disputes outside the courts:

● Arbitration (see page 116)● Mediation (see page 122)● Administrative boards, agencies, and commis-

sions (quasi-judicial forums which tend to beless formal than the regular courts and special-ized in nature).

In most legal matters affecting design practice,it is advisable to obtain professional legal advice.Selection of an attorney may be facilitated by con-tacting a local or state bar association which, inmany areas, operate convenient lawyer referralservices free of charge.

THE ARCHITECT’S LIABILITY

The architect’s legal obligations and responsibil-ities are owed to a variety of parties, and are gov-erned by statutes, administrative regulations, andcommon law.

However, the majority of suits against archi-tects are concerned with:

1. Breach of contract2. Negligence

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5US Supreme Court

State Supreme Court

State Court of Appeals

District Court(County, Circuit,Superior, etc.)

Lower Courts(City, Municipal,

Small Claims, etc.)

Figure 1.4

Go to SmallClaims Court

The hearing

The award

Pay fee

Court gives trialdate and serves

summons

If yes, fill outcomplaint form

Is amount belowlimit?

Figure 1.5

State court systems generally have two levels ofappeals courts: intermediate courts of appeals andthe State Supreme Courts. The final court ofappeal is the US Supreme Court.

Small Claims Court

In many states, simple procedures have beendeveloped for individuals wishing to sue for smallamounts which would not be financially practi-cable in the regular courts system. The financial

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Breach of Contract

The architect enters into a contractual relationshipwith the owner to perform specific services (seepage 36). An implied agreement is made by thearchitect to carry out the required work to the stan-dards expected of the profession. Failure to meetthese standards, which cause extra expense ordelays for the owner, may result in a claim fordamages against the architect on the grounds ofbreach of contract.

Negligence

Separate from any contractual obligations whichmay have been agreed upon, a duty or standard ofcare under the law of tort may exist (see page 4).If a person fails in this duty, a negligence suitcould succeed. So the architect could be liable forthe consequences arising from negligent behavioreven in the absence of a contractual relationship.

The extent to which any party may be heldliable to others in tort depends upon their specificduty or standard of care. In contractual situations,the obligations of both parties are usually clearlydefined, but in tort it is often difficult to deter-mine the extent or even the existence of a duty ofcare. However, some duties of care have beendefined by case law and/or statute. Two of particu-lar concern to the architect are:

● Strict liability● Vicarious liability

Strict Liability

In certain cases, liability may exist independentlyof wrongful intent or negligence. This concept is

best illustrated by the English case of Rylands v.Fletcher (1868), in which water from a reservoirflooded a mineshaft on neighboring land and ledto a successful claim for damages, although nonegligence on the part of the reservoir owner wasproved. The decision against the owner was madeon the basis that he had kept on his land “some-thing likely to do mischief” and that it had subse-quently “escaped.” This made him automatically,or strictly, liable for the consequences.

The concept of strict liability has relevance topractice, for example, in the specification of ma-terials, where the architect may be held liable forrequiring new products that subsequently fail (seepage 60).

Vicarious Liability

In some circumstances, one party is responsiblefor the negligent acts of another without necessarilycontributing to the negligence. This is referred toas “vicarious liability” and a common example isthe employer’s responsibility for the acts ofemployees in the course of their work. A relatedexample is the architect’s liability for the defectivework of consultants (see page 21).

In all cases concerning claims based on negli-gent behavior, certain conditions must be provedby the plaintiff if the claim is to be successful:

a. That a duty of care was owed by the defendantto the plaintiff at the time of the incident com-plained of

b. That there was a breach of contractc. That the plaintiff suffered loss or damage as a

result of the breach

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Owner

Employees

Others(Contractor, etc.)

Architect

State/federalgovernment

The public

StatutoryContractualTortiousProfessional

Figure 1.6

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Standard of Care

In all cases, it is the “reasonable standard of care”established by common law against which adefendant’s performance is matched and judged.In the case of the architect, the standard is consid-ered to be the average standard of skill and care ofthose of ordinary competence in the architecturalprofession.

The Practice Overview on page 10 will give anindication of the extent to which an architect maybe held liable for negligent acts, and also help tohighlight the areas which merit particular care andattention. It should be noted that the architect’s lia-bility in tort is subject to periodic change as a resultof changes in the law and, therefore, it is necessaryto be constantly aware of new developments.

Criminal Liability

In certain limited cases, individual state law mayimpose criminal liability upon the architect (forexample, if death results from the violation of acompulsory building regulation which expresslystates that such a situation gives rise to a charge ofmanslaughter).

SAFEGUARDS AND REMEDIES

The law can be seen as a complex web of rules andprocedures that enable and constrain the actionsof individuals and groups. Breaking the rules,

whether intentionally or not, might lead to theimplementation of prescribed punitive or com-pensatory measures.

In the construction field, a number of precau-tions and remedies are available to prevent orallow for certain contingencies. The most impor-tant of these are shown in Figure 1.7.

Insurance

Contracts of insurance may be entered into by thearchitect, the contractor, the subcontractor, and theowner to protect their respective interests. Underthe AIA Document A201-1997 General Conditions(Article 11), provisions are made for owners andcontractors to provide their respective insurancerequirements with regard to property and safety and,optionally, project management liability.

Bonds

These fulfill a similar function to insurance: theyenable an owner to claim relief from the suretywho underwrites the contractor in the eventof the latter’s noncompliance with the contractrequirements. Types of bond include performancebonds, bid bonds, and payment bonds (seepage 74).

Warranties

These are assurances given by parties in respect oftheir goods and/or services (e.g., roofing) which

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Insurance

Bonds

Warranties

Retention

Indemnity

Disruptive eventWaiver

Liquidated damages

Liens

Normal progress

Figure 1.7

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usually last for a stated period of time and arelegally enforceable.

Retention

Before each progress payment is made during theconstruction phase, an agreed percentage willsometimes be retained by the owner to ensure thecontractor’s continued performance until thecompletion of the work, when the accumulatedsum is released. Though a prudent precaution forowners, retentions are unpopular with contractorsand, in recent years, retained amounts havetended to be increasingly lower.

Variations of the procedure include retaining apercentage for the first 50 percent of the work only,after which the retainage, with the consent ofany surety, may be reduced or discontinued.Alternatively, an agreed percentage may be retainedupon the first 50 percent on each line item of thework, enabling subcontractors to benefit from earlyrelease. Some parties may agree to invest theretainage in order to accrue interest payable to thecontractor upon successful completion of the work.

Indemnity

One party may secure or “indemnify” anotheragainst liability for loss or damage resulting fromcertain circumstances (e.g., AIA A201, Article3.18). Indemnity may be implied by events, but,in the construction industry, it is generally con-sidered good practice to express it in a writtencontract. Legal actions against architects are fre-quently based on differing interpretations ofimplied indemnity.

Waiver

A waiver indicates the giving up by one party ofrights which may prevail over others (for example,in some instances, the acceptance of paymentmay constitute the waiver of certain claimsagainst the payer). Waiver of some rights isrestricted by individual state laws (such as waiverof lien: see below).

Liquidated Damages

These represent a formula specified by the con-tract documents which provides an agreed methodof assessing damages, arising from late completion(e.g., $x per day, to be paid by the contractor tothe owner for every day by which the agreed com-pletion date is exceeded: see page 92).

Liens

In cases where goods and/or services have been pro-vided, the supplier may be able to secure a privatemechanic’s lien or “hold” upon the recipient’s

property to ensure payment of outstanding fees.The applicability of lien laws varies from state tostate, particularly with regard to professional ser-vices. A lien effectively encumbers the title of theproperty and may be released after satisfactorysettlement of the debt.

Some states allow the architect to impose a lienfor design work and administering the contract,whereas other states only allow a lien for workdone by the architect on site. A few states do notpermit the architect any liens at all. In view of theseconsiderable variations, individual state lien lawsshould be carefully noted before attempting tomake use of this remedy.

Claims: Settle or Defend

If a claim is made upon the basis that legal obliga-tions have not been fulfilled, the party so chargedmay admit responsibility and settle the claim byagreed damages or other appropriate means ofcompensation. Alternatively, the claim may bedenied, in which case it is likely that the disputewill be resolved either by litigation (through thecivil court system), arbitration (see page 116) ormediation (see page 122).

Shared Liability

It is possible that more than one party will becited in a tort action on the basis that they shareresponsibility for the act or omission complainedof. In these circumstances, the cited parties maybecome joint tortfeasors.

Time Limits

Lapse of time may affect the validity of a civil courtaction, and individual states have promulgated limi-tation statutes. These vary, not only as to the timelimit for bringing an action, but also as to the com-mencement of the limitation period (see page 109).

INSURANCE

A contract of insurance is created when one partyundertakes to make payments for the benefit ofanother if specified events should occur. The con-ditions upon which such a payment would bemade are usually described in detail in the policy.The consideration (see page 63) necessary to vali-date the insurance contract is called the premium.

Types of Insurance

The most important types of insurance relating tothe construction process are:

1. Professional liability2. Public liability3. Construction contract

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Professional Liability

In the light of current statistics, which indicate asignificant number of negligence suits against thearchitectural profession each year (see page 10),liability insurance is a valuable means of provid-ing financial protection. However, there is nolegal requirement to insure, and some architectsprefer to risk the consequences and save the highcost of premiums. Some clients, however, mayrequire proof of insurance as a prerequisite toemployment.

Professional liability insurance (often referredto as E & O, or errors and omissions) varies fromcompany to company both in coverage and con-ditions, and great care should be taken in policyselection. In particular, the time limitation onclaims under the policy should be checked (to dis-cover whether the policy covers errors made priorto the policy period, which only become apparentduring the policy period). Joint ventures (see page19) are not covered automatically by professionalliability policies, and at the outset of a joint ven-ture agreement the architect should contact theinsurer to request the necessary coverage.

Even the most careful and experienced archi-tect should consider the security afforded by pro-fessional liability insurance, particularly because:

a. even if not negligent, the architect must stillfinance the defense of claims, unless protectedby a suitable policy;

b. the architect is vicariously liable for the errorsand omissions of employees; many professionalliability policies provide coverage against thiscontingency.

Public Liability

Most architects, whether or not insured under aprofessional liability policy, carry a comprehensivegeneral liability policy to protect against claimsinvolving injury to persons or damage to propertyin connection with the architect’s business orpremises. These policies often exclude the risksspecifically covered by professional liability policies.In addition, the architect in practice may require:

Employee-related insurance:● Workers’ compensation● Disability● Medical● Retirement

● Death/dismemberment● Group life

Office-related insurance:● Building● Building contents● Documents● Business interruption● Criminal loss● Motor vehicles

Construction Contract Insurance

In most building contracts (e.g., Article 11 of AIAA201), both parties are required to insure againstcontingencies relating to personal injury andproperty damage resulting from operations on siteand, optionally, project management protectiveliability.

Points to Remember

Advice by the architect to the owner on matters ofinsurance should be avoided and may be specifi-cally prohibited in some professional liabilitypolicies. Similarly, many types of policy becomevoidable if the insured fails to follow instructionsprohibiting admission of liability. Policies should beread carefully to avoid potentially expensive errors.

Contracts of insurance are said to be of “theutmost good faith” (uberrimae fidei). This meansthat all material facts which might affect theinsurer’s willingness to accept the risk must be dis-closed. Failure to disclose may render the contractvoidable (see page 63).

Insurers should be notified immediately of allevents which may affect the policy (e.g., changesin personnel).

Regularly check that the amounts of coverageare adequate, bearing in mind inflation, newacquisitions, etc. Keep all policies in a safe place.Ensure that renewal dates and premium paymentdates are carefully noted so that policies do notlapse through inadvertence. Never take insurancecover for granted. If in doubt as to whether a risk iscovered, check with the insurers promptly and askfor confirmation of specific coverage in writing.

Although personally unconnected with construction-related insurance policies, the archi-tect should ensure that evidence of insurancerequired from the contractor has been approvedby the owner prior to any certifications forpayments.

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LEGAL LIABILITY IN PERSPECTIVE

Legal liability has been a long-standing concern for architects, but just howserious an issue is it for contemporary practice? A brief historical overview mayhelp to bring perspective to both the extent of the problems faced by the pro-fession and the nature of the risks involved.

During the 1970s and 1980s, it was not uncommon to hear that over one-thirdof practicing architects were likely to be sued each year.1 Much of that infor-mation, however, tended to concentrate on why the situation had developedwithout too much attention being paid to what the threat was. In the absenceof any reliable database clarifying and quantifying the nature of legal liability,it remained largely undefined and, as such, was all the more disturbing by itsvagueness.

Today, liability is still prominent as a focus,although much has been achievedto both understand and alleviate the threat.2 During the 1980s, significantstrides were made in dealing with the types and sources of liability claims.

First, it appears that the early estimates of the incidence of legal action wererelatively accurate. The AIA reports that in 1978, thirty-five claims per one hun-dred insured firms were reported by architects and that by 1984, this figure hadrisen to forty-four.3 These figures, of course, do not take into considerationaction taken against uninsured architects or claims that were settled withoutrecourse to insurers. Fortunately, these alarming increases subsided throughoutthe 1990s and are now around twenty claims per hundred. Second, informa-tion concerning the nature of architects’ liability has provided a clearer indi-cation of the characteristics of each lawsuit, and has helped to identify theareas of greatest concern. Perhaps most interesting is the high proportion ofclaims generated by alleged errors in the design phase. Assumptions that themajority of cases arise from construction-related problems are at variance witha number of sources. For example, the AIA has estimated that 78 percent ofproperty damage suits blame errors in the design and/or contract documentsfor building failure. A study undertaken in Colorado also found that the designphase was the major source of litigation:

The projects sampled in this study experienced an overall additive claim rateof 6% (i.e., 6 cents on the dollar) and, furthermore, 72% of these increaseswere due to design error or owner initiated changes. The more volatile issuesso prevalent in the literature (delay, differing site conditions, maladministra-tion, etc.) account for only 28% of the claims.4

The combined findings of these sources tend to suggest that architects seekingguidance on litigation-free practice should pay more attention to aspects ofdesign than may otherwise have been considered necessary.

In addition to this finding, the information highlights the danger areas wherearchitects typically become involved. The cases indicate an expansion in lia-bility over time not simply in the number of cases involving architects eachyear but in both the range of duties expected to be fulfilled and in the height-ened expectation of the architect’s performance. Areas of contention thathave become more prominent include third-party claims, cost estimates,responsibility for shop drawings, and even slander, although perhaps the twoareas that stand out most clearly both in the number of cases involved and intheir serious implications to the profession are the limitation of liability and

PRACTICE OVERVIEW

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11implied warranties. In the first, cases reported throughout the United States5

have involved statutes of limitation and repose, which have been interpretedin some states to render the architect accountable for errors for a virtually lim-itless period of time. Even death appears to be no protection against theseclaims. In one of the more extreme cases, the decision to allow the liabilityperiod to commence when the fault was discovered (and not at an end of theconstruction period, as was generally held in the past) resulted in a claimagainst the estate of a deceased architect, the residue of which was providingsecurity for his widow.6 Fortunately, many states have sought to limit the poten-tial of never-ending liability through the enactment of “long-stop” statutes (alonger period of time during which claims may be brought but starting on aspecified date).

The question of warranties, or the degree to which architects should beexpected to guarantee their work, also raises some concerns. Strict, or auto-matic, liability has yet to be completely successful in arguments against archi-tects in the courts. Nevertheless, decisions in the field of product liability havebeen used to suggest that complete building elements, such as roofs, are infact products, and as such should render their designer strictly liable for theirperformance. These expansions of the architect’s duty, in this case to a pointwhere no fault needs to be proven to attach liability, is reflected in a number ofcases, and suggests that the difference between a warranty and satisfactoryperformance is becoming less apparent. Two cases are illustrative of the highstandards expected of the architect. Both seem ridiculous in their claims, andin fact both were decided in favor of the architects (who, of course, still had topay legal fees and may have lost their deductibles).

The first case, brought against an architectural firm for negligent design of aprison facility, was instigated by the family of a prisoner who had committedsuicide in his cell. The plaintiffs claimed that the architects should havedesigned the cells in such a way as to preclude the likelihood of self-inflicteddamage. In the second case,7 a zoo employee was injured while feeding anelephant, and sued the architect for failure to design the cage properly.

Both cases, although seemingly frivolous, were considered to be sufficientlysubstantial to make an adequate case against the architects’ failure to exer-cise reasonable care in the designs.Although these cases failed, similar ones inthe past, which at the time seemed unlikely to succeed, were successfullybrought against the architects, increasing the standard of care for the profes-sion as a whole. Such cases tend to highlight the boundaries of “safe” practicefor the present, while indicating new areas of concern for the future and bring-ing the concept of implied warranty closer to reality.

Given the high level of legal liability, what has the impact been on the pro-fession in real terms? Apart from general anxiety engendered by involvementin legal action and potential loss of reputation, the most dramatic, quantifiableimpact can be calculated in insurance rates. Although it is a relatively newphenomenon (errors and omissions insurance became available in theUnited States only in 1956, although policies were drafted by Lloyd’s of Londonsoon after World War II), insurance costs have risen to the point where anannual premium has accounted for as much as 4 percent of the gross incomeof a practice, second only to payroll as a practice expense.

It has been suggested that at least part of the increased cost should bepassed on to the client. In a highly competitive and expanding profession,however, firms may not want to risk losing work by increasing their fees. Theresult may lead to lower wages and reduced profit.

Is the current liability situation a serious problem for the practicing architect?There are some signs of encouragement and hope. For example, nationalinsurance figures suggest that more than half of claims are settled without

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wpayment to the plaintiff, and that in two-thirds of the cases, the architects arevictorious in court.

In addition to these figures, the increased understanding of the liability threathas raised the consciousness of the profession as a whole. This has led to theproliferation of guidance and warnings in the form of books, newsletters, arti-cles, and workshop seminars, which are directed towards the self-protection offirms and the individual practitioner through understanding of the dangersand pitfalls involved in practice, and a commensurate lessening of malprac-tice claims.

Perhaps more significantly, liability has become a major issue at the profes-sional level, and initiatives for reform in state legislation regarding liability, frivo-lous claims and tort has made some progress.

In conclusion, legal liability continues to be a sobering reality for the archi-tect, although it is encouraging to see that the threat is now more clearly per-ceived and understood. In addition,action at both the individual practice andinstitutional levels has led to a more stable and secure future for the profession.

References

1. New York Times, 12 February 1978.2. Dickmann, J.E., “Construction Claims—Frequency and Severity,” Journal of

Construction Engineering and Management 111, no. 1, March 1985 (aColorado study), and Greenstreet, R., Legal Impacts upon the Profession ofArchitecture: The Liability of the Architect in Wisconsin,Center for Architecturaland Urban Planning Research,University of Wisconsin-Milwaukee, 1985.

3. AIA Memo Newsletter of the American Institute of Architects, September1985.

4. Dickmann,“Construction Claims.”5. Greenstreet, R., “The Limitation of Liability,” The Wisconsin Architect, May

1985, 5.6. Cecil, R.,“Writing your Will to Defend your Estate from Eternal Liability,” Royal

Institute of British Architects Journal, December 1982.7. LaBombarbe v. Phillips Swager Associates, 474 N.E. 2d 9 42 (Ill.App.1985).

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Liability insurance can be very expensiveand a number of practices I know opt notto carry a policy. Is this a wise idea?

Errors and omissions insurance can be expen-sive and has in the past cost as much as 4 per-cent of gross, an expense second only topayroll. While premiums depend upon the“hardness”of the insurance market, they haverisen in recent years and some smaller prac-tices have elected to “go bare.” This strategy,which is risky, may be accompanied by thebuilding of a “disaster” fund, essentially aninvestment of the premium amount in aninterest-bearing account that may be used inthe event of legal action. The advantagesinclude a healthy saving of the accumulated

premiums (if the practice remains litigation free)and a potentially lowered claims profile—anuninsured architect is probably less of a target,after all. The disadvantages are financialtrauma if legal action occurs before an ade-quate pool can be saved and the likelihood offewer clients, because many will require insur-ance coverage as a prerequisite for employ-ment on anything but the smallest projects.

While insurance is not a universal panaceafor protecting the architect against claims—there is usually a deductible and a limit tocoverage—some of the national carriers pro-vide a useful and often necessary componentof successful practice and may offer extensiveinformation, education, and training that canlimit claims through improved practice.

Question & Answer

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2The building industry

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FORMS OF OWNERSHIP ANDASSOCIATION

Parties operating within the construction industryhave different legal personalities according to theirform of association. There are several methods ofcarrying on a business:

1. Sole practitioner2. Partnership3. Corporation4. Joint venture5. Other

Before setting up any type of business, it is advisableto obtain professional legal and financial advice.

Sole Practitioner

This is the simplest business form, with all liabil-ities and responsibilities vested in a single person.It is considered an appropriate organizational formfor a small business with a predictable small-scaleworkload and a limited number of employees.

In recent years, however, many states havecreated legislation that has allowed architects topractice as limited liability partnerships, where apartner is not necessarily personally liable for lia-bilities, debts, and obligations of the partnershipother than for his or her own negligence, or thatof someone acting under his or her control.

Formation

The partnership relationship can be created by:

● Conduct of the parties● Oral agreement● Written agreement

Most satisfactory is the written agreement, in whichall aspects of the relationship can be expressed,thereby limiting the potential for disagreement ormisunderstanding. In some states, all partners inarchitectural firms are required to be licensedarchitects.

Types of Partner

There are two major categories of partner:

1. The general partner2. The limited partner

The General Partner Unless otherwise arrangedin the partnership agreement, all partners aredeemed to have equal rights and liabilities withinthe firm, and all profits of the firm are dividedequally in the absence of an agreed ratio. Similarly,all authorized acts of the partners bind thepartnership.

Some partnerships may agree to take juniorpartners into the firm. As the title suggests, juniorpartners have less authority and control of thebusiness, and take correspondingly lower respon-sibilities (usually restricted to personal acts andomissions). Profit-sharing will also be limited atthis level. Care should be taken by all prospectivejunior partners to ensure that their position isclearly and accurately described in the writtenagreement. Further attention should be given todealing with the public so as to avoid a generalassumption of equality, and therefore joint liabil-ity, with the senior partners (for example, letter-heads should be clearly marked, indicating thejunior partner’s name and position, distinct fromthose of the senior partners).

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Owner The law

Figure 2.1

Owner The law

Figure 2.2

Owner The law

Figure 2.3

Partnership

A partnership exists where two or more individ-uals carry on a business as co-owners for profit.All profits are shared between the partners in previ-ously agreed proportions. The Uniform PartnershipAct has been adopted by most states, and it gov-erns the major principles of partnership law.

Partnership has become a common method ofoperating an architectural business as it enablesarchitects to share their expertise, capital, and otherresources.

The formation of a partnership does not limitthe liability of individual partners, and each part-ner is responsible for all negligent acts and omis-sions of the firm jointly and severally, or in otherwords, whether personally negligent or not.However, partners joining the firm before, orleaving it after, a negligent act may be affordedprotection.

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The Limited Partner Limited partners mayinvest capital in a firm and share profits, but theycannot be involved in the management of thebusiness. Unlike general partners, their liabilitymay be restricted to the extent of their invest-ment. Limited partners are allowed in most statesunder the Uniform Limited Partnership Act, butthey are not common in architectural practices.

Termination of Partnership

The partnership agreement may be terminated by:

● Expiration of an agreed time period● Completion of a designated project or task● Death of a partner● Bankruptcy● Retirement of a partner● Mutual agreement● Court order● Subsequent illegality (see page 63)

Taxation

Partnerships are not taxed as distinct entities, andall partners pay individual tax upon their share ofthe partnership profits. Consequently, larger orga-nizations may prefer to become incorporated inorder to take advantage of tax concessions oftenavailable to corporations.

Partnership Agreement Checklist● Date of agreement and names and signatures of

the parties● Date of termination (if any)● Name and purpose of partnership, and business

address● Contribution of capital, provision for with-

drawal, interest on capital, etc.● Division of responsibilities and duties within

the firm● Salaries and profit-sharing details● Methods of accounting, banking, etc., includ-

ing specification of the partnership’s fiscal year● Insurance● Benefit schemes, including pensions for outgo-

ing partners and their families● Rights of all partners in case of death, sickness,

retirement, and withdrawal● Arbitration/mediation agreement● Length of vacations● Provisions for check-writing● Provisions for hiring and firing● Procedure relating to loans by partners to the

partnership● Provisions in case of disqualification, bank-

ruptcy or misconduct of a partner

● General provisions for dissolution● Admission of new partners

The above checklist is by no means exhaustive,and architects should note that the more detailedand specific the partnership agreement, the lesschance for future problems.

Corporations

Corporations are legal entities suited mostly tolarger scale operations, and owned by (althoughdistinct from) their shareholders. Corporationscan be characterized by:

● perpetual existence of independent, individualshareholders;

● profit-sharing by shareholders;● limitation of liability of shareholders to the

extent of the value of their personal share obliga-tion (except in limited circumstances where theso-called “corporate veil” can be pierced by acourt to enable an injured party to seek redress).

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Owner The law

Figure 2.4

All corporations are subject to the law ofthe state in which they are incorporated. In addi-tion, each corporation has its own Articles ofIncorporation which generally draw the param-eters of its activities, its organizational structure,and shareholders’ rights.

There are three major types of corporation:

● Profit corporations● Nonprofit corporations (e.g., charities)● Professional corporations

An architect may generally be a shareholder ina corporation as long as it does not affect his orher professional duties. In recent years, manystates have enacted statutes to enable architects toset up professional corporations in which to practicearchitecture.

Professional Corporations

Professional corporations differ from other corpo-rations in that, although liability can be limited incertain contractual matters, the individual profes-sional remains personally responsible for all negli-gent acts or omissions despite the incorporation.

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Consequently, an errors and omissions (E & O)insurance policy is advisable for architects who aremembers of professional corporations.

In some states, architects who practice in a pro-fessional corporation can avoid liability where thenegligent act was totally outside their personal con-trol. Individual state laws should be consulted toascertain the position of members of professionalcorporations with regard to personal liability.

Major advantages for the architect in forming aprofessional corporation include certain taxationbenefits, perpetual existence of the corporation,and limited security of personal assets. However,

The arrangement must be conceived as a limitedone, or it may be viewed by the taxation author-ities as taxable on a corporate basis. If a joint ven-ture is felt to be an appropriate means of temporarypractice, the form of agreement between the organi-zations concerned should be carefully drafted,specifying the precise purpose of the venture,respective tasks and responsibilities, and compen-sation, using the same guidelines as those for apartnership agreement (see page 18).

Formation

There are two basic types of joint ventures:

● Fully integrated self-supporting joint venture● Nonintegrated joint venture

The fully integrated self-supporting joint ven-ture is formed when the organizations concernedcreate an entirely new association, separate fromthe original firms, which operates independentlywith a separate work force, payroll etc.

The nonintegrated joint venture is less formaland allows employees in each firm to undertakethe work while remaining in their respectiveoffices, and on the original firm’s payroll. This isthe more usual form of architectural joint venture.

Compensation

Firms engaged in a joint venture may divide thecompensation from the venture in one of twoways:

a. Profit splitb. Compensation split

Profit Split By this method, compensationreceived from the owner is placed in a jointaccount and divided between the venturers (afterexpenses have been deducted) according to anagreed formula.

Compensation Split This method allots a por-tion of the project’s compensation to each ven-turer at the outset, and then offsets the costs ofthe services necessary to complete the workagainst the sum allotted so that the difference isretained as profit. This means that firms whichoperate efficiently avoid financial loss caused bythe inefficiency of other firms.

In some circumstances, architects will formjoint ventures with a view to being commissionedfor a particular project. Rather than undergo thefull requirements before the work is assured, thedetails of the proposed venture may be writtendown in a memorandum of understanding. Thismemorandum could form the basis of a full joint

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Owner The law

Figure 2.5

Owner The law

Figure 2.6

this form of association also has disadvantagessuch as administrative costs and formalities. Also,some public authorities may be unable to dealwith professional corporations, and out-of-statework might be made difficult. For a variety of rea-sons, professional legal and financial adviceshould be sought prior to setting up a professionalcorporation.

Limited Liability Companies (LLCs)

While having many of the characteristics of com-panies, LLCs are taxed by the federal authorities aspartnerships. State law varies, although typicallyarchitects in LLCs can limit their liabilities for actsor omissions not directly under their control.

Joint Ventures

If two or more organizations wish to combineforces for a specific project, they may engage in ajoint venture. This is a type of partnership limitedto the duration of the task. Advantages include:

● Shared resources● Combined expertise and knowledge● Joint capital● Fluidity of staff allocation

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venture agreement if the firms are granted thecommission.

Insurance can be taken out under each firm’sexisting policies with an appropriate endorse-ment, or by a separate policy in the name of thejoint venture.

Other Associations

Other forms of organization which may be encoun-tered in the construction industry include:

a. Associated architects, or “loose groups”b. Professional associations and unincorporated

associationsc. Trade unionsd. Governmental agencies (federal and state)

Associated Architects

The term “associated” with regard to architecturalpractice is vague, and may refer, among otherthings, to independent organizations sharingfacilities, or to a nonintegrated joint venture offirms. The AIA recommends that the use of theterm “associated” should be avoided unless theactual legal relationship of the parties is clearlydefined. In the absence of a clearly defined rela-tionship, a partnership may be implied by thecourts, leading to complex and expensive liabilityproblems.

Two forms of association are increasingly common:

1. Often a “design architect” works with an“architect of record” on specific design pro-jects. The former establishes the conceptualand schematic basis for the project, while thelatter takes responsibility for construction docu-mentation and construction administration.

2. In large or complex projects, an “executivearchitect” may manage and coordinate thework of a “consulting architect” who is respon-sible for specific portions of the project.

Professional Associations andUnincorporated Associations

The professional association is not technically acorporation, but is sufficiently corporate to betreated as such for taxation purposes. Unin-corporated associations (e.g., social clubs) are notlegal entities, but in most states they do have lim-ited legal capacity (e.g., to contract). Architectsworking for such groups should be careful tocheck the authority and liability of the membersthey deal with; this information can usually befound in the constitution or regulations of theassociation. State laws regarding the legal capacityof these associations should also be checked by

the architect before entering into a contractualrelationship.

Trade Unions

These are groups formed within the trade (oftenas unincorporated associations) for the purpose ofcollectively bargaining for pay and conditions ofemployment.

Government Agencies

The regulations of these bodies, both at state andfederal level, derives from statutes. They have, inthe past, enjoyed immunity from legal actions.However, this immunity is now less absolute inmany states, and a number of claims have beenmade successfully against governmental agenciesfor their negligent acts or omissions (e.g., negli-gent plan inspection).

THE PARTIES INVOLVED

Professional Relationships

The Architect/Owner

The relationship between the architect and theowner is primarily contractual, and as such is gov-erned by the terms of the contract between them.The contract formalizes a relationship of agencyin which the architect (the agent) acts as the rep-resentative of the owner (the principal), workingsolely in the latter’s best interests.

Agents are expected to work with the level ofskill normally associated with their profession oroccupation, and to be concerned to prevent anyconflict arising between their own interests andthose of their principal. The agency authority ofthe architect is limited by the terms of theappointment, and the architect should be carefulto avoid overstepping his or her authority. Forexample, ordering the contractor to undertakework where the latter acts upon the apparentrather than actual authority of the architect mayconstitute a breach of the architect/owner agree-ment. Should the owner wish to extend the pow-ers of the architect beyond those specified in thesigned contract to enable the undertaking of spe-cific tasks outside the scope of authority, writtenauthorization should be obtained by the architectbefore carrying out such work.

The agency relationship between the ownerand the architect is not a general one, and thearchitect may act as the owner’s representative onlyin areas specifically stated in the contract betweenthem. Where a decision is needed on a questionin which the agent does not have authority, the20

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principal should be contacted. In an emergency,where the principal is not available, the agent isauthorized to do anything which prevents loss to theprincipal. Such situations may give rise to dispute,and should be treated with the utmost caution.

Under the AIA A201 Contract for Construction1997, the architect takes on a secondary role ofquasi-arbitrator of the agreement between theowner and the contractor. Absolute fairnessshould be exercised in this role and, in spite ofbeing the owner’s agent, the architect must notshow undue favor to the owner in the event of adispute concerning the contract (A201. 4.2.12).

The Architect/Consultant

Where services necessary to a construction projectare outside the architect’s purview, specialists maybe employed by either the architect or the owner

to undertake the work. It is usual for the architectto form a contractual relationship with a consultantalthough, in some instances, it may be possible forthe owner to contract directly with the specialist(e.g., soils engineer).

Types of Consultant Consultants may be employed:

● for their technical knowledge (e.g., lighting,acoustics, landscaping);

● for their knowledge of specific building types(e.g., hospitals, theaters, schools);

● for other attributes relevant to a specific project(e.g., financial expertise, behavioral studies).

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Fina

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Mortgages and financeInsurancesBanks

Sup

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Suppliers

WholesalersRetailers

Manufacturers

Producers

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Realtors

PromotersDevelopersBrokers

Pub

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Building inspectors

HealthFire

Other

Zoning

Insu

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EmploymentSuretyLiability

Owner

Constructionmanager

Contractor

Building trades

Architect

Consultants

Subcontractors

Sub-subcontractors

Figure 2.7

Owner

ContractualTortious

Architect

Figure 2.8

Consultant(e.g. soils engineer)

Owner

Consultant

Architect

Figure 2.9

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Care should be taken when employingconsultants not to use their services for workwhich may fall under the architect’s purview, asthis may result in reduction of the architect’s fee.

Selection As the architect is vicariously responsiblefor the errors and omissions of the consultants,selection should be made with great care. Owner’srecommendations may be considered, but thefinal choice should remain with the architect,who can and should require all consultants tomaintain errors and omissions insurance coverage.

In order to fully delineate responsibilities,duties, and conditions of the relationship betweenthe architect and the consultant, a written con-tract is advisable. The AIA produces two standardforms which are recommended:

● AIA Document C141, Standard Form ofAgreement between Architect and Engineer

● AIA Document C431, Standard Form ofAgreement between Architect and Consultantfor other than Normal Engineering Services.

These documents are written to correspondwith other AIA contracts (e.g., B141, A201, etc.)in terms of timing, format, and sequence. If aconsultant’s services are employed, the architectmay be entitled to further payment to coveradministration and extra risk. In some cases, theextent of work to be undertaken by a consultantmay make it appropriate for the parties to engagein a joint venture (see page 19).

For limited or clearly defined work, a care-fully drafted letter may serve instead of the fullcontractual documents. The letter should be sent

to the consultant in duplicate with instructions toreturn one copy signed to the architect, and itshould include:

● The names of the parties● Date of the agreement● Title and location of the project● Description of the work● Terms and conditions of service● Payment type, method, and amount● Insurance details

The Architect/Contractor

In conventional project delivery, there is no con-tractual relationship between the architect and thecontractor, as the latter contracts directly with theowner. However, most building contracts containprovisions enabling the architect to undertakeprescribed duties in the capacity of the owner’sagent (see page 85).

Errors made by the architect which cause lossto the contractor could not result in an actionunder contract law (see page 63), but could formthe basis for a claim against the owner whoremains responsible for the agent’s authorized

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Owner Architect

Figure 2.10

Contractor

Subcontractors

Sub-subcontractors

Owner

Suppliers

Architect

Figure 2.11

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acts. This may in turn lead to an action by theowner against the architect for breach of the con-tract between them. Alternatively, the contractorcould sue the architect in tort, where no contrac-tual relationship is necessary (see page 6).

The same situation arises between the architectand subcontractors whose contracts are with thecontractor, and also the suppliers who dealdirectly with the contractor and subcontractor.

The Engineer and ConstructionManager

The Engineer

As in the profession of architecture, engineeringwork and the title “engineer” are usually protectedunder state law, although often the boundarybetween architecture and engineering work is ill-defined. In some states, engineers may be allowedto undertake work which might be considered tobe architectural elsewhere, in addition to workprimarily classified as engineering.

In any event, the professional engineer willnormally be expected to conform to the examina-tion, registration, and professional requirementsof the state of residence, and will be subject tomany of the practice-associated conditions whichmay apply to architects. The term “engineer” is ageneral description of many distinct fields ofexpertise, several of which are represented by theirown professional bodies (e.g., the AmericanSociety of Civil Engineering). Engineering fieldsinclude:

● Soils● Structural● Mechanical● Electrical● Acoustic● Highways● Civil● Drainage

Architects and Engineers Where architecturalfirms wish to engage the services of an engineer,it is advisable to use AIA Document C141,Standard Form of Agreement between Architectand Consultant. It is important to define theengineer’s services as fully as possible in the con-tractual agreement, so that relative duties andliabilities can be determined and insurance coveragemaintained accordingly. This is particularly rele-vant because, although the engineer must per-form to the standard expected of his or herprofession, the architect is usually vicariouslyresponsible for an engineer’s negligent acts ofomissions.

The Construction Manager

The use of construction managers is an increasinglycommon practice for large and/or complex buildingprojects, though the scope and detail of operationscarried out under this term varies. Constructionmanagement services may be practiced by a numberof parties. Some general contracting companieshave entered the field, either in addition to orinstead of normal construction work. Also, archi-tects, engineers, and others with expertise andexperience in the construction industry (e.g.,construction superintendents) have undertakensimilar services. The contractual arrangementsmade with a construction manager vary. Often,the contract is made directly with the owner, andthe construction manager acts as go-between forall the parties involved in the building project andthe owner. However, it is possible for such a man-ager to be employed as a consultant by the architect,or to form a joint venture with the architect (seepage 19).

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Owner Architect

Manager

Primecontractor

Primecontractor

Primecontractor

Figure 2.12

There are basically three primary roles under-taken by construction managers.

1. Advisers provide expertise on constructability,cost control, and construction methods. Advisersdo not have a monetary interest in the meansand methods of construction.

2. Agents organize and coordinate the varioussubcontractors and construction trades.

3. Constructors play an advisory role duringdesign and then shift to the role of contractorfor the construction phase. This dual roleholds the potential for conflict of interest, asadvice provided during design may undulyinfluence the overall cost of the project, andthe constructor’s profit.

AIA Document B144/ARCH-CM, StandardForm of Amendment for the Agreement Betweenthe Owner and Architect where the ArchitectProvides Construction Management Services asan Adviser to the Owner, provides a means tointegrate a construction manager role with that of

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an architect providing design and other construc-tion administration services as described in AIADocument B141. Construction management car-ries with it a correspondingly high level of liabilityfor actions related to supervision. Architectsinvolved in construction management assumegreater responsibility and authority during con-struction, but also face a correspondingly highlevel of liability.

Architects who offer services in this area shouldbe careful to ensure that the scope of work andattached responsibilities are adequately defined inthe contractual agreement, and that insurancecoverage is correspondingly broad.

Other standard AIA documents that have beendeveloped for use in these circumstances include:

● A101/CMa, Standard Form of Agreementbetween Owner and Contractor – StipulatedSum, Construction Manager-Adviser Edition

● A121/Cmc, Standard Form of Agreementbetween Owner and Construction Managerwhere the Construction Manager is also theConstructor (AGC Doc. 565)

● A131/CMc, Standard Form of Agreementbetween Owner and Construction Managerwhere the Construction Manager is also theConstructor – Cost Plus a Fee, No Guaranteeof Cost

● A201/CMa, General Conditions of theContract for Construction, where theConstruction Manager is not a Constructor,Construction Manager-Adviser Edition

● A311/CM, Performance Bond and Labor andMaterial Payment Bond, ConstructionManagement Edition

● A511/CMa, Guide for SupplementaryConditions, Construction Manager-AdviserEdition

● B141/CM, Standard Form of Agreementbetween Owner and Architect, ConstructionManagement Edition

● B141/CMa, Standard Form of Agreementbetween Owner and Architect where theConstruction Manager is not a Constructor,Construction Manager-Adviser Edition

● B144/ARCH-CM, Standard Form ofAmendment for the Agreement betweenOwner and Architect where the ArchitectProvides Construction Management Services asan Adviser to the Owner

● B801, Standard Form of Agreement betweenOwner and Construction Manager where theConstruction Manager is not a Constructor

● G701/CM, Change Order, ConstructionManagement Edition

● G701/CMa, Change Order, ConstructionManager-Adviser Edition

The Design-Builder Design-builders provide a one-stop source for design and construction services.The design-builder may provide all services or maysubcontract parts of design services or constructionwork. Document A191 provides for flexibility intax arrangements. Note that as with constructionmanagement, architects who participate indesign-build may substantially increase their lia-bilities. Contractors are held to a vendor’s stan-dard of care which differs from that of theprofessional. The vendor’s standard is based onperformance of the work specified in the contractdocuments.

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THE ARCHITECT/CLIENT RELATIONSHIP

The literature of architectural practice is relatively consistent in its treatment ofthe architect/client relationship. Whether the architect is conceived of as anexpert adviser or likened to the supporting partner in a Victorian marriage,1the importance of establishing and maintaining close ties with the client is con-stantly stressed and,given the largely private,commercial nature of practice inthe United States, may seem perfectly logical. However, research into the sepa-rate but associated areas of professionalism and legal liability suggests thata potential conflict may exist between the desire to maintain goodarchitect/client relationships and the pressing need to guard against legalaction.

As many architects are painfully aware, the threat of legal liability has esca-lated over the years, and every aspect of practice needs to be monitoredclosely to reduce the likelihood of court action. While the construction phaseproduces a significant share of legal actions, many cases originate from actsor omissions taking place during the design phase, where the architect andthe client are the major participants.2 Many of the problems in these casesoriginate from alleged errors in construction documentation, but a sizablenumber are concerned with conflicts between the architect and the client,not necessarily connected to design error. In a Wisconsin study,3 for example,over one-fifth of the actions were initiated by architects suing for fees. In manyof these cases, the architect/client relationship had broken down and refusalof further payment had precipitated the legal action.

Many law suits stem from inconsistencies and misunderstandings in clientnegotiations. In a number of instances, particularly in small-scale commissionsfor clients with little knowledge of or previous experience with the buildingprocess, architects had casual, informal contractual arrangements and a ten-dency to shield the client from potential construction problems. When prob-lems do arise in such instances, the client is rudely awakened to his or her(often monetary) consequences and tends to blame the architect, not alwaysunreasonably, for their occurrence. In order to minimize these pitfalls, the archi-tect should follow more businesslike and formalized procedures that clearlydefine the rights and responsibilities of the two parties. However, by establishingclearly-defined legal boundaries between the parties, such actions seem todiminish or violate the architect/client relationship that has become acceptedat the smaller scale of practice.

A review of common misunderstandings between the architect and theclient suggests that they can be avoided in a way that does not violate orendanger the relationship. Closer attention to procedures both before a for-mal agreement is signed and during the contractual relationship may not onlyreduce the chances for legal action, but establish a sounder “professional”relationship which ultimately increases the likelihood of successful completionof the project.

At the beginning of the architect/client relationship, before contract forma-tion, it is vital that the parties achieve a “meeting of minds,” where the expec-tations and duties of both parties are clearly and unambiguouslycommunicated and mutually agreed upon. This fundamental contractualprinciple may seem obvious to those practitioners with regularized proceduresand broad negotiating experience. Nevertheless, many misunderstandings

PRACTICE OVERVIEW

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ryand disputes have arisen from situations that could have been easily avoidedby clearer explanation and planning before the architect/client agreementwas signed. For example, a number of cases suggest that, during early negotia-tions, some clients were not fully apprised of their responsibilities or the finan-cial, legal, and temporal implications of the project. Potential problems werenot mentioned, and even monetary matters were glossed over. It was notclear, for instance,how much the architect’s fees would be,how they would becalculated, or even when they would be paid, so that the client’s financialobligations to the project were not clearly articulated. Accordingly, whenproblems became apparent, the architect was often blamed for not alertingthe client in advance. Whether these problems arose from insufficient briefingby the architect or by a misguided desire to shield the client from some of therigors of the construction process, courts are likely to hold that, as the expertwith a duty to “advise and consult” with the owner, the architect should bearresponsibility for ensuring that full communication exists between the two par-ties, and that the client is aware of the obligations of both.

Architects approach client negotiations in different ways, and may not wishto risk losing potential commissions by appearing overly alarmist or pessimistic.However, it is more prudent to highlight the realities of the building process,withits complicated rules and procedures and attendant uncertainties, than toallow the client to discover these after the contract is well under way. Otheraspects of the architect/client relationship that have proven problematicshould also be discussed before signing the contract to ensure a clear under-standing of the respective roles of the parties. It should be made clear, forexample, that architects do not warrant perfection in their work, and that,despite every effort being made, some problems—in timing or cost, forexample—may arise. Similarly, the extent of architectural duties that should beexpected for compensation should be carefully explained using either B141 orB151 as a checklist. Problems have arisen where architects have either askedfor payment after the fact for work that the client assumed was part of theirbasic fee (attendance at hearings, preparation of graphics or models for pre-sentations, etc.) or where clients have been dismayed to discover a requiredtask had not been fulfilled. A classic example of this lies in the expectation ofdetailed cost estimates instead of the more approximate preliminary estimatesrequired in the AIA contract.

Once the contractual relationship has been formalized, both parties shouldhave a clear idea of their respective roles. However, the rather flexibleapproach to contracts taken by some practitioners has led to problems thathave found their way to the courts. If standardized documentation is used(and the AIA contract documents are likely to be the most representative oftraditionally accepted practices), many potentially problematic issues will beunderscored, particularly if such documents are used as a negotiation vehiclein the pre-contract phase. In this way, the architect can “educate” the client asto the expectations of the contract establishing the boundaries of the archi-tect’s duties and responsibilities. Where verbal or personalized contracts areused in preference to standardized documents, there is a greater risk of omis-sion of information that might be a potential remedy should problems arise ata later stage. For example, few personalized contracts are likely to contain arti-cles covering ownership of the drawings, yet it is possible that, in the absenceof a specific statement such as that made in AIA document A201, the ownermay be granted custody of the employee’s work.4 Similarly, mediation or arbi-tration procedures,which can offer a useful alternative to litigation,may be dif-ficult or impossible to implement without prior written agreement of the parties.If standardized contracts are used other than AIA (e.g., client-generated docu-ments), they should be checked very carefully to ensure that the architect’s

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rights and responsibilities are not radically altered without the clear consent ofboth parties. It is possible that documents prepared by the client’s attorneysmay vigorously protect their client’s rights at the expense of the architect.5

Adherence to and full knowledge of contractual obligations is as applicableto architects as to their clients. An exact understanding of required dutiesshould ensure that adequate payment is received, that prescribed duties areundertaken and, implicitly, that the boundaries of permissible power are notexceeded. AIA contracts, for example, do not empower the architect to stopor change the construction work or to have any responsibility for safety on site.Consequently, any action by the architect beyond that required or permissibleis both gratuitous and a potential focus for liability claims.Similarly, the architectshould not give advice on bonding and insurance to the client: in fact, certainerrors and omissions insurance plans specifically prohibit such advice and willwithdraw coverage should such advice be given.

If standardized documentation is used, the architect should take advantageof all its provisions, which, research suggests, is not common. It is estimated, forinstance, that of the architects who use AIA A201 (by no means the whole pro-fession), less than 5 percent take advantage of the article requiring the con-tractor to submit a list of subcontractors’ names, to which the architect maymake reasonable objection.6 Strict adherence to contract provisions not onlyminimizes problems that may arise, but provides an effective defense in theevent of court action, if it can be shown that the firm performed its obligationsunder the contract in a reasonable and professional manner.

Despite the perception that more formalized, businesslike procedures con-flict with the traditional architect/client relationship, the former are clearlydesirable and not incompatible with the traditional image. More effectivearchitect/client negotiations using standardized agreements will help minimizethe misunderstandings and legal liability and even strengthen the relationship.The ultimate objective of the association is, after all, a project completedwith the minimum number of disturbances or setbacks. Increased efforts by thearchitect to reduce possible conflicts can only serve to strengthen this goaland ultimately serve the expectations of the client in a responsible and profes-sional way.

References

1. Maister, D.,“Lessons in Client-Loving,” Architectural Technology, Fall 1985.2. In Dickman, J.E.,“Construction Claims—Frequency and Severity,” Journal of

Construction Engineering and Management 111, no. 1, March 1985.3. In Greenstreet, R., Legal Impacts Upon the Profession of Architecture: The

Liability of the Architect in Wisconsin, Center for Architecture and UrbanPlanning Research, University of Wisconsin-Milwaukee, 1985.

4. Walker, N., Walker, F. and Rohdenberg, I., Legal Pitfalls in Architecture,Engineering and Building Construction, 2nd edn, McGraw Hill, 1979.

5. Greenstreet, R. “Who Really Owns Your Design?” Progressive Architecture,April 1985.

6. Kaskell, R., “How Do I Protect Myself from Suits by the Contractor?” inAvoiding Liability in Architectural Design and Construction (R. Cushman,ed.), John Wiley Interscience, 1983.

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Architects are getting sued for everythingthese days—I even hear you have to watchwhat you say or you could be sued for youropinions. Can this possibly be true?

The tort of negligence encompasses manyaspects of the architect’s activities whichmay include negligent misstatement. If profes-sionals give expert advice which, if reliedupon, leads to loss or injury, they may be heldliable for the consequences. This responsibility,which does not require a contractual rela-tionship or any form of compensation to berelevant, means architects should only offertheir professional opinion with care. This

includes the giving of references, anycomments regarding safety or operations onsite (which are not contractually requiredanyway) and advice on the selection of con-tractors, subcontractors and suppliers. In thelast instance, there have been several caseswhere the architect has legitimately usedcontractual authority to reject subcontrac-tors, only to be sued for defamation.

In any case, where a professional opinion orjudgment is offered, it should be as objective,dispassionate, factual and accurate as pos-sible. Any indication of malice, inaccuracy orbad faith,especially in a written form,could bethe basis for a legitimate claim.

Question & Answer

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3The architect in practice

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THE PROFESSION

Each state enforces licensing laws which controlthe use of the title “architect” and the practiceof architecture. Qualification requirements differdepending upon the standards of the state licens-ing boards, although the National Council ofArchitectural Registration Boards (NCARB), withsupport from the AIA, encourages uniformity ineducational and examination procedures and facili-tates reciprocity among the states. A combina-tion of higher education, architectural experienceunder the supervision of a licensed architect, andpassing a licensing examination, is generally requiredas a prerequisite to a license, together with otherspecified requirements. The state laws are enforcedby regulatory boards.

Interstate Licensing

As the licensing of architects is carried out on astate-by-state basis, it may be necessary for thearchitect to requalify a number of times if engagedin work in several states. However, some statesoperate a reciprocity system to facilitate interstatepractice, and enable architects to obtain a tempo-rary or permanent license. NCARB certificationgreatly facilitates interstate licensing. Partnerships(see page 17) should ensure that all general part-ners are registered in states where work is under-taken. Failure to abide by state licensing laws rendersthe offender liable to imprisonment or fine, andmay provide sufficient grounds for the owner tosuccessfully avoid payment of fees.

Intern Development Program

Most states require an internship under the super-vision of a registered architect as a prerequi-site for license. NCARB administers the InternDevelopment Program (IDP) as a means to facili-tate exposure of interns to a broad range of profes-sional responsibilities and experiences. Workingwith a supervisor within the intern’s firm and aseparate mentor assigned to the intern, internsmaintain detailed records of their experiences,and must attain a specific number of trainingunits in order to satisfy licensing requirements.

ETHICS

The broader field of ethics is concerned with thenorms, values and associations of individuals andgroups, which may be embedded in cultural,religious or societal frameworks. They may beformalized in laws, or simply incorporated inaccepted standards of behavior.

In a professional context, ethical behavior is oftenestablished in codes of conduct, which provide acollective assessment of required standards of pro-fessional performance with specific regard to society,to clients and to other members of the profession.

In the profession of architecture, codes areenforced at the level of registration within eachstate, and by the professional bodies that repre-sent the field.

State Codes

Rules of behavior are enacted by each state andare codified in administrative regulations. Theyare mandatory, and violation may result in:

● suspension of license;● censure;● fine;● imprisonment.

Many state codes are based upon the modeldeveloped by the National Council of ArchitecturalRegistration Boards.

National Council of ArchitecturalRegistration Boards Rules ofConduct

NCARB comprises the registration boards of allfifty states, the District of Columbia, Guam, theNorthern Mariana Islands, Puerto Rico andUS Virgin Islands. The Council has developedstandards regulating architectural practice whichare established in the Rules of Conduct.

The rules incorporate the following areas:

● Competence● Conflict of interest● Full disclosure● Compliance with laws● Professional conduct

The Rules of Conduct are recommended byNCARB to Member Boards and may be adoptedin whole or part by individual state ArchitecturalRegistration Boards.

American Institute of ArchitectsCode of Ethics and ProfessionalConduct 1997

The latest version of the code is a balance ofmandatory and voluntary principles that conformto the Sherman Anti-Trust Act. It is administeredby a National Judicial Council appointed by theAIA Board of Directors and is applicable onlyto AIA members. Licensed architects who are notAIA members are not subject to the provision ofthe code.

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The code addresses responsibilities:

● to the public;● to the clients;● to the profession;● to colleagues.

The code is arranged in three tiers:

● Canons● Ethical Standards● Rules of Conduct

Canons

These are broad principles of conduct whichmembers are encouraged to meet.

For example, “Members should maintain andadvance their knowledge of the art and science orarchitecture . . .” (Canon 1).

Ethical Standards

These are more specific goals to which membersshould aspire in professional performance andbehavior.

For example, “Members should serve theirclients in a timely and competent manner.”

Rules of Conduct

The Rules of Conduct are mandatory and the onlycomponent of the Code of Ethics and ProfessionalConduct that are subject to enforcement.

For example, “Members shall not accept com-pensation for the services from more than oneparty on a project unless the circumstances are fullydisclosed and agreed to by all interested parties.”

THE OFFICE

Although architectural offices vary considerablyin their structure, management, and workload,certain general observations and recommenda-tions can be made regarding their administration.

Administration

Initial factors to be considered in the running ofan architectural office include:

1. Insurance2. Financial management3. Office organization4. Staff organization and selection

Insurance

As well as sufficient insurance to cover negligentperformance by all employees for whom the prin-cipals remain vicariously responsible, insurance

policies should be maintained to cover the officeand its contents with respect to loss or damage,and also employee benefits (e.g., medical expenses,vehicular insurance, and compulsory coverageunder the workers’ compensation laws).

Financial Management

The necessity for maintaining accurate accountscannot be too highly stressed, and professionalassistance may be necessary to establish anaccounting system and, possibly, to operate it.The AIA has prepared a manual for its memberson the subject entitled An Architect’s Guide toFinancial Management (1997), by Lowell V. Getz,which architects in private practice may find ofinterest. The AIA Firm Survey periodically pub-lishes billing data according to firm size andemployees. A number of firms, such as PracticeManagement Associates and Zweig White &Associates, collect and publish updated surveys onfinancial performance, and accounting, fees, andcompensation for architects.

Office Organization

To ensure efficiency and consistency within theoffice, it is advisable to record and maintain uni-form procedures and techniques of office manage-ment. For example:

● Standardized communication methods (seepage 85)

● Standardized drawing conventions● Explicit roles, duties, and responsibilities for all

personnel● Use of standardized forms for office administra-

tion (see page 85). The AIA produces several ofthese including:G804 Register of Bid DocumentsG805 List of SubcontractorsG806 Project Parameters WorksheetG807 Project Team DirectoryG809 Project AbstractG810 Transmittal LetterOther standardized paperwork may be usedincluding accounting forms, fax sheets, tele-phone messages and memo pads, and orderforms which can be printed in the house style.

In order to communicate and record informationregarding office procedures in a consistent and read-ily available format, firms sometimes produce an“Office Standards Manual” containing the abovedata to provide a useful reference to new employees.

Staff Organization and Selection

Many practices consider it useful to establish officepolicy concerning their employees. A “Personnel32

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Policy Manual” is advised as a method ofconsolidating preferred practice both for existingmembers and prospective employees to familiarizethem with office characteristics and expectations.The manual may contain general details of thepractice (workload, direction, etc.), its organization,and fundamental policies regarding employmentprocedures and staff benefits. Information mayinclude:

Office practice:● Office hours● Payment methods● Overtime and time recording● Lunch and coffee breaks● Travel and expenses● Responsibilities (equipment, etc.)● Salaries and salary review● Other concessions (parking space, etc.)● Client service expectations

Staff benefits● Pensions● Profit-sharing and trust funds● Holidays● Incentive pay● Sick leave● Professional activities (further training, confer-

ences, conventions, etc.)● Civil duties (jury service, voting, civil projects, etc.)● Dues to professional and civil organizations● Future promotional policy

Hiring practices:● Methods of selection● Moving expenses and transfers● Termination of duty, layoffs, and resignations● Leaves of absence (military, emergency, etc.)

Contracts of Employment

A contract of employment need not be formu-lated in writing, but a carefully drafted agree-ment, covering all relevant issues established inthe office manual will help to lessen the risk offuture misunderstanding. Such agreements may bedrafted into a letter of appointment, or attached toa letter in a standardized format, including thefollowing details:

● Names of parties● Date upon which employment commences● Salary and payment intervals● Hours of work● Vacation period and vacation pay● Sickness pay● Pensions and other benefits● Insurance coverage (professional indemnity,

health, accident, etc.)

● Periods of notice● Job title, duties, and responsibilities● Required membership in professional associa-

tions● Office benefits (e.g., automobiles)

Of course, professional legal advice is importantin the drafting of contracts of employment. Finally,an architectural practice should be kept under con-tinual review with regard to procedures, personnel,and equipment. In this way, timely adjustmentscan be made to assure the smooth running of thefirm in the event of changed circumstances.

THE ARCHITECT/OWNERRELATIONSHIP

The architect/owner relationship will be affectedby the nature of the owner, who may be:

● a private individual;● a partnership;● a corporation or institution;● a state or federal department or governmental

agency.

When dealing with employees of large organi-zations, it is advisable to check or verify theirauthority to bind the firm at the outset.

In some cases, the owner and the user of theproposed project may not be the same party (as,for example, in the case of a school or hospital),and care must be taken not to confuse therequirements of the two roles. Though users mayseek features they deem appropriate, owners maynot be willing to pay for them.

The character of the owner will affect theadministration of the project in a number ofways, including:

● selection of the architect;● the architect/owner agreement;● contractor selection procedures;● methods of construction;● means of communication among the respective

organizations;● forms and paperwork to be used.

State and federal agencies are likely to want touse their own forms and contracts, and will bebound by statutory requirements in the selectionof both architects and contractors.

Selection of the Architect

This may be accomplished in three ways:

1. Directly: Direct selection is a function of rep-utation, recommendation, previous contract,or chance.

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2. Comparatively: This method is usually usedby institutions, public agencies, etc., where anumber of architects will be asked to submittheir résumés for consideration by a board.Information required may include:a. age and achievements of the firm (examples

of work, clever solutions, efficiency);b. details of the practice (staff, workload, orga-

nization, and ability to take on new work);c. references (bank, former clients);d. names of preferred consultants.Interviews may also form part of this selectionmethod.

3. Competitively: Competitions may be:a. selective, where a limited number of

entrants will be invited to participate;b. open, where anyone may enter.Architects are advised only to enter competi-tions approved by the American Institute ofArchitects, and abide by the guidelines it hasestablished.

The Agreement

The form of agreement between the architect andthe owner is very important, and care should betaken to clearly establish the relationship at theoutset. Oversights, omissions, or misunderstand-ings at this stage may lead to serious problemslater in the relationship which foresight and thor-ough attention could have helped to prevent.

There are a number of ways in which archi-tect/owner associations can be formed:● By conduct of the parties (see page 63)● By letter (see page 63)● By formal written agreement

A contract may be drafted for each new project,although the use of standardized forms is advis-able. The AIA produces a number of standardforms although some owners, specifically largerinstitutions and governmental agencies, may wishto use their own standard forms. These should bestudied carefully before signing as they may seekto increase the architect’s liability beyond thestandard of reasonable care.

In most cases, the use of AIA forms is stronglyadvised, as they are generally accepted and under-stood throughout the building industry and arecomprehensive in their coverage. Less formalmethods of agreement may be used in projects ofa simple or minor nature where a full contractappears inappropriate. Here, abbreviated contractsmay be useful (AIA Document B151) or carefullydrafted letters of agreement, which might include:

● Details of the extent and purpose of the project● The general nature of the agreement

● Details of the site (location and address)● The responsibilities and roles of each party● Payment type and times of payment (see

page 38)● Details of retainers● Methods of calculating fees and expenses● Details of full and partial services● Copyright considerations (see page 38)● Additional services, if any● Other matters (consultants, type of building

contracts, etc.)

Article Changes

In the eventuality that the standard contract arti-cles have to be amended, omitted, or enlarged,great care should be taken to ensure that the termsof the agreement, as amended, do not adverselyaffect the architect’s position with regard to liabil-ity, or conflict with provisions contained withinrelated documents. If changes are necessary orrequired by the owner, legal counsel might beconsulted to ensure that the overall documenta-tion of the project remains consistent, and accept-able to the architect.

Checklist

Factors to be considered at preliminary meetings,and possibly mentioned in letters of agreementand/or contracts include:

1. Obtaining details of:● the owner and any representatives (names,

addresses, etc.);● the project (description of intent);● the site;● the proposed user (if different from the

owner).2. Checking:

● the seriousness of the owner and ability toproceed with the work (even a credit check ofsome clients might be prudent at this stage);

● whether any other architects are involvedwith the project (if so, they should beinformed);

● the availability of office resources for the job;● statutory requirements and consents necessary.

3. Discussing:● appointment and payment of consultants;● type of building contract to be used;● method of contractor selection;● single or separate contract system (see

page 66);● early appointment of contractor;● subcontractors and suppliers;● methods of insurance and security (bonds,

warranties);● limitation of liability and indemnities.

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AIA Document B141-1997: Standard Form of Agreement Between Owner and Architect

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4. Providing the owner with:● details of the owner/architect agreement and

information, including details of payment;● details of the architect to be in charge of the

project;● methods of communication;● other data which will help the owner

to understand respective duties and respon-sibilities and details of the constructionprocess.

The Architect’s Services during theDesign Phase

While the architect and client can agree to anycontractual agreement they like, it is alwayspreferable to reduce the scope and details of theagreement to writing. Furthermore, the use of stan-dard forms is highly recommended. These havebeen developed by all respective parties to the con-struction process and present a fair, balanced agree-ment that encompasses all the necessary details of aservices agreement which may be encountered.There is also an industry-wide understanding ofthe meaning of each of the articles, which helps inany disagreements over interpretation.

Without a standard agreement, key issues affect-ing the relationship—arbitration procedures, owner-ship of drawings, etc.—may be unclear. Similarly,if a standard form is amended or supplemented,care should be taken not to adversely affect therights of either of the parties involved, and legalcounsel is advised should such an unnecessary stepbe taken.

American Institute of ArchitectsStandard Forms

Clients may have their own contract, althoughthe AIA produces a range of agreements whichcan be used:

● B141-1997 Standard Form of Agreementbetween Owner and Architect

● B141/CMa Owner-Architect Agreement,Construction Manager-Adviser edition

● B151-1999 Abbreviated Owner-ArchitectAgreement for Projects of Limited Scope

● B163 Owner-Architect Agreement forDesignated Services

● B171 Interior Design Services Agreement● B181 Owner-Architect Agreement for Limited

Architectural Services for Housing Projects● B727 Owner-Architect Agreement for Special

Services● B901 Design/Builder-Architect Agreement

The Architect-Owner Agreement 1997Edition

There have been fourteen previous editions of thestandard form beginning in 1917, although thelatest 1997 format represents an important depar-ture from its predecessors. The document recog-nizes and details the architect’s duties. Ratherthan just defining the “basic services”, it:

● attempts to clarify mutual responsibilities;● quantifies respective roles;● provides a mutual waiver of consequential

damage;● determines the loss of profit after the architect’s

termination.

The document is more flexible than previouseditions, and provides benefits to both ownersand architects, while creating a better overallagreement.

The 1997 Edition: Owner Benefits

● The architect must keep all information relativeto the owner confidential.

● The architect must have no conflicts of interest.● The architect must produce a project manual

for every job.● Criteria must be established for certificates, and

better documentation must be kept.● The architect will meet with the owner on final

completion and in the post-construction periodto review facility operation.

● If the project exceeds the original estimates,redesign will be undertaken by the architectwithout cost to the owner.

The 1997 Edition: Architect Benefits

● Better project parameters for compensation.● Compulsory mediation.● Contingencies can be included in estimates.● Clearer involvement in the bidding phase and

preparation of change orders.● Ownership and use of drawings, including elec-

tronic materials.● Better solutions for owner nonpayment.

The 1997 Edition: General Benefits

● The agreement (terms, conditions and com-pensation).

● The scope of services.● Supplemental attachments.● A more explicit services description and quan-

tifications (e.g., number of site visits).● Categorization of services by type, not phase.● Linking compensation directly to services.

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In summary, the 1997 edition tries to createcloser communication between the architect andowner, promote careful negotiation (of both com-pensation and services) and thereby ensure mutualunderstanding of the agreement.

Scope of Services Replacing the original fivephases of work (or basic services), the 1997 edi-tion provides for sixty-eight possible servicesavailable to the owner divided into the followingcategories:

● Project administration services● Planning and evaluation services● Design services● Construction procurement services● Contract administration services● Facility operation services

Each category contains a range of potential ser-vices that may be assembled and tailored to eachindividual project.

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Project Administration Services

● Program management● Management and administration● Owner/consultant coordination● Project presentation● Special presentations● Evaluation of project budget● Schedule development and monitoring● Preliminary estimate of cost of the work● Detailed estimate of the cost of the work● Owner-supplied data coordination● Value analysis● Agency consulting

Construction Procurement Services

● Bidding/proposal documents● Reproduction and distribution of bidding/proposal

documents● Special bidding/negotiation addenda● Analysis of alternates/substitutions● Pre-bid conference/selection interviews● Bidding/negotiation● Bid/proposal evaluation● Contract award● Report of bidding/negotiation results

Contract Administration Services

● General administration● Submittal services● Site visitation● On-site project representation● Payment certification● Administration of testing and inspection● Supplemental documentation● Administration of changes in the work● Interpretations and decisions● Project close-out● Construction management

Facility Operation Services

● Maintenance and operational programming● Start-up assistance● Record drawings● Warranty review● Facility operations and performance meeting● Post-contract evaluation● Tenant-related services● Project promotion● Leasing brochures

Planning and Evaluation Services

● Programming● Space schematics and flow diagrams● Existing facilities surveys● Economic feasibility studies● Marketing studies● Project financing● Site analysis and selection● Site development planning● Detailed site utilization studies● On-site utility studies● Off-site utility studies● Environmental studies and reports● Energy studies and reports● Zoning processing assistance● Geotechnical engineering● Site surveying

Design Services

● Architectural design● Structural design● Mechanical design● Electrical design● Civil design● Interior design● Landscape design● Graphic design● Special design● Material research and specifications● Special furnishings design

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The Architect’s Compensation

A range of methods is available to ascertain com-pensation for architectural services. The followingare time based, reflecting the actual time spent ona project for which payment is calculated:

Multiple Direct Personnel Expense

The direct salaries of designated personnel aremultiplied by a factor representing benefits, over-head, and profit.

Multiple of Direct Personnel Expense

The salaries of designated personnel are multipliedby a factor representing overhead, and profits.

Professional Fee Plus Expenses

The salaries, benefits, and overhead of personnelinvolved in the project represent the expense. Thefee, or profit, may be agreed as a lump sum, a per-centage or a multiplier.

Hourly Billing Rates

Salaries, benefits, overhead, and profit are includedin the rate.

Other methods of calculating compensationare only indirectly tied to the actual time spent onthe project:

Stipulated Sum

This is expressed in a finite, dollar amount.

Percentage of the Estimate of the Work

Compensation is calculated as a percentage of theestimated or actual cost of the work.

Multiple of Consultant’s Billing

The bill of consultants hired by the architect ismultiplied by a factor that accounts for the latter’sadministrative costs, overhead, and profit.

Square Footage

The overall square footage of the building ismultiplied by an agreed pricing factor.

Unit Cost

Where appropriate, certain units, such as rooms,are multiplied by an agreed pricing factor.

Royalty

The architect’s compensation may be calculatedas a share of the owner’s income or profit gener-ated by the built project.The compensation calculation methods may beused in differing situations or combined on thesame project. Generally, the more uncertainthe conditions—unresolved owner requirements,unusual site conditions, experimental—the harderit is for the architect to calculate the amount oftime needed to accomplish the tasks. Accordingly,the time-based formulae are more appropriate.However, in some instances, such as publicly bidwork, there may be no opportunity for negotia-tion and the payment type may be prescribed.

Reimbursable Expenses

In addition to the compensation method agreedupon, the architect may charge for expensesdirectly incurred during the project, including:

● Transportation connected with the project● Fees paid for securing approvals● Reproductions, documents, postage, etc.● Overtime, if approved in advance by the owner● Renderings, models, and mockups requested by

the owner● Professional liability insurance in excess of nor-

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eAdditional Services

The agreement of services identifies a series of servicesthat are not included in the general scope of servicesand would be provided only if specifically designated:● Programming● Land survey services● Geotechnical services● Space schematics/flow diagrams● Existing facilities surveys● Economic feasibility studies● Site analysis and selection● Environmental studies and reports● Owner-supplied data coordination● Schedule development and monitoring● Civil design● Landscape design● Interior design● Special bidding or negotiation● Value analysis● Detailed cost estimating● On-site project representation● Construction management● Start-up assistance● Record drawings● Post-contract evaluation● Tenant-related services

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Project Administration Services

There are a number of activities associated withmanaging and administering an architecturalproject, including consulting with the owner,researching design criteria, attending meetings,communicating, and issuing progress reports. Itis the architect’s responsibility to coordinate hisor her own services with those of the architect’sconsultants.

Additional project administration activitiesinclude:

● Furnishing a project schedule● Considering the value of design, material, and

equipment alternatives and their impact onprogram, budget, and aesthetics

● Explaining the design to the owner● Submitting the design to the owner for evaluation● Helping the owner file appropriate governmen-

tal documentation pertaining to the project

Architectural Programming

An architectural program, or brief, helps to definethe scope, nature, scheduling, and cost of a pro-ject. It is the owner’s responsibility to furnish aprogram setting forth project objectives, includ-ing space requirements and relationships, equip-ment, and site details. However, the architect willprovide a preliminary evaluation of the informa-tion furnished by the owner pertaining to pro-gram, schedule, and budget, reviewing these forconsistency with the overall intent of the projectand determining if additional information is nec-essary to begin design.

For larger, more complex projects, the archi-tect, or a consultant to either the owner or thearchitect, may be retained to provide program-ming services to assist the owner in articulatingproject requirements. Many public sector clientsrequire such a programming phase. In these cases,the owner’s further requirements should be estab-lished by obtaining information on:

● Design objectives and criteria● Possible constraints● Space requirements and relationships● Future flexibility and expandability● Special equipment or systems required● Landscape or site requirements

Budget Evaluation

Once the requirements of the project are identi-fied, the architect is also responsible for preparinga preliminary estimate of the project’s costs. Thismay be calculated by:

● Area and volume method

● Unit use method● In-place unit method● Quantity and cost method

The method of cost calculation will dependupon the specific nature of the project.

If the estimate exceeds the owner’s budget, thearchitect must make recommendations to theowner to adjust the scope, quality and/or budgetof the project. Any evaluation of the owner’s bud-get for the project, and preliminary estimates ofthe project cost does not imply or warrant thatthese will match the actual bids of contractors.The architect must also be allowed to make esti-mates based on contingency factors and alternates.At this point, it may be useful to review potentialmethods of contracting for construction services.Although in some cases it may be too early tofinalize decisions on the project, it is useful toconsider the following matters together with theirpossible effects upon:

● Selection of the contractor (bidding ornegotiation)

● Mode of project delivery (traditional, design-build, bridging, etc.)

● Form of payment to the contractor● Use of bonus/penalty clauses● Use of construction manager● Rate of liquidated damages● Employment of consultants● Insurance, bonds● Use of separate or single contract systems● Additional architect’s services

Surveys

According to AIA Document B141, StandardForm of Agreement between Owner andArchitect (2.2.1.2), it is the owner’s responsibilityto provide all necessary descriptions of the site,and any further investigations which the archi-tect considers appropriate. This may be doneby employing the services of a land surveyor.However, the owner may seek assurance from thearchitect to undertake this work as part of thearchitect’s services.

Specific data should be provided to enable thearchitect to make an adequate assessment of the site.

Site Surveys

Site surveys should describe the physical and legalcharacteristics of the site and should include (asapplicable):

● Grades and lines of streets, alleys, pavements● Adjoining property and structure● Adjacent drainage● Rights of way

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● Restrictions, easements or encroachments● Zoning● Deed restrictions● Boundaries and contours of the site● Locations, dimensions and relevant data about

existing buildings● Trees and other improvements● Utility services and lines (public and private)

above and below grade

All information should be referenced to a pro-ject benchmark.

Note: Sketches, photos or video recordings ofthe site and surrounding area can prove useful forthe architect as a ready-reference source back atthe office, particularly if the site is some distanceaway.

Although provision of site information isgenerally the contractual responsibility of theowner, the architect should be assured of its accu-racy, as reliance on outdated or inaccurate datamight be attributed to architectural negligence.

Design Services

The architect’s design services on big projects mayinclude structural, mechanical and electrical engi-neering services, although more complex buildingswill necessitate the engagement of consultants.

Design services are divided into these categories:

Schematic Design

The architect provides conceptual ideas for theproject, illustrating the scale and relationships ofthe programmatic components. Materials mayinclude:

● Site plan● Preliminary building plans, sections, and

elevations● Study models● Perspective sketches● Electronic models● Preliminary advice on major building systems

and materials

Information that may be communicated at thisstage may include:

● Location of proposed project on site● Function and relationship of rooms and spaces

(including their areas and heights)● Primary elements (walls, floors, etc.)● Overall appearance/character of the scheme

Design Development

Once the schematic design has been approved bythe owner, along with an updated budget, the

architect should start preparing more detailed illus-trations and data related to the proposed design.

Any consultants who have been employed maygive assistance at this stage, providing integratedinput into the design process so that a finalscheme can be prepared for the owner’s approval,ready for the construction documents phase tobegin. A further updated budget must also besubmitted to the owner during this phase.

Submittals to the owner concerning the devel-opment of the design could include the following:

● Site plan● Floor plans● Elevations● Sections● Schedules and notes● Calculations● Preliminary draft of the project manual● Outline specifications● Other data (e.g., electrical, and mechanical

systems)

The importance and significance of decisionsmade at this stage should be made clear to theowner, and written approval to proceed obtainedbefore continuing to the next phase.

The Project Manual

During the design development phase, a projectmanual should be drafted. This will contain thebidding requirements and the contract docu-ments, including the technical specifications, butexcluding the drawings.

Construction Documents

When details of the project have been sufficientlydetermined and approved by the owner, the archi-tect will undertake:

● preparation of detailed working drawings and spec-ifications sufficient for construction purposes;

● assistance to the owner in securing biddinginformation, forms, contracts, and conditions(see page 67);

● any further changes in the projected construc-tion cost;

● assistance to the owner in filing for any govern-ment approvals (see page 51).

Drawings

Some offices develop standardized practices inrespect of working drawings and the constructiondocumentation phase.

At the beginning of the documentation phase,estimate the number and type of drawingsnecessary to complement the specifications, and40

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prepare a drawings schedule. This will facilitateoffice programming and improve the productionsequence.

Draw only as much as is necessary. Time andmoney are often wasted in the duplication ofmaterial which is adequately covered elsewhere(e.g., in the specifications or schedules). Again,careful planning at the outset can help to preventinefficiencies. Generally, information that relatesto quantity and location should be in the draw-ings, while that pertaining to quality, method,and result should be in the specifications.

Use standard methods of cross-referencingthroughout all projects so that employees becomefamiliar with their use.

Although the number and mix of drawings willvary from project to project, the basic range ofdrawings is as follows:Key drawings:● site plan● floor and roof plan● elevations● sections● details● schedules (e.g., doors, windows)

Structure and assembly drawing:● foundation layout● floor and roof layout● sectional structural details● relevant schedules (e.g., columns beams)

Mechanical drawing:● mechanical layouts● plumbing data and schedules● heating, ventilating, and air conditioning

layouts and data● stacks

Electrical drawings:● electrical layouts● electrical details and schedules

Make sure each sheet contains:● project title and location

● project number● sheet number and title● scale● drafter’s name● checker’s name● date (of issuance and revision)● north point (where relevant)● space for stamp● revision space● the name and address of the practice● space for owner’s approval signature

Build up a collection of standard details orschedules that may be used in future schemes.

Specifications

Because of their important interrelationship,drawings and specifications should be developedtogether to avoid any duplication or omission ofinformation. In accordance with the UniformSystem for Construction Specifications, DataFiling and Cost Accounting (AIA DocumentK103), specifications are split into sixteen parts,or divisions.

The MASTERSPEC system may also be usefulto the architect in the preparation of specifica-tions: this is a computerized resource based uponthe Uniform System and, at a time when it isbecoming increasingly difficult to keep up to datewith technical developments, represents a com-prehensive and current professional aid.

Great care should be taken in the preparationof the specifications, which should generallyeither be handled by one of the principals or aspecialist employed specifically for the purpose.

Specifications should be as concise and com-prehensive as possible to prevent the necessity oftoo many addenda and/or the passing of alter-nates or unit prices (see page 68). Furthermore,the use of specific trade names should be avoidedwhere possible, as this may unnecessarily restrictmaterials and product selection.

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ARCHITECTURAL ETHICS

Almost a century of debate about architectural ethics reflects in large measurethe evolution of the profession’s view of itself as it has transformed from noblecalling to competitive business. The result of those discussions codified in codesof conduct reflect the nature of professionalism in architectural practice.

What is a Profession?

Issues of ethical behavior inevitably raise the notion of professionalism and all itentails.While many would agree that architecture is certainly one of the majorprofessions, along with other fields such as law and medicine, the definition ofwhat that actually means is a little more elusive and bears some examination.Briefly, a profession is defined in Webster’s New Collegiate Dictionary as “a call-ing requiring specialized skill and knowledge and often long and intensiveacademic preparation.” More usefully, certain elements can usually be foundin professions which may be absent in other career pursuits, including arestricted field of practice, a combination of academic and practical training,high degrees of professional autonomy and collective responsibility, a repre-sentative national body and enforceable codes of conduct.1 It is the last cat-egory which is arguably pivotal to the operation of the professional body andwhich has caused problems in the last few years. Basically, codes of conduct,by providing specific guidelines for behavior, establish minimum standards forperformance which determine the actions of each individual within the pro-fessional group in relation to their clients, their fellow professionals, and ulti-mately the public they serve. The codes are usually developed throughconsensus, and are particularly important to a profession such as architecture.Unlike medicine and law, architecture is not concerned with such intangiblesas the maintenance of health and the preservation of freedom but with theprovision of a consumer service. As such, it is more susceptible to the pressuresof commercialism and the free market. Codes determining behavior in thearchitectural profession are established at various levels—by individual states,each of which maintains a licensing statute, by the American Institute ofArchitects and by the National Council of Architectural Registration Boards(NCARB).Although they cover some of the same areas, state requirements arespecifically concerned with competence and the protection of public health,safety, and welfare, while the AIA and NCARB Codes delve further into profes-sional behavior (and are, of course, only applicable to architects who are AIAand NCARB members respectively). Thus, the earlier AIA codes generally cov-ered issues such as competence, plan stamping, and unauthorized practicewhich are usually found in state codes, but also provided, among other things,specific regulations dealing with competitiveness and client solicitation.

The Development of the AIA Codes of Conduct

While the AIA itself was formed in 1857, it did not develop its first ethics codesuntil 1909 when it approved, after considerable discussion, the “Circular ofAdvice Relative to Principles of Professional Practice and the Canons of Ethics”at its annual convention that year.2 This document proclaimed that“Advertising tends to lower the dignity of the profession,” although it was theethics of competitions rather than advertising which held the profession’s

PRACTICE OVERVIEW

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attention that year, self-promotion being considered more “an exhibition ofbad taste rather than bad morals.” Interest grew rapidly though,and the codeswere revised regularly prior to World War II with the issue of advertising gener-ating numerous and often violently conflicting discussions. In 1918, the canonpreventing advertising was dropped after a particularly fierce debate, but wassuccessfully reinstated in 1927 when the Principles and Canons of former yearswere forged into “Principles of Professional Practice.”3 By 1945, the rules stiff-ened considerably as high-minded proponents of advertising-free practicesuccessfully persuaded their colleagues that restrictive codes were an essen-tial component of a respectable profession.These codes stated unequivocallythat “An Architect will not indulge in false publicity,” and formed the basis forrequirements which remained in place until 1978. By this time, they were veryexplicit in outlining what an architect could or could not do, particularly withregard to advertising and work solicitation. “Standards of Ethical Practice”(J330) established a number of canons that set forth obligations to the public,to the client and to the profession. They collectively codified a professionalethos that was intended to separate the architect from the more pragmaticattitudes and actions of the marketplace.

The End of the Mandatory Code

Unfortunately, the codes, as well as the codes of other professional bodies,began to raise issues of unlawful restraint of competition during the 1970s fol-lowing a 1972 consent decree signed by the US Justice Department.This culmi-nated in the Mardirosian case, which led to the demise of the code which hadfor so long helped to determine architectural behavior. Briefly, matters came toa head when a Washington architect was suspended for one year from theAIA in 1977 for alleged violation of the supplanting clause. He challenged thedecision on the grounds that the AIA was imposing a restraint of trade whichviolated the Sherman Anti-Trust Act. When a federal District Court judge ruledin his favor, the plaintiff was reinstated into the Institute and received a $700,000out-of-court settlement. The AIA promptly withdrew the mandatory codesbefore any further challenges were brought and replaced them with a set ofpurely voluntary guidelines,“Ethical Principles” (63400),which were published in1980. This move effectively transferred the conscience of the profession fromthe collective level to the individual level in matters concerning advertisingand job competition and led to some interesting developments. Advertisingwas always the most common infraction of the old rules,4 so the lure of unre-stricted opportunities led some firms to dabble in full page ads and promo-tional exercises which drew reactions from their colleagues ranging from mildbemusement to high dudgeon. Additionally, at least one regional director wasforced to deal with a practice in his state which was systematically contactingthe clients of other architects and offering to work for lower fees. Similar unset-tling incidents were rumored, although no official action could be taken as theprofession was no longer allowed to regulate such behavior.

The “Code of Ethics and Professional Conduct”

The broad and rather vague contents of the “Ethical Principles” were felt bymany to be too insubstantial to give members adequate direction, so, afterthree years of careful preparation, the AIA published the current “Code ofEthics and Professional Conduct” which was intended to provide more specificguidelines without violating federal law. The document is divided intoCanons—broad principles of conduct, Ethical Standards—specific goalstowards which members should aspire, and mandatory Rules of Conduct,transgression of which can lead to disciplinary action by the AIA’s National

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eJudicial Council. This body interprets and enforces the code, although it doesnot become involved in fee disputes or cases of client dissatisfaction with amember. It does, however, issue advisory opinions which are nationally distrib-uted to AIA Chapters to provide some guidance on ethical issues.5 However,all units of the organization are acutely aware of the dangers of establishingrules which transgress any part of anti-trust legislation. While establishing somemuch needed structure and guidance, the code by necessity avoids anyrestrictions on practice behavior which, it has been argued in the past, goes tothe very heart of professionalism—the means by which architects deal withtheir clients and their peers, and how they present themselves to society.

Is There an Ethics Problem in the Profession?

While the code has raised some issues with regard to its implications for com-petence and how that relates to liability,6 it still ensures that the choice ofarchitects’ attitudes towards advertising and job selection remain solely a mat-ter of personal choice. Given the pressures of commercialism, have membersstepped over the boundaries of behavior established in former codes andthreatened the notion of professionalism in architecture?

Some members of the profession evidently believe so in the wake ofcode change. The results of a poll conducted among readers of ProgressiveArchitecture7 indicated a general concern about ethical abuses. However, noclear-cut agreement on correct ethical behavior emerged, except in obviousareas like public safety, the unauthorized stamping of drawings, the embellish-ment of credentials, and the padding of bills—all of which are coveredunder the new code and suggest problems of enforcement, not omission.Interestingly, concerns expressed by older architects diverged from those ofyounger members. The latter perceived a greater amount of unethical behav-ior and focused, not surprisingly, on low pay for recent graduates and falsepromises of advancement as areas of greatest concern. Older practitioners fortheir part felt that moonlighting was a problem,although the notion of accept-ing gifts from contractors—forbidden under the old rules—seemed to be rela-tively acceptable to both age groups.

The profession was split on the issues of advertising and solicitation of workfrom a client who has already agreed to work with another architect.Youngerpractitioners distinguished themselves by, on the one hand, disapproving ofadvertising more than their older counterparts, but being more receptive tothe idea of competition in client solicitations. In both instances, though, respon-dents did not collectively express strong objection to either area as a majorsource of ethical breach.

Perhaps this indicates a softening of professional attitudes towards practiceswhich are considered commonplace within the rest of the commercial world,suggesting that the restrictions formerly maintained on advertising and clientsolicitation were outdated and inappropriate. Certainly, such arguments havebeen made by some members since codes first appeared.

Alternatively, perhaps the more restrictive codes were not really necessary.While the flurry of advertising which came out in the wake of the Mardirosiancase caused a stir, it was a fairly short-lived phenomenon, and most examplesseen these days are mild in content and limited in distribution. Many architectsbecame aware that “big bang” advertising was not the most cost-effectiveway to secure commissions. Similarly, there appear to have been limited prob-lems with supplanting in the last few years. While some complaints have beenmade to the AIA, the considerable practical problems associated with takingover another architect’s work—liability, copyright, the need for hold-harmlessclauses, etc.—seem to have largely obviated the need for additional pressure.

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Summary

As codes of conduct developed in the architectural profession, the issues ofadvertising and solicitation,once the fulcrum of great debate and contention,faded from interest as professional attitudes have evolved. Despite fundamen-tal changes in the codes precipitated by actions of the judiciary, the removalof restrictions addressing the two areas do not appear to have created anymajor threats to professional practice. However, this is not to say that problemsdo not exist or that the current code is perfect. Approximately 78 percent ofthe respondents to the Progressive Architecture poll believe that, despite rein-forcement, it is still insufficient to maintain necessary standards of ethicalbehavior, notwithstanding the lack of any substantial evidence of major prob-lems in the profession. Perhaps this indicates a desire among architects forgreater restrictions and clear-cut boundaries demarcating professional behav-ior. Perhaps it is a fear of too much unrestrained competition or perhaps simplya desire to see high personal standards implemented throughout the profes-sion. Whatever the reasons for concern, it is unlikely that debate on the issueshas ended. Regardless of legal and economic pressures, the appropriate ethi-cal behavior of architects has been a topic of lively discussion for nearlyone hundred years and will inevitably surface again at some future AIAConvention.

References

1. Ware, P.,“The Sociology of the Professions,” Chapter Two.2. Osman, M., “To Advertise or Not to Advertise? Footnotes from History,” AIA

Journal, December 1978, 55–7.3. Coxe, W., Marketing Architectural and Engineering Services Van Nostrand

Reinhold, 1971, 9–35. The book contains an excellent account of codesrelating to advertising since the beginning of the century.

4. Coxe, W. op. cit.5. The National Judicial Council has issued two Advisory Opinions: (1) Mis-

leading Prospective Client—Uncompensated Design Services,30 June 1987;(2) Conflict of Interest—Referral Fees, 30 June 1987.

6. Coplan, N.,“Law: AIA Code of Ethics,” Progressive Architecture, March 1987,61–5.

7. Progressive Architecture, February 1988, 15–9.

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Is getting a license really that important toan architect, especially as I have a Mastersdegree and several years’ experience?

Architecture is a restricted area of practicein all states, although the definition of whatconstitutes “architecture,” “the practice ofarchitecture,” or the title “architect” may vary.For example, any project under 50,000 cubicfeet that does not affect public health andsafety does not constitute architecture inmany states, which excludes the majority ofhousing work.

Anyone wishing to use the title “architect”must be registered in each state where prac-tice is undertaken and abide by the rulesestablished in each administrative state’s code(see page 31).

An important aspect of licensure is the abilityto approve design and construction drawings

by the imprimatur of a stamp. All projectsare required to be under the supervision andcontrol of the architect, who will bear theresponsibility for any failure attributable todesign failure.

Anyone wanting to practice as an architectmust meet state requirements which frequentlyrequire:

● an accredited degree;● a period of internship;● successful completion of a rigorous

examination.

Some, but not all, states offer reciprocity toenable practice outside of the architect’sstate of registration. The National Council ofArchitectural Registration Boards provides anationally recognized level of qualificationthrough its requirements that facilitates prac-tice beyond the confines of the home state.

Question & Answer

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4Law and the design phase

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PROPERTY LAW

Certain legal rights, obligations, and restraintsconcerning land should be considered in thedesign process as they may affect:

● the choice of site for a particular development;● the character of the development of the site that

has been selected;● the methods and procedures to be adopted in

any proposed development.

Land law varies from state to state in its detailsand specific applications, but some general obser-vations on a few important aspects of land law canbe made.

Ownership

Ownership of land is expressed by title, which canbe transferred from one party to another. Prior topurchase, a prospective owner normally has aninvestigation carried out into the background ofthe property:

● to ensure that the prospective seller actuallypossesses a transferable title to the land;

● to check whether any encumbrances are attachedto the title which might affect the future enjoy-ment of the land;

● to discover whether any governmental statutesor regulations exist which restrict developmentor usage of the land (see page 51).

Transfer of ownership is accomplished by deed,of which there are three basic types:

1. General warranty2. Special warranty3. Quitclaim

General Warranty

By this kind of transfer, the transferor remainspersonally responsible for the title indefinitely.Although this is the most secure form of deedfrom the buyer’s point of view, it is rarely granted.

Special Warranty

This guarantees that the land has not beenencumbered during the current ownership, butgives no assurances in respect of the title prior tothat period. This is the most common form oftransfer deed, and its character requires that thetitle be carefully investigated.

Quitclaim

If a quitclaim is used, the owner promises nothingexcept that he or she will not contest the new

ownership. This form of transfer is inadvisable inmost circumstances.

Absolute and Acquired Rights in Land

Certain rights accrue to the owner of the landwhich require no legal formality beyond thetransfer deed (e.g., lateral support). Other rightscan be of great importance, but must be formallyacquired. These rights are often created by ease-ments or covenants.

Easements and Covenants

These are legally enforceable, and attach certainconditions to specific land.

Easements are legal rights enjoyed by one partyover the property of another. They are usuallydescribed in a deed or in a license, but in some cir-cumstances they can be implied by usage over a longperiod (e.g., five to thirty years’ continual use hasbeen considered sufficient to imply an easement).Easements are frequently sought with regard to:

● Access● Light● View

Restrictive covenants restrain an owner fromundertaking certain actions in relation to his orher land. They are usually established by a previ-ous owner (e.g., the developer, if the land formspart of a general development) and they are oftenintroduced in an effort to protect the character ofa neighborhood, or to maintain property values.Restrictive covenants may be used:

● To prevent fence building● To assure minimum levels of aesthetic or archi-

tectural appearance● To prevent major alteration or change to exist-

ing buildings● To prevent tree-lopping

In certain circumstances, easements can besought by a new owner in connection with theproperty of a neighbor (e.g., in order to dig outfoundations close to the boundary). A license forthis purpose should be requested and may involvemonetary consideration.

A prospective purchaser of land should ensurethat a thorough check is carried out by a suitablyqualified professional, to familiarize the buyerwith any easements or covenants which may existand which may affect the land’s usage. This inves-tigation should also include searches for otherencumbrances (e.g., unpaid mortgages, outstand-ing liens, etc).

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Other legal provisions exist which can affect therelationship between neighbors, and the liabilityfor persons entering upon the land. These include:

1. Spite fences2. Tree ordinances3. Nuisance4. Occupier’s liability

Spite Fences

In some states, if a landowner maliciously erects ahigh fence which interferes with a neighbor’s land(e.g., by causing excessive shading or view block-ing), the courts can order the fence to be removedand allow the offended neighbor to claim dam-ages. Other states refuse to interfere in the case ofa spite fence on the basis that a landowner shouldhave free use of the land owned. However, thereappears to be a trend toward some control of spitefences.

Tree Ordinances

In some localities, where a view is blocked byexcessive foliage from a neighbor’s tree, a reason-able request can be made to remove the obstruc-tion, with costs to be shared between the twoparties. Tree Commissions are sometimes set upto decide these matters in case of dispute.

Nuisance

Ownership of property generally entitles theowner to enjoy the land without interference byneighbors. Sometimes the activities of one partyaffect the enjoyment of the other to the extentthat legal action might be taken to prevent furtherdisturbance. An action for nuisance might bebrought in respect of:

● loud noises;● antisocial activities (e.g., excessive vibration

caused by pile-driving);● pungent odors or smoke;● unsightly appearance of neighboring property.

It is important to remember that nuisance isclassified as a tort, and in each case the court is con-cerned to discover whether a reasonable person

would find the act complained of to be disturb-ing. The court will often also consider the con-duct of the plaintiff and the extent and durationof the alleged nuisance in reaching its decision.Another consideration is the benefit to society atlarge (e.g., industrial disturbances) which will beweighed against the disturbance caused to theplaintiff.

Occupier’s Liability

Occupiers have a duty of care to all persons law-fully on their premise, and the duty varies accord-ing to the classification of the visitor:

Invitees

These are owed the highest duty of care by theoccupier, who is responsible for those hazardsknown to exist, and those which could reasonablyhave been revealed. The category of invitees doesnot include social guests.

Licensees

A licensee is generally a person who comes ontothe premise for personal reasons rather than forthe purposes of the occupier, but with the occu-pier’s consent (e.g., sales representatives). Socialguests fall into this category. The occupier isobligated not to subject licensees to unreasonablerisks, but this duty is reduced if licensees are inany way partially responsible for the injuries theysustain.

Passers-by

Boundaries should be clearly demarcated, andactivities on the property conducted so as to showreasonable care in avoiding injury to passers-by.

Trespassers

Trespass may be defined as the unauthorized trans-gression of another person’s land, including theairspace above and the ground below. Trespassingis classified as a tort (see page 6).

Even individuals who enter premises as tres-passers are owed some duty of care, although thisis reduced, particularly if the trespasser is intenton malicious damage. However, attempts to phys-ically abuse the intruder should be limited to per-sonal protection: courts have in the past held thatprotection of property alone does not justifyextreme physical assault upon a trespasser, and insome cases high damages have been awardedagainst the occupier.

The duty to child trespassers is generally higherthan to adults because children may be less aware50

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of property boundaries and inherent dangers thanadults. In particular, building sites should beadequately secured and posted.

The above classifications are highly technical andit is difficult for ordinary persons to be sure of thestatus of all people who enter on their land. Forthis reason, occupiers should exercise great care inkeeping their premises reasonably safe.

GOVERNMENTAL RESTRAINTS

In the early stages of each project, attentionshould be paid to the various legal restrictionswhich might affect the scheme. Some restrictionsapply to all projects, whereas others are applicableonly to projects of a certain type, or in a particularlocation.

General Provisions

Although these vary according to state and local-ity, most building operations will require:

● a zoning permit (see page 52);● a building permit (see page 56);● services connection (e.g., gas, electricity, water,

sewage, telephone, etc.).

Special Provisions

In addition to the general requirements, someprojects will require additional attention:

● OSHA● HUD

OSHA

The Occupational Safety and Health Administrationwas set up by an Act of 1970 which makes it ille-gal to work in an unsafe place. OSHA has theauthority to enforce safety standards, and toimpose high financial penalties for violation ofsafety regulations. It enforces its standards by car-rying out inspections of workplaces where acci-dents have occurred, or from which complaintshave been made by employees. Spot checks are

also made by OSHA officials to promote wide-spread adherence to the regulations.

OSHA Checklist Architects are particularly con-cerned with section 1910 of the OccupationalSafety and Health Act. The following points helpto avoid problems with conformance to theOSHA regulations:

1. Obtain clear instructions of intended use fromthe client so that OSHA provisions can beconsidered in the early stages of design.

2. Ensure that the client is aware that compliancewith OSHA can unavoidably increase the costof the project.

3. Note that, in the case of a conflict betweenOSHA provisions and local building codes,the more stringent regulations prevail.

Other governmental departments may haveadditional requirements. For example, theDepartment of Housing and Urban Developmentwas created in 1965 to help alleviate problems inurban areas by the promotion of major federal aidprograms coupled with financial aid and technicalassistance. If HUD is providing an input to a par-ticular project, design guidelines may be laiddown with which the architect is expected tocomply.

Specific Types of Project

Particular projects are sometimes affected by spe-cific legal constraints and need approval and/orinspection by individual state authorities whichmay impose their own standards (e.g., hospitals,schools, factories, etc.).

Location

Some restrictions affect all proposed projectswithin a specified area, particularly districts desig-nated as historic preservation zones. In these,locally elected commissions develop and enforcerules and standards for future development. Insome cases, individual buildings are singled out as

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Inception Finalized design

LocationBuildingtype

Generalcontrols

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Figure 4.2

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historic landmarks, either at a federal, state or locallevel, and this effectively prevents their demolitionor alteration unless an appeal is successfully madeaccording to the designated procedures. Architectsworking in older districts or on the alteration orextension of older buildings should check first todiscover whether the preceding restrictions havebeen imposed, and consider how extra requirementswill affect the design and progress of the project.

In assessing each project at the outset, the archi-tect should ensure that the owner is aware of thescope of the architect’s services in respect to gain-ing approvals so that there is no misunderstandingshould there be a need for additional payment(e.g., where a zoning appeal is necessary). It ismost inadvisable for an architect to assure a clientthat the necessary approvals will be granted with-out difficulty. Attention to these matters at theearly stages of the project will help to prevent anylater decline in the architect/owner relationship.

ZONING

Definitions● Zone: to mark off into zones; specific, to divide

(a city, etc.) into areas determined by specificrestrictions on types of construction, as intoresidential and business areas. (Webster’s NewWorld Dictionary).

● Zoning Permit: a permit issued by appropriategovernmental authority authorizing land to beused for a specific purpose (AIA Glossary ofConstruction Industry Terms).

General

Zoning activity is the responsibility of individualstates which pass zoning legislation as part of theirpolice powers to protect the community. UnitedStates’ zoning originated in the enabling acts ofthe 1920s which placed power to create andadminister public land use regulations in thehands of local authorities. The most commontype of zoning became known as Euclidean zon-ing; it consisted of establishing specific districts orzones for particular uses, e.g., commercial, manu-facturing, residential, etc. These zones were thenbroken down into smaller units, e.g., light andheavy industry.

Scope

In addition to restricting use, the zoning regula-tions grew to cover matters such as:

● Density● Light

● Air● Space● Height of buildings● Bulk of buildings● Plot sizes● Aesthetic considerations

Model Land Development Code

Although the Euclidean model was, and is, incommon usage, cumulative zoning (i.e., allowingcarefully regulated, multi-use districts) has gradu-ally developed since the 1920s. In 1975, theModel Land Development Code was approved bythe American Law Institute. The MLDC is only arecommended code, but some authorities haveadopted some of its recommendations whichinclude:

● substantial responsibility for administering thedevelopment scheme should lie with localauthorities;

● state authorities should provide some input toavoid state problems resulting from purely localadministration;

● less rigid approaches to zoning;● more stress on the environmental and aesthetic

considerations of zoning.

Procedures

In many communities, the building departmentdeals with zoning requirements, although wheresize and complexity of a community warrant aseparate administration, zoning officers are some-times appointed.

Applications for zoning and building permitsare made simultaneously. If the applicant’s requestfor a zoning permit is rejected, appeal proceduresare generally available (see page 53). However, anappeal may not be the only alternative if a pro-posed project fails to match zoning requirements:procedures allowing greater zoning flexibility areavailable in many localities. These include:

1. Variances2. Special use permits3. Conditional permits4. Rezoning

Variances

Variances may be granted to enable land to beused for a different purpose than the categorystated in the zoning ordinance. Specific require-ments vary, but generally the applicant must show:

a. that exceptional circumstances exist;b. that strict application of the zoning ordinance

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c. that the granting of the variance would not bedetrimental to the public at large, or to thoseowning neighboring property.

Other restrictions often apply to the grantingof variances.

Special Use Permits

Many localities make provision for the issuance ofspecial use permits in given circumstances, whichmay be expressed in specific or general terms bythe zoning ordinance.

Conditional Permits

In some cases, permission may be granted by thezoning authority contrary to the ordinance, pro-vided that the applicant agrees to fulfill certainconditional requirements (e.g., noise control, pro-vision of fences, etc.)

Rezoning

When an owner cannot match either the zoningrequirements, or the conditions for a variance or aspecial use permit, application may be made to havethe area in question rezoned. This is a difficult pro-cedure especially if, as is often the case, neighboringlandowners would suffer hardship as a result.

Common Features

Zoning is a complex and detailed field which canvary considerably from place to place. Careshould be taken to gain an understanding of thezoning law which applies to the locality of a pro-posed project. However, there are several featurescommon to many local zoning policies including:

1. Nonconforming uses2. Floating and bonus zones3. Environmental impact statements4. Green belt/open space zoning5. Conservation of historic buildings and land-

marks

Nonconforming Uses

Where an existing use failed to conform with newzoning segregation policy, the tendency was toeliminate that use. This approach caused consid-erable problems, and now several areas allow non-conforming uses to continue if they were lawfuland existing prior to the new zone being estab-lished. Conditions for nonconforming uses varyfrom one locality to another.

Floating and Bonus Zones

Floating zones are sometimes located within spec-ified zones to provide a measure of flexibility in

future development. Bonus zones allow possibledispensation from the requirements of the zoningordinance, provided that certain extras or“bonuses” are built into the project for the benefitof the community. For example, certain buildingsin New York have been allowed to violate aspectsof the ordinance on condition they provide publicplazas or shopping arcades.

Environmental Impact Statements

These have been developed in some areas as ameans of protecting and improving the environ-ment by requiring detailed accounts of probableenvironmental consequences of certain zoningdecisions. The statements are concerned withissues such as:

● Pollution● Natural resources● Coastlines and scenic features

Green Belt/Open Space Zoning andSmart Growth

This type of zoning is gaining support in theUnited States and it provides for the maintenance ofopen spaces, free from development and restrictedto specific activities, e.g., recreation.

In recent years, states have enacted SmartGrowth legislation, which attempts to controlsuburban sprawl, enhance public transportationand encourage sustainable growth.

Conservation of Historic Buildings andLandmarks

Increasingly, federal, state or local governmentauthorities are taking steps to preserve historicdistricts, or individual historic buildings. Wherethis type of land use control exists, there are oftenprovisions to alleviate the possible financial bur-den on the owner.

Appeals

A Board of Zoning Appeals is usually establishedin each locality and given the power to modify,reverse, or uphold zoning decisions. AppealsBoards are also usually empowered to grant vari-ances and special or conditional permits. Theduties and powers of the local Appeals Boards andthe procedure which they must follow vary fromplace to place, but are generally defined in the rel-evant ordinances.

Appeal Procedure

Generally a Notice of Appeal must be made on theappropriate form which may require information

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and enclosure such as:

● Name and address of appellant● Identification of property● Name and address of agent (if any)● Affidavit of appellant or agent● Date of decision appealed● Proposed use of property● Present use of property● Zoning classification● Estimated cost of construction● Copy of the decision against which the appeal

is made● Statement of grounds of appeal● Certified plan survey● Plans and drawings of the scheme● Proof of ownership● The requisite filing fee

Other information and enclosure may berequired, and some documents may have to besubmitted with a specified number of copies.Generally, all zoning appeals must be made withinthe time limit stated in the relevant ordinance.

In the event that the appellant is unsuccessfulin the appeal, there may be a further applicationto the regular courts in certain limited circum-stances (e.g., if the Board of Zoning Appeals actedbeyond the scope of its authority).

BUILDING CONTROL

Most construction projects have to conform to therequirements of the local building inspectorate,

which are expressed in the form of a buildingcode. Building codes vary in their scope and cov-erage, but tend to concern the following areas:

● Health● Safety● Welfare

Typical codes include sanitary provisions, fireprotection, structural requirements, etc. To ensurethe code provisions are complied with, buildingpermits are required for all building work (with afew exceptions: see page 56).

Buildings are divided into use or occupancygroups according to their proposed purpose. Eachcategory has a separate set of requirements whichmust be matched in addition to the general provi-sions which apply to all building work. The occu-pancy groups may include:

● Assembly● Business● Factory and industrial● Institutional● High hazard● Mercantile● Residential● Storage

Although a number of states have enactedstatewide provisions for certain types of building,building control in the United States is predomi-nantly carried out under the authority delegatedby each state to the individual locality. Although

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Zoningdecision

Decision toappeal

Submit noticeto appeal

Approved Rejected

Proceedto build

Yes No

Appeal tocourts

Yes No

Certain matters only

Specified time period

Figure 4.3

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the level of uniformity has been raised by thedevelopment of the International Building Code,this means that each local authority can developand administer its own individual code, whichgenerally consists of several sections, dealing with:

● Building● Electrical● Plumbing● Heating, ventilation, and refrigeration● Housing● Fire

In addition, most localities have separate FirePrevention Codes which are administered by thelocal Fire Department.

Types of Code

Building code requirements can be expressed indifferent ways as:

1. Specific regulations2. Functional requirements3. Performance standards

Specific Regulations

There are basic statements of a direct nature, giv-ing a fixed and clear standard providing a limitedrange of solutions and little flexibility of choice.

Functional Requirements

These give complete freedom to provide a solu-tion by making very generalized requirements,without indicating how the desired level of per-formance might be achieved (e.g., buildingsshould be designed and constructed so that if afire breaks out, everybody can evacuate the build-ing and immediate area in safety). Despite theirflexibility, functional requirements are sometimescriticized because of the lack of direction in theirdemands.

Performance Standards

These provide an intermediate alternative to theother forms of regulation by providing a measur-able and precise account of the performance thatis required, but leaving it to the designer to decide.

The Model Codes

In an effort to assist local authorities in the devel-opment of building codes, several model codes weredeveloped and published by groups concerned withthe building control process, including:

● The Uniform Building Code, published by theInternational Conference of Building Officials(ICBO)

● The National Building Code, published by theBuilding Officials’ Conference of America(BOCA)

● The Southern Standard Building Code, pub-lished by the Southern Building Code CongressInternational

Recently, the three major building codes havebeen consolidated into a single model codeknown as the International Building Code, pub-lished in 2000.

The model codes are widely used in the regula-tory process but, owing to their voluntary status,each authority may amend, alter, or ignore themodels as they wish. Out-of-date provisions havealso been identified as a problem. Architectsworking over a wide geographic area should takecare in checking the regulatory requirements spe-cific to each project during the early design stagesand, in the event of uncertainty, contact the rele-vant building department.

Standards

The building codes are a tabulation of acceptedstandards in building practice, and are developedby reference to organizations which test and giveofficial approval to new building materials andtechniques. The opinions of each organization arenot binding upon local authorities, but the morerespected of these tend to be widely accepted,including:

● The American Society for Testing Materials(ASTM)

● The National Fire Protection Association(NFPA)

● The American National Standards Institute(ANSI)

● United States Department of Commerce(USDC)

Accessibility Guidelines

Various forms of federal civil rights legislation,including the Americans with Disabilities Act(ADA) and the 1988 Federal Fair HousingAmendments Act, ensure accessibility to a widevariety of settings. Individual states may alsoenact more stringent requirements.

ADA

The Americans with Disabilities Act AccessibilityGuidelines (ADAAG) 1990 establish require-ments for accessibility for public accommoda-tions, including governmental offices, privatebusinesses, and public transportation facilities. Theguidelines are developed by the US Architectural

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and Transportation Barrier Compliance Board(ATBCB) and are enforced by the US Departmentof Justice (DOJ). Some state and local buildingcodes have been certified by DOJ as equivalent.However, ADAAG are sufficiently ambiguous inplaces to warrant diligence in their interpretation.DOJ provides technical assistance through vari-ous materials available through its website and atelephone hotline: 1-(800)-514-0301.

1988 Federal Fair HousingAmendments Act

This legislation applies to certain types of privately-owned multifamily housing. It ensures accessibilityof public accommodation spaces and the adapt-ability of dwelling units. Specific requirements areenumerated in the Fair Housing AccessibilityGuidelines adopted by the US Department ofHousing and Urban Development (HUD). Statesmay also enact their own adaptability legislation.

BUILDING PERMIT APPLICATION

Each locality administers its own building regula-tions and specifies the procedures which appli-cants must follow to obtain a permit. Outlinedhere are some common aspects of the proceduresfollowed in many localities, but architects anddevelopers should take care to discover the appli-cation procedures relevant to the locality of theproject. Any questions should be directed to therelevant building department. Architects requirewritten authority of the intent to make a permitapplication as the landowner’s agent.

Need for Permit

Most building work requires a permit including:

● Construction● Demolition● Occupancy● Heating and cooling installation● Moving of buildings● Alterations

Exemptions are limited to minor alterationsand ordinary repairs where:

1. no work of a structural nature is proposed, and2. health and safety are not affected.

Applications for permits usually consist of thefollowing:

● The completed form of application whichincludes a description of the work, location,occupancy use, and other information requiredby the individual building department

● A plot survey showing proposed and existingbuildings, distances to lot lines, and accurateboundary line information, etc.

● Building plans including drawings and specifi-cations of sufficient size and detail to show thecharacter and nature of the work (foundationplans, floor and roof plans showing exits, etc.)

● Additional details, e.g., structural, mechanical,electrical drawings, computations, stress dia-grams etc., structural calculations and provi-sions for fire resistance

● The required fees

The building inspectorate will consider theapplication and either:

● issue a building permit;● reject the application in writing, specifying rea-

sons for the rejection.

If a permit is issued, work must generally beginwithin a fixed period and be completed within aspecified time.

A notice signed by the building inspector con-firming the issuance of the permit must generallybe displayed on the construction site.

The building inspector has the right to enterthe site at any reasonable time to check that thework is in compliance with the code. Requiredinspections are likely to be undertaken at impor-tant stages in the construction process, and duenotice must be given to the inspector before suchwork begins. These stages may include:

● Foundations (trench, reinforcement, weather-proofing, etc.)

● Concrete slabs and framing● Roofing● Electrical work● Gas piping and fixtures● Plumbing and sewer connections● Heating, ventilation, and refrigeration● Plastering (interior and exterior)

The cost of tests which are ordered by thebuilding inspector in connection with theseduties must be borne by the owner.

Certificate of Occupancy

When the work is completed, a certificate of occu-pancy must usually be obtained before the build-ing can be used. This certificate confirms that allthe building regulations have been compliedwith, and must be available for inspection of thepremises at all times.

If a part or portion of the work is ready foroccupation before the completion of the projectas a whole, a temporary certification may beissued for the part of the work concerned.56

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Variations

Where there are practical difficulties in carryingout the requirements of the building code, theinspectorate may, upon written request, vary ormodify it as long as the spirit of the law is upheld,and health and safety provisions are not affected.

Violations

If at any time during the construction process theinspector feels that the work is not sufficient tosatisfy the building code, the contractor will berequired to amend the work before further certifi-cation. In certain instances, the building permit

can be revoked, and a Stop Work Order may beissued if the inspector considers the violation tobe sufficiently serious.

Appeals

If an application for a building permit or a varia-tion is rejected, there is generally provision forappeal to a Board of Appeals which is empowered touphold, reverse, or modify the inspector’s decision.

If the appellant is not content with the Board’sruling, a court action might be considered if thereare sufficient grounds. Advice of legal counselshould be sought before such action is taken.

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Is the work“building”?

Apply forbuilding permit

Ask buildinginspectors

Beginbuilding No Yes

No Yes

Don'tknow

RejectConform

Apply to Courts

Inspe

ctio

ns

Yes No

Apply for variance

Begin building

Building complete

Owneroccupies

Certificate of occupancy

Yes No

Appeal

Yes No

Figure 4.4

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THE CASE FOR COPYRIGHT

The 1980s sparked some interesting cases involving architectural copyright,peppered with well-publicized disputes involving such personalities as StevenHoll, Donald Trump, and Arquitectonica. These cases revolved around theargument that architects provide a service, not a product, and therefore own-ership of the ideas embodied in the end result—the buildings—could not passto the owner without specific agreement.

Interesting as the issue was, most of the cases and, ultimately, interest fizzledout until the latest attempt to create legal safeguard. The US joined the BerneConvention in 1989 and, to align with its international provisions (which holdcopyright as a natural rather than a statutory right), Congress enactedthe Architectural Works Copyright Protection Act of 1990. The new actreplaces legislation that primarily protected the drawings (rather than theembodied ideas), and has now been in place long enough for us to assess itseffectiveness.

Small Scale

The 1990 act provides valuable protection for architects in a specific condition.It prevents their designs as well as their drawings from being reused withouttheir permission or compensation. However, it has raised some interesting ques-tions as to the definition of “architectural works” (for example, churches andgazebos are included, but parking garages, grain silos or even freestandingwalls may not be), what actually merits copyright protection and, most inter-estingly, what constitutes real originality.

The act states specifically that copyrightable matter must be “an originalwork of authorship,” although quality, aesthetic merit, ingenuity, and unique-ness are not necessarily factors.What is important is that the work must containa “certain minimum amount of original creative expression,” and that copy-right registration cannot be based on standard designs such as commonarchitectural molding or features, nor upon design elements that are function-ally required. This creates a wealth of opportunity for dispute, particularly insmaller projects with few design variables such as houses, where permutationsof bathrooms, kitchens, structural walls, windows, etc.—all arguably functionalrequirements—are relatively limited. However, it is in the house building industrywhere the issue of originality seems to be most intently debated.This is ironic,ashousing is not a field traditionally dominated by architects (the AmericanInstitute of Architects once estimated that as little as 1 percent of Americansingle family houses were designed by architects), nor one celebrated forwidespread design originality, but it is the housing realm where issues of origi-nality may ultimately be decided.

Three recent disputes focus on the same scenario: A home-building com-pany applies for and receives copyright protection for their model homestyles—the “Lakeside Colonial,” the “Traditional Saltbox,” etc.—and then suesanother home-building company that subsequently builds something strikinglysimilar. The cases, none of which have yet found resolution in the courts, sug-gest a major shift in home-building habits and create some potentially interest-ing implications for architects in particular and the design industry as a whole.First, the notion of jealously protecting the design integrity of, say, the “Lakeside

PRACTICE OVERVIEW

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Colonial” tends to fly in the face of traditional house-building habits of the pastcentury. House plans and styles have been published freely in newspapers,journals, and specialty magazines beginning in the 1920s—even Frank LloydWright once published some model houses for general consumption—with theintention of giving owners alternatives to use when discussing a new housewith a builder. (And, of course, the discussion of a particular model or housingtype, with or without modifications, is just as likely to involve the brochures ofnumerous home builders collected by the prospective owner.)

Second, the kinds of works submitted for and receiving copyright protectionscarcely fall into the category of cutting-edge design, limited as they are inscale,budget,and, in many cases,architectural expertise.Furthermore,despitethe best intentions of the act to prevent flagrant, wholesale copying of existingdesigns and drawings, how can protection on the grounds of originality begiven to a colonial or a saltbox? Aren’t they by definition redolent of genericstyles that have long been in existence?

Large Scale

Precedents now being determined in the home-building end of the copyrightspectrum may also affect the architectural profession beyond the singularbuilding to the physical environment as a whole. While copyright protectionshields the rights of individuals on a building-by-building basis, it cannot dealwith the notion of multiple buildings, the issue of precedent, or the need tocreate physically coherent communities.

Sometimes, being a good neighbor—blending in with the existing context ofbuildings—is an appropriate response and one certainly taught as a relevantstrategy in architecture schools. If copyright law vigorously protects the designuniqueness of each building, then each new building, it might be argued, hasto be designed to consciously be different from every other—not a recipe for acoherent built environment. Illustrative cases include the Trump Tower, wherechanges to the nearby building were legally mandated to prevent its appear-ance from being too similar to the original “statement;” this, despite urbanisticargument that the towers together could create a powerful and coherentgateway to the street and the neighborhood.

This would not be the first time case law—the law as defined by the courts—created situations never conceived by drafters of the original legislation. Ifcase law becomes problematic, there is of course the recourse of new legisla-tion, although this is a slow, cumbersome, and equally unpredictable course.The best strategy for architects and planners for the time being is to stayinformed, stay within the architects’ standard of care, and continue to strive forthe originality of creation that drew architectural works copyright protection inthe first place.

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I love to experiment with new ideas andmaterials, and it often saves my clientsmoney if I use a less expensive productthat has just come on the market. Am Iincurring any unnecessary risks in veeringfrom the tried-and-true traditional methodsand materials?

Selection of building materials and compo-nents is the responsibility of the architect and,if they subsequently fail, may result in liability.While this may be less of a worry with tradi-tional, tried-and-tested solutions, the use ofinnovative, new materials may expose thearchitect to claims of negligent specificationshould they fail. The failure of high aluminacement, for example, which, despite rigorouspreliminary testing, proved to deterioratedrastically after a number of years, causedmany problems to the professionals whorelied on its early promise.

While new products and materials can pro-vide many benefits—savings to the owner,excit-ing new design possibilities, etc.—architects

could minimize exposure by incorporating thefollowing guidelines in their selection of rela-tively unproven building components:

● Insist upon detailed manufacturer’s informa-tion and test results.

● Require a list of previous users and contactthem, particularly those involved in similarprojects.

● Require the approval of nationally recog-nized standards institutes.

● If still in doubt, require further independenttests.

● Inform the manufacturer of the proposed useof the product and ask for written commentson its suitability.

● Request warranties from manufacturers.● Retain all written representations, communi-

cations and warranties well beyond thecompletion of the project.

● If the installation of the material is unusual orspecifically defined by the manufacturer,request that their representative be presentduring installation.

Question & Answer

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5Contract formation

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CONTRACT LAW

A contract has been defined as:

A legally binding agreement between two ormore parties, by which rights are acquired byone or more to acts or forebearances on thepart of the other or others.

(Sir William Anson)

Formation

Contracts may be formed in a number of ways:

a. Orally: A contractual relationship may beformed between parties in some instanceswhere no written agreement exists but a verbalcontract was made.

b. By conduct: The actions of parties may be suchas to imply a contractual relationship betweenthem.

c. In writing: Certain kinds of contracts shouldbe formed in writing if they are to be enforce-able (e.g., in some states, real estate brokerageservice contracts must be in writing).

d. Under seal: Contracts made in this form tradi-tionally did not require consideration to beenforceable in the courts (see below). However,the law relating to the status of sealed contractsnow differs greatly from state to state.

e. Evidenced in writing: Some contracts must beevidenced in writing if they are to be enforce-able (e.g., contracts which, according to theirterms, cannot be performed within one year).

Status

Contracts may be:

● Valid● Void—without any legal effect● Voidable—i.e., valid until one of the parties

repudiates● Unenforceable—in the courts

Elements of a Valid Contract

There are a number of basic elements which arenecessary for the creation of a legally binding andenforceable contract. These are:

1. Offer and acceptance: An offer by one partymust be clearly made, and the offer must beunconditionally accepted by the other party orparties. Upon acceptance, the contract comesinto effect.

2. Intention: Intention must be shown by all par-ties to enter into a binding contract.

3. Capacity: All parties to the contract must belegally capable. For example, minors and

persons of unsound mind may be excludedfrom certain types of contract.

4. Consent: Consent must be proper and notobtained by fraud or duress.

5. Legality: The contract must be formed withinthe boundaries of the law. For example, a con-tract to commit a crime would not be binding.

6. Possibility: Contracts formed to undertakeimpossible tasks are unenforceable.

7. Each party must contribute something in con-sideration of the other’s promise. Consideration:● must be real● must be legal● need not necessarily be adequate● must be possible● must not be in the past● and must move from the promisee.

Privity

Privity is a legal doctrine which recognizes thatonly a party to a contract may sue upon it. Thereare certain exceptions to this general rule, e.g.,where an agency relationship exists, the principalis bound by contracts entered into by his or heragent with third parties.

Discharge

A contract may be discharged by:

● performance, i.e., realization of the agreementwithin the terms of the contract;

● agreement by all parties to cease their contrac-tual relationship;

● operation of law, e.g., if a contract is made for alimited period, and that period expires;

● frustration or subsequent impossibility. Per-formance of the contract may be possible at theoutset, but later frustrated by events (e.g., deathof a party, destruction of an element constitut-ing the basis of the contract).

Breach

A breach occurs when a party to the contract doesnot fulfill obligations. If the breach “goes to theroot” of the agreement, the contract is treatedas discharged. Such breaches are referred to as“material,” and the injured party may seek one ofthe following remedies:

1. Refusal of further performance of the contract.2. Rescission: This is a discretionary remedy,

enabling the courts to cancel or annul the con-tract.

3. An action for specific performance: If success-ful, the court orders the party in breach to ful-fill his or her obligations under the contract.

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4. An action for an injunction: An injunction is alegal means of preventing further action by theparty in breach.

5. An action for damages: This is the most com-mon remedy for breach of contract. Damagescan be:● General, i.e., arising out of the breach● Nominal, if the breach is merely technical● Punitive or exemplary, if the court considers

the defendant’s behavior particularlydeplorable

● Liquidated, i.e., ascertained by an agreedmethod to assess damages (e.g., $x per daywhen the completion date is exceeded), as inmost construction contracts.

● Unliquidated, i.e., unascertained, or deter-mined after injury occurs.

6. An action for a quantum meruit: This is aclaim for an amount equal to that which theplaintiff has earned in respect of the contract.

BUILDING CONTRACTS

Types of Contract

A building contract may take any form which isagreeable to the parties involved, but certainproven types of contract have been developedwhich are useful for certain building projects.These are:

1. Fixed price/stipulated sum contracts2. Cost-type contracts

Fixed Price/Stipulated Sum

This method of agreeing a contract price is widelyused in the construction industry, where oneparty pays an acceptable sum for a specifiedamount of work to another party who agrees toundertake it. It is nearly always used in connec-tion with competitively bid work (some publicbodies are constrained by law to use this method),and has the advantages of:

● enabling the owner to know the final cost ofconstruction at the outset of the work;

● releasing the contractor from having to keepaccurate time records for the owner’s scrutiny.

Stipulated sum contracts have certain disad-vantages; for example, escalation or inflation ofprices or unforeseen circumstances might affectthe contractor’s fixed profit margin. In somecases, this could mean a higher base bid to coversuch contingencies, and so the owner may paymore than is strictly necessary. However, standardforms of contract often include equitable clausesto deal with these matters (e.g., escalation clauses,

concealed conditions clauses, etc.). The fixedprice method of contracting is most suited tobuilding projects of a predictable nature, where afull set of construction documents is available. Infederal projects a fixed price-incentive firmmethod of contracting has been developed.

Cost-type Contracts

In this type of contract, the owner reimburses thecontractor for the actual cost of completing thework, together with a negotiated fee. The feemight be:

● A percentage of the final construction cost● A fixed fee● An award fee

The method is useful:

● In negotiated contracts● Where unknown conditions might be encoun-

tered● If new building methods or materials are being

used● Where final scheme designs are not fully

completed

It has the advantage of not needing a full set ofdocuments before a price can be negotiated andwork started, and enables the owner to bring thecontractor into the process at an earlier stage, ifrequired. It may be disadvantageous in that theowner is uncertain of the final cost and, in its per-centage form, the cost-type contract gives noincentive to the contractor to keep cost down.Furthermore, the contractor will be obliged tokeep accurate records of the work for paymentpurposes. In fact, cost-type contracts are prohib-ited in some states for certain kinds of work.

Certain variations upon the cost-type contracthave been developed which make it more viable.These are:

a. Cost plus award feeb. Cost plus incentive fee

Cost Plus Award Fee (CPAF Contract) This isoften used in federal procurement work where thefee is negotiated on a percentage of the agreedestimated final cost. Added to this will then be anaward fee, which may be two or three times thebase fee, and is paid by the owner upon previouslyestablished criteria.

Cost Plus Incentive Fee (CPIF Contract) By thissystem, the contracting parties negotiate a targetcost and fee, a base and ceiling fee, and a feeadjustment formula to provide an incentive forearly and economic completion.64

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Foreign Contracts

Architects may often be called upon to work inother states or, increasingly, other countries. Aswell as considering licensing requirements (seepage 31), the architect should take great care atthe contract formation stage to avoid difficultieswhich might arise in enforcing agreements due to:

● conflicts between state laws (e.g., lien laws);● conflicts between national laws;● the contractual capacity or immunity of parties

operating in other states or countries.

Before any major agreements with a foreignelement are entered into, it would be prudent tocheck the legal position with legal counsel.

Contract Checklist

Some of the more important factors to be consid-ered when determining the type of building con-tract are:

● Type of project (unusual building, renovation,etc.)

● Methods of construction proposed (experimen-tal techniques, etc.)

● Size and complexity of project● Time constraints● Finance available● Degree of certainty of the owner’s requirements● Progress of the construction documents● Probability of further changes● Amount of information available at contract

formation● Availability/desirability of accurate cost

prediction● Expertise necessary/available● External factors or problems (e.g., site con-

straints, labor shortages, etc.)● Quality of work required (luxury, low cost, etc.)

STANDARD FORMS OF CONTRACT

Just as any type of contract can be selected by theparties involved, so any form of agreement canbe used to determine the terms and conditions ofthe contractual relationship.

However, in the interests of both parties, it isgenerally recognized that a format which hascommon usage and understanding is preferable.Standard forms of contract have been developedby a number of bodies, including:

● Professional associations● The federal government● State agencies● Large institutions and private sector organizations

In some cases, house forms are a requirement ofthe owner. These should be carefully scrutinized,particularly in relation to the owner-architectagreement to ensure that provisions affecting thearchitect’s duties do not violate state licensingrequirements or increase the architect’s liability.

Where possible, AIA contract documents shouldbe recommended. These have been developed overa long period of time, and are recognized through-out the construction industry. Furthermore, theymay be used in conjunction with a wide range ofother AIA standardized documents.

Supplementary Conditions

Despite the broad and thorough coverage of thestandard forms of contract, it is not unusual forvariations or additions to be required. These mayoccur through:

● Owner’s requirements● The nature of the project● Local/state legal requirements● Climatic or physical factors

Where variations to the General Conditionsare necessary or required, they may be included:

● In the Instructions to Bidders● By the addition of the AIA Supplementary

Conditions● By inclusion in the General Requirements of

the Specifications (Division I, UniformConstruction Index)

● In the owner-contractor agreement● By modifications of the General Conditions of

the Contract

Location of new addenda usually follows thesegenerally accepted principles:

● Anything concerning the bidding phase andnot affecting the construction phase should beincluded in the Instructions to Bidders.

● Matters going to the root of the contract (price,time, etc.) should be included in the owner-contractor agreement.

● Legal matters which may vary according tolocation (indemnification, insurance, etc.) shouldbe dealt with in the Supplementary Conditions.

● Matters of a procedural or administrative nature(e.g., temporary structures, etc.) should be in-cluded in the General Requirements (DivisionI) of the Specifications.

Great care should be taken in the reformula-tion of contract documents if any changes areanticipated, and certain matters (e.g., legal res-ponsibilities) should not be attempted withoutprofessional legal assistance.

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CONTRACTOR SELECTION

During the development of each scheme, it willbe necessary to establish on what basis the projectwill be constructed. This will have been reviewedwith the owner much earlier in the process, inrelation to other important factors, such as timeor finance available, type of project, or site charac-teristics.

Once such variables have been assessed, certainalternative construction procedures can be con-sidered. These might include:

● Single or separate contract systems● Negotiated or competitively bid contracts● Types of building contracts (see page 64)

Single Contracts

In most construction projects, a prime contractoris responsible for the full extent of the construc-tion involved. If the work requires more labor orskill than the prime contractor can supply, sub-contractors (and even sub-subcontractors) will behired, but will remain the responsibility of theprime contractor in matters of liability to theowner, payment, etc.

Separate Contracts

In some instances (e.g., certain state work andsome larger projects), contractors will be selectedfor specific and distinct divisions of the work(electrical, mechanical, etc.). There is no primecontractor as such because all contractors willhave an equal relationship with the owner. Thissystem has the advantage of reducing the primecontractor’s extra charge for administration of the

subcontractors and reduces the expense of doubleinsurance. However, it may also complicate therelationship between the contractors involved.Since no hierarchy of responsibility exists betweenthem, management and supervision of the projecthave to be coordinated carefully to ensure smoothand uninterrupted transfer between the individ-ual work forces. Problems have been known tooccur in matters of delay, cleaning up, etc., andthe role of the construction manager (see page 23)is useful in this contracting system as a coordina-tor and supervisor of the various work forces.Alternatively, the architect could be employed bythe owner to undertake this task.

Negotiated or Competitively BidContracts

The selection of the contractor can be undertakenin one of two ways, depending upon the characterof the project:

Negotiated Contracts

The owner can select a contractor directly basedupon the latter’s reputation, recommendation,etc., and then negotiate the terms of agreementand form of payment. This may be appropriate:

● Where the contractor possesses skill or experi-ence relevant to the project

● Where quality and not economy is a majordeterminant

● Where an early completion of the project isdesired

● Where details of the final scheme are incomplete

Using the direct selection approach, the ownerneed not wait until the normal selection phase tobegin construction. This means that completeddrawings and specifications are not necessaryfor work to start, and that the contractor’s skilland expertise may be brought into the designprocess.

However, there is no competition in this formof selection, making it potentially unsuitablewhere a low overall price is sought. Usually, a costplus fee contract (see page 64) is used in conjunc-tion with negotiated contracts.

Competitively Bid Contracts

In order to obtain the lowest possible price for thework, completed sets of contract documents aresent to a number of contractors who bid againsteach other. Usually, the lowest bidder is awardedthe contract (see page 69).

Public agencies often require this method ofcontracting, which is best suited to projects of a66

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Sub-contractor

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Figure 5.1

Owner

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Primecontractor

Primecontractor

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straightforward, traditional nature, where nounforeseen problems are likely.

It is widely used in the construction industry,and necessitates complete design documentationto enable accurate bidding.

In the last few years, certain alternatives to thebasic contracting methods have emerged. Theseinclude:

● Fast tracking● Design-build work● Turnkey contracts● Bridging

Fast Tracking

As previously stated, if the contractor is selected ona negotiated basis, it is possible to begin construc-tion work before the completion of the designphase. This method of overlapping the design andconstruction work is known as “fast tracking.”

Design-Build Work

In the traditional model of building, the phases ofdesign and construction are separate and usuallyundertaken by different specialists, and thereforedifferent firms. It is increasingly common forcompanies to provide a package combining all thefunctions of the building process, often in largespecialist-type projects, allowing the owner tocontract with only one party to provide the com-plete building. This has the advantage of allowingfast tracking, and combining the skill of thedesigners and the constructors. It does, however,deprive the owner of an expert agent to look outfor his or her best interests throughout the project.

The website of the Design-Build Institute ofAmerica carries further information on this grow-ing mode of project delivery (www.dbia.org).

Turnkey Contracts

This kind of contract usually relates to projectswhere a developer proposes and constructs anentire development (including the purchase of thesite) and hands it over to the owner ready forimmediate occupancy when complete. It has beenused in dealings with local housing authorities.

Bridging

Bridging is a variation of design-build wherein theowner hires an architect to prepare a preliminarybuilding design and performance criteria. The con-cept and criteria information are then “bridged” toa design-build team that generates the constructioncontract documents and completes construction.

To facilitate the process of contractor selection,the AIA has developed AIA Document G612-

2001, Owner’s Instructions to the ArchitectRegarding the Construction Contract. This formmay be filled out by the owner in advance of theselection stage, and can help to clarify the require-ments and preferences for the architect so thatappropriate action can be advised.

BIDDING

If the contractor is going to be selected by com-petitive means, certain procedures can be imple-mented to facilitate the task.

Selection of Bidders

The initial process of identifying possible biddersmay be:

● Open● Selective

Open Bidding

Where the maximum number of bidders is con-sidered desirable (usually in public work), anadvertisement to bid will be published in trade orgovernmental publications or professional jour-nals, inviting any interested contractors to partic-ipate in the process.

Selective Bidding

If a limited number of bidders is preferred, aninvitation to bid will be sent to a number of con-tractors. These will be singled out by reputation,recommendation, previous contact with eitherthe owner or the architect, etc.

Contractor Qualification

Prospective bidders should be chosen for theirability to successfully undertake the project, andit may be necessary to establish their suitabilitybefore bidding documents are issued. In somecases, the contractor’s reputation or relationship withthe owner will be sufficient, but AIA DocumentA305, Contractor’s Qualification Statement, mayhelp to outline contractors’ suitability.

The document when completed provides fulldetails of the contractor’s business record, andenables the owner and the architect to gain a clearimpression of such details as:

● History of the business● Organization and scope of operations● Past record of construction work (type of work,

range of experience, etc.)● Trade and bond references● Bonding company● Details of assets and liabilities

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The qualification statement can be used as aprequalification stage in the open bidding processto eliminate unsuitable bidders and cut down theadministration involved in high numbers.

Once the bidders have been identified and con-tacted to ensure their interest, a package of infor-mation concerning the proposed project is issued.The package includes:

● The invitation/advertisement to bid● Drawings and specifications (see page 41)● The bid form● Notice to Bidders● Instructions to Bidders● Proposed contract documents● Bid security details (if required)

Drawings and Specifications

These documents, which should be as completeand unambiguous as possible to allow the con-tractors to bid accurately, are sent free of charge tothe bidders. The number of sets necessary for eachbidder varies, depending on project size andcomplexity. More sets may be required to expeditethe bidding process; the architect can requireadditional payment for the extra work necessaryto accomplish this. Similarly, if any of the biddersasks for extra copies, they may be provided attheir expense.

To ensure return of the bidding documents byunsuccessful bidders, a deposit is usually requiredwhich is returned upon receipt of outstandingdocuments.

Notice to Bidders

This may be included in the bidding documents,and informs prospective bidders of their opportu-nity to bid, and conditions and requirementsinvolved.

Instructions to Bidders

AIA Document A701, Instructions to Bidders,provides all relevant information concerning thedetailed requirements involved in the biddingprocess, including:

● Definitions● Bidding documents● Consideration of bids● Owner-contractor agreement● Supplementary instructions● Bidder’s representations● Bidding procedures● Post-bid information● Performance payment bonds (see page 74)

Contract Documents

All documents intended for use in the proposedproject should be sent to each bidder for examina-tion, including the conditions (e.g., AIADocument A201) and any other applicableaddenda or Supplementary Conditions.

Bid Form

This form, which should be sent to all bidders,contains all relevant information concerning theproject. Each bidder will then return the docu-ment complete with the price of the work, or basebid, and any other figures which may be appro-priate (e.g., alternate bids, substitutions, etc.).

Bid Security

In order to ensure each bidder’s commitment totheir base bid, some form of security may berequired by the owner, which should be submit-ted along with the returned bid form. The secu-rity might take the form of cash, a certified check,or a bid bond (AIA Document A301; see page72). The bond could be expressed either in alump sum or as a percentage of the base bid,although the former is usually preferred by bid-ders, as it does not reveal their bid before opening.The bond ensures that, in the event of the suc-cessful bidder refusing to undertake the work forthe bid specified, the whole or part of the securitymay be forfeit. The amount of the penalty is usu-ally determined as the difference between theselected bid and the next lowest.

Variations

Where possible, documentation necessary foraccurate bidding should be comprehensive andunambiguous. In some instances, however, it maybe necessary to provide some alternatives inthe bidding process if requirements cannot befully determined. Two mechanisms which allowthis are:

● Alternates● Unit prices

Alternates

An alternate bid may be required or accepted for aspecific section of the work, and should beincluded in the calculation of the base bid. Thisprocedure can be useful in helping to keep costswithin a certain budget, but should be used spar-ingly and not employed to give one bidder prefer-ence over the others.68

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Unit Prices

Unit prices provide a means of measurementwhich can be included in the bid, indicating aprice per unit for materials and/or services. It isuseful in giving an idea of price calculation forunknown quantities or variable factors and, again,should be restricted in use if the overall budgetaryfigure needs to be controlled.

INSTRUCTIONS TO BIDDERS

In implementing the AIA procedures of contrac-tor selection by requesting bids, certain rules havebeen developed which should be adhered to by allparties concerned. These are outlined in AIADocument A701, Instructions to Bidders.

The procedural format, following the mailingof necessary bidding documents includes:

● Modification of bidding documents● Submission of bids● Bid opening● Selection● Announcement● Contract award

Modification of Bidding Documents

Certain queries or adjustments to the documentsmight be necessary or requested prior to the clos-ing date for submission. These are usually in theform of:

1. Interpretations2. Substitutions

Interpretations

If any of the bidders should discover errors orambiguities in the documentation, they mustinform the architect in writing at least seven daysprior to the submission date. Any changes oraddenda will then be issued by the architect to allbidders.

Substitutions

Should any of the bidders wish to substitutematerials or services otherwise than specified inthe bidding documents, the architect must receivea request for approval in writing at least ten daysprior to the submission date. If the architectdecides that the submission is acceptable, all par-ties will be notified by addendum, although noaddenda can be made within four days of the finalreceipt date except a notice cancelling or postpon-ing the request for bids.

Submission of Bids

Bids must be delivered in writing, contained insealed, opaque envelopes prior to the time anddate specified in the advertisement/invitation tobid. Oral bids are not acceptable. Any bidsreceived after the specified time should bereturned unopened.

Bid Opening

If the bids are opened in public, they are often readaloud, whereas if opened in private, the biddinginformation may be sent to all bidders at theowner’s discretion. The owner need not accept anyof the bids if they appear too high, and may rejectany bid not in conformance with the stated require-ments. The bidding documents do provide, how-ever, that if a contractor is chosen, it will be on thebasis of the lowest responsible bid. The decision isusually reached within ten days of the bid opening.

In publicly bid work, the owner is often con-strained by law to accept the lowest responsiblebidder, and may be held criminally liable if theselection does not conform to these requirements(i.e., the lowest monetary bid, coupled with theowner’s satisfaction that the contractor can suc-cessfully undertake the work). In privately bidwork, the commitment is not as clear, althoughthe rules of bidding should be adhered to.Granting of the contract to any other than thelowest bidder should only be made with verygood reason to prevent suspicion of favoritism,and ill feeling among the contractors.

Selection

At any time prior to the bid opening, all biddersmay withdraw or modify their bids. However,once the bids are opened, the bidders cannotmake changes or withdraw from the process for aperiod stipulated in the bidding documents (e.g.,thirty days). Once selected, the successful biddermust undertake the work for the agreed price, orrisk forfeiture of the bid bond (if any). Exceptionsto this are sometimes made if the bidder canprove substantial error in the bid calculation, inwhich case withdrawal might be appropriate, withaward of the contract to the next lowest bidder.Alternatively, the contract may be rebid.Defaulting bidders should be disqualified fromany further bidding on the same project, and nobid correction should be permitted, except forminor clerical errors and alterations.

Announcement

When a contractor has been selected (usuallywithin ten days of bid opening), all bidding parties

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should be informed of the decision. The unsuc-cessful bidders are often given a list of the bid fig-ures, and the bid deposits are returned once thedocumentation is received. The successful biddershould be informed of the decision in a waywhich does not form a legally binding agreementprior to the signing of the contract documents.Usually, the bids of the next two or three lowestbidders will be retained for a period as a contin-gency measure.

At this stage, each party to the proposed build-ing contract may provide further informationand/or assurances to the other:

● The owner will, upon request, prove to the con-tractor that sufficient financial arrangementshave been made to undertake the project.

● The contractor, within seven days of thecontract award, should furnish:a. details of the amount of work to be under-

taken by the contractor’s forces;b. names of proposed suppliers of material and

equipment;c. a list of intended subcontractors for the

architect’s approval (see page 77).

The contractor may also be asked for:

● A contractor’s Qualification Statement (if appro-priate and if not completed prior to selection)

● Proof of the responsibility and reliability of thework force

● Bonds, in accordance with the owner’s require-ments as expressed in the Instructions to Bidders

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Advertisementto bid

Interpretations Substitutions

Invitation to bid

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Bids delivered

Bids opened Late bidsreturned

Accept lowestresponsible

Notifybidder

Signcontract

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returned

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Contractorprovides

required data

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period

Open SelectiveChoose

contractor

Select basisfor payment

Exchange letters ofintent if necessary

Signcontract

Figure 5.3

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When these preliminary matters have beendealt with, and the contract documents are pre-pared, both parties will be ready to enter into thecontractual agreement.

CONTRACT PROCEDURES

The contract documents comprise:

● The owner-contractor agreement● The conditions of the contract (including any

supplementary details or other conditions)● The drawings● The specifications● Any addenda previously issued, or modifica-

tions (i.e., written amendments to the contract,signed by both parties, e.g., change orders, writ-ten interpretations, or minor changes)

● Related documents and agreements● Performance bond and labor and material pay-

ment bond● Owner’s insurance and contractor’s insurance

When the documents are ready, they should besent to the parties for signing with a cover letter.

Notice to Proceed

This is written authorization from the owner tothe contractor establishing a date of commence-ment and completion of the building work. TheNotice to Proceed is used if the work is startedafter (not before) the date of the signing of thecontract.

Letter of Intent

Should construction need to be started before thecontract documents have been signed (e.g., wheretime is of the essence), a letter of intent may besent by the owner, giving the contractor authorityto proceed. If used, the letter should be carefullydrafted to avoid any conflict with the actual con-tract documents, and legal assistance should besought. The letter should emphasize that no sub-contracts should be effected, nor should anymaterials be ordered other than those relevant tothe specific work permitted. Insurance should becarefully considered if a letter of intent is used,and it should be made very clear that the letterwill cease to have effect upon the signing of theactual contract.

Once the contractual relationship is estab-lished, certain obligations must be met by bothparties, including:

● Owner capability (see page 70)● Contractor’s work schedule● List of subcontractors

● Schedule of values● Certification of insurance● Permits

Contractor’s Work Schedule

As soon as the contract has been awarded, thecontractor should provide for the architect’s infor-mation an estimated schedule of progress. This isusually in the form of:

● A bar chart● Critical path method

Bar Chart

A bar chart indicates the work, divided by tradesor operations, against which a time scale can beset. The progress of the work can be plottedbetween the two.

Critical Path Method

Critical path analysis is a project planning devicewhich aims to optimize time and operations onsite. The system divides various activities whichare sequenced in terms of their interrelationship.When the time factor is added, a path may beplotted which reveals the most efficient opera-tional procedures which should be followed. Theschedule can be monitored by regular assessmentof actual achievement on site. This enables con-tinued prioritizing and adjustment throughoutthe period, to enable maximum efficiency inallotting time for the various stages of the project.

PERT (Project Evaluation ReviewTechnique)

This is a method of scheduling which establishes,in chart form, activities and operations antici-pated in the project layout which can introduce acost element into the programming. PERT hasnot been commonly adopted in the constructionindustry.

List of Subcontractors

See page 77.

Schedule of Values

Prior to the first application for payment, thecontractor must submit a Schedule of Values tothe architect, together with any data supportingits accuracy that the architect may require. Thisthen forms the basis for reviewing future applica-tions for payment, and should indicate the sec-tions of the contract sum provided for the variousparts of the work.

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AIA Document G715: Supplemental Attachment

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Certification of Insurance

The contractor should file with the owner (orwith the architect if requested by the owner) cer-tificates of insurance before starting work (AIADocument A201, Article 11.1.3).

Permits

Under the AIA General Conditions, the contrac-tor is responsible for obtaining the buildingpermit and certain other governmental require-ments, e.g., licenses.

BONDS

Of the various measures often taken in the con-struction industry to minimize risk and potentialloss, surety bonds are a common precaution. Asurety bond is basically an assurance by one partywhich provides that specified obligations ofanother will be met, despite unforeseen or unde-sirable events. In reality, the cost of bonds,although technically borne by the contractor, istransferred to the owner by inclusion in the bid.

Performance Bond

A performance bond ensures that all bids forlabor and materials will not revert to the owner inthe event of nonpayment by the contractor.

Combination bonds are considered inadvisableby the AIA as they can cause legal complicationsin the event of a claim. The AIA recommends thetwo-bond system as a preferable procedure. Statelaws should be checked regarding the use ofbonds, as statutory requirements vary with regardto bond provisions.

If claims are made against bonds during a con-struction project, AIA Document B141, Owner-Architect Agreement, provides for additionalpayment to the architect for the work involved inmaking the necessary arrangements for the con-tinuation of the project.

Other Bonds

Other forms of bonds sometimes used include:

● Payment bond● License or permit bond● Lien and no-lien bond● Maintenance bond● Release of retained percentage bond● Statutory bond (check each state for require-

ments)● Subcontract bond● Termite bond

AIA Bonds

Although there are no standardized requirementsfor bonds compatible with all state laws andowner preference, the AIA produces certain formswhich are helpful in many cases. These include:

● A310, Bid bond (see page 72)● A312, Performance Bond and Payment Bond

(see pages 75, 76)

In certain states, variations of the basic formshave been developed to comply with individualstate laws for use in public and private construc-tion projects.

In all matters relating to bonds and insurancethe owner should seek expert advice. The archi-tect should not attempt to provide this informa-tion, as it does not fall within architecturalservices and may be expressly proscribed by someprofessional liability insurance policies.

SUBCONTRACTORS AND SUPPLIERS

Under the single contract system, it is not unusualfor prime contractors to sublet parts of the work74

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SuretyIf principal defaults,surety satisfiesobligation

Principal(Contractor)

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Figure 5.4

Types of Bond

Bonds used frequently in the construction indus-try are:

1. Bid bond2. Performance bond

Bid Bond

(See page 72.) In order to ensure that the selectedbidder signs the contract and fulfills other prelim-inary requirements, a bid bond may be requested.This should cover not less that 10 percent of thebid amount, and would be used to pay the ownerthe difference between the two lowest bids if thesuccessful bidder decides to back out. The penaltyfor this cannot exceed the bond amount, whichshould be expressed as a specific sum, not a per-centage of the bid.

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AIA Document A312: Performance Bond and Payment Bond

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to other contractors, either due to the size andscope of the project, or to take advantage of spe-cialist skill or knowledge. If subcontracting isanticipated where AIA owner-contractor agree-ments are being used, a standard form of subcon-tract is advisable. The AIA produces DocumentA401, Contractor-Subcontractor Agreement Form,which can be used in conjunction with other AIAforms including A101, A107, A111, and A201.

The subcontractor agreement corresponds tothe other AIA Documents in terms of:

● Responsibilities and liabilities● Payment● Relationships of parties

The subcontractor may, in turn, delegateresponsibility to other contractors who are knownas sub-subcontractors. The same relationship isestablished as with the contractor and subcontrac-tor, although the prime contractor still retains over-all responsibility for all work undertaken on site.

Selection

The contractor may select suitable subcontrac-tors, and cannot be forced by the owner to workwith anyone to which reasonable objection can bemade. However, as soon as is practicable after theowner-contractor agreement is signed, the con-tractor should submit to the architect a list ofproposed subcontractors and suppliers. The archi-tect and/or owner may reasonably object to any ofthe names on the list, but such objection shouldbe made promptly so that the contractor maysubmit a substitute. Objections should also bemade on the basis of actual objections andaccurate material to avoid potential claims of

defamation (see page 38). If the substitution isacceptable, the contract sum can be adjusted byChange Order (see pages 89 and 95) to accom-modate any financial inequities caused by thechange. No substitution of subcontractors shouldbe made by the contractor without architectand/or owner knowledge and approval.

Payment

Payments to the subcontractor by the prime con-tractor are governed by the same requirements asthe owner’s payments to the contractor, althoughthe AIA agreement provides for subcontractor pay-ment within three working days of the owner’s pay-ment, reflecting the same retainage (see page 8).

The subcontractor may request informationfrom the architect concerning the percentage ofwork completed or amounts certified (under theGeneral Conditions 9.6.3), even though no con-tractual relationship exists between the two par-ties at any time. If a certificate of payment iswithheld from the contractor through no fault ofthe subcontractor, the latter is nonetheless enti-tled to payment for work completed to date, andthe contractor will be bound to pay it. If the sub-contractor is not paid, Article 11.12.1 of AIADocument A401 states that, after giving duenotice, the subcontractor can stop work until pay-ment is made.

In some cases, payment made by the owner tothe contractor may not reach the subcontractor(e.g., in the event of the contractor’s bankruptcy).It is possible for the subcontractor to successfullyclaim against the property through the impositionof a lien (see page 8), causing the owner to paytwice for the same work. To avoid such problems,

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Owner

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Suppliers, manufacturers, etc.

Sub-Sub Sub-Sub Sub-Sub Sub-Sub Sub-Sub

Sub Sub

Figure 5.5

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payment bonds should be used to prevent unduehardship to the owner (see page 76).

Suppliers

Material suppliers and manufacturers contractdirectly with the prime contractor, subcontrac-tors, and sub-subcontractors and have no contrac-tual relationship with either the owner or thearchitect. However, similar legal rights exist wherenonpayment occurs, and appropriate bondsshould be required from the contractor to givenecessary protection.

The owner and the architect have similar rightsunder the AIA General Conditions A201 to rea-sonably object to any suppliers that the contractorintends to use.

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No Yes

Owner payscontractor

Suecontractor

Possible lien againstowner's property

Labor and materialpayment bond

Contractor doesn'tpay subcontractors

Contractorpays subcontractors

Figure 5.6

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BIDDING AND SELECTION

Although much attention has been paid to the liability problems architectsface during the design and construction phases, little consideration has beengiven to the interface between these phases: the selection of the contractor.Perhaps this is appropriate; after all, the architect usually receives approxi-mately 5 percent of the fee for the bidding and negotiation phase, andresearch suggests that comparatively few cases involving architects originatefrom errors in this area. Still there are a few safeguards that architects can taketo protect themselves from claims by clients, contractors, or subcontractors,and also to safeguard the owner’s interests during the construction phase.

Complete Documentation

The more complete and accurate the drawings and specifications, the moreprecise the bids are likely to be. While some factors may make this difficult—ashortage of preparation time or uncertain owner requirements, for example—itis important to strive for unambiguous, accurate documentation, with a mini-mum of alternates or unit prices. In claims brought by contractors on thegrounds of misinterpretation of the contract documents, the courts tend to findagainst the drafter (in this case the architect acting as the owner’s agent) inmatters of unclear contractual information. Alternatively, hazy documentationmay lead a contractor to build a substantial contingency into the calcula-tions, creating a base bid that far exceeds the architect’s original projections.There has been a noticeable increase in claims against architects for inade-quate prediction of construction costs. While cases vary, courts have foundagainst architects where bids exceed the architect’s estimates by 15 percentor less, a particularly worrying phenomenon since most malpractice insurancepolicies do not cover errors in cost estimating.

The Selection Process

Federal procurement procedures are remarkably specific, and state and localgovernmental rules are similarly designed to ensure fair and open competition.While such procedures are not required in the private sector, adherence toclearly articulated rules is still advisable, both to ensure a successful selectionof a capable contractor at a fair price and to minimize the possibility of legalproblems raised by irregular performance of one or more of the parties.

While some owners will insist upon their own procedures, the AmericanInstitute of Architects has developed widely accepted guidelines that should,whenever possible, be used. The procedures provide a series of orderly stepsand safeguards that protect the owner and, by implication, the architect fromunsuitable or unqualified contractors, while at the same time providing all bid-ders with an equitable basis for submitting their bids. Clear communication ofall rules is very important at this stage. In instances where owners have not fullycommunicated their intentions and actions to bidders, legal action hasensued. For example, when an owner rejected all bids for a public project inLouisiana—a right established in the bid solicitation—one of the bidders filedsuit when the former refused to provide reasons for the decision. The courtruled that the owner had not acted in good faith by failing to provide anexplanation of the arbitrary action, contrary to the bidders’ expectations.

PRACTICE OVERVIEW

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Selection Procedures

Most bidding procedures establish specific rules with regard to the bid open-ing. Strict adherence to these procedures is advisable, and care should betaken to avoid any collusion or conspiracy between the owner or the architectand one of the bidders. Exactly the same data should be sent to all bidders,including any clarification requested by one of the bidders prior to bid open-ing. Valid bids should, if possible, be opened in public and late bids should bereturned unopened. The question of what constitutes a late bid has been thefocus of a number of court cases instigated by disgruntled bidders who feltthat a late bid gave a competitor an unfair edge. In one case involving a fed-eral project, acceptance of a bid thirty seconds beyond the time of bid open-ing established in the bid solicitation was held to be invalid. While some publicprojects and certainly all privately bid work are likely to be less rigid on thispoint, it is advisable to reject late bids after the opening of the first one to pre-vent even the appearance of unfairness or competitive advantage.1 Whilesome flexibility may be considered acceptable under special circumstances—mail delivery problems, perhaps—the architects should advise the owner ofpotential problems that can occur whenever there is a departure from theestablished procedures.

The architect should also exercise great care in the advice given to theclient about selection of the contractor. If it is believed that the contractor withthe lowest bid should not be hired, the architect should articulate the reasonsfor a rejection with great care. Several suits have recently been broughtagainst design professionals where they counseled against a particular con-tractor. In one case, an engineer advised against hiring the lowest bidderwhom he felt did not possess enough experience to adequately complete thework. The bidder sued him for slander and interfering with a business relation-ship. The suit, however, was not successful, as it was held that the opinion wasrendered in good faith.2

In another instance, the consultant,who was hired by a city to prepare spec-ifications and help review the bids, was discovered to have “an unlawful rela-tionship” with the contractor he recommended. The lowest bidder successfullysued the city, and the persons responsible pleaded guilty to criminal viola-tions.3 These and similar cases demonstrate the need to give advice on hiringonly on an objective, factual basis, free of any conflict of interest and to recordthe process in writing. Documentation should be clear, concise, and well rea-soned, avoiding any sweeping personal statements or colorful adjectives. Inthe absence of inaccuracy or perceived malice, slander will be very difficult toprove.

There is technically nothing to stop an owner from rejecting the lowest bidand hiring a pre-selected contractor who was encouraged to go through thecompetitive bidding process merely to keep the base bid down. However,architects should discourage this practice. Apart from the ethical implicationsof ignoring the rules, some outraged low bidders have sought legal relief toprevent the owner from proceeding with a project.

The selection of any other than the lowest responsible bidders is very difficultin publicly bid work, and great care should be taken in such cases to ensurethat complete documentation can substantiate why a contractor was notconsidered “responsible”or the bid “responsive.”The rationale should be basedsolely upon the criteria that were established in the bidding information.

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81In fact, some states insist upon open hearings to let disappointed bidders dis-cuss the selection of anyone other than the lowest bidder in public projects.

Where the lowest bidder was considered insufficiently responsible basedsolely on rumors of poor performance, or where the owner had solicited insuffi-cient data on a hitherto unknown contractor, courts have found against theowner for insubstantial reasoning.Owners are expected to consider a contrac-tor’s recent performance to verify if former problems have been eradicated.4

Summary

While contractor selection is a relatively minor duty by comparison to those inthe design and construction phases, there are still ample opportunities forproblems in what is, after all, a sensitive and highly competitive area. In the roleas adviser to the owner, the architect should strive to ensure that the proce-dures adopted are initially sound and rigidly and fairly adhered to, particularlyin publicly bid work, and that the owner is kept informed of the possible impli-cations of straying from the established rules. This helps to protect the architectfrom claims by the owner for poor advice and from the contractor for collusionor slander. It furthermore helps to shield the owner from unforeseen problemsand allows a smooth transition from the design to the construction phase, opti-mizing the chances for the successful completion of each project.

References

1. Jervis, B.M. and Levin, P., Construction Law: Principles and Practice, McGraw-Hill, 1988, p. 13.

2. Riblet Tramway Co., Inc. v.Ericksen Associates, Inc. 665F Supp.81 (P.N.H.1987).3. F. Buddie Contracting Inc. v. Seawright, 595 F. Supp. 122 (N.D. Ohio 1984).4. Jervis and Levin, Construction Law, p. 15.

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Once the client has picked a contractor,the architect’s role in the selection is over,right?

In the traditional, competitively bid process,the contract is usually awarded to the lowestresponsible bidder. The architect has anadministrative role in the organization of thebidding process and advising the client onthe outcome.

While the architect’s compensation for thisphase is comparatively small (typically around5 percent of the overall amount), the architectplays an important role in overseeing theestablished bidding procedures, offeringadvice to the owner on the appropriate selec-tion and reviewing the winning contractor’s list

of proposed subcontractors and suppliers (seepage 77).

The architect has further responsibility inensuring a smooth transition from the design tothe construction phase through the signing ofthe building contract (see page 69.) and mayhave to further advise the client if there is a mis-take in the winning bid. In this event, the con-tractor may be allowed to withdraw thewinning bid or correct it to adjust for a legiti-mate mistake, although the architect shouldbe careful if the corrected bid now exceedsthe next lowest responsible bid. In publicly bidwork, it may be necessary to re-bid the project,while in privately bid projects, the client shouldbe advised accordingly on the potential fordisgruntled contractors taking legal action.

Question & Answer

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6The construction phase

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AIA FORMS

Throughout the design and construction process,a number of procedures and operations involvingthe architect have to be carried out which requiredocumentation and record. As a written format isalways preferable, standardized forms are useful,and many larger organizations will prepare theirown personalized paperwork. This includes letter-heads, memorandum pads, and telephone mes-sage pads, but may also extend to more technicaland detailed documents necessary in both officemanagement and project administration.

The AIA produces a comprehensive collectionof documents for use in the construction processwhich are strongly recommended for their gener-ally accepted meaning, consistency of format, andinterrelated content.

The AIA documents are divided into seriesreflecting different aspects of administration inarchitectural practice:

A Series: Owner/ContractorDocuments

These include all agreements designed for variousconstruction project types and their respectiveconditions of agreement, bond forms, and bid-ding-related documents.

B Series: Owner/ArchitectDocuments

Standard forms of agreement, duties, responsibili-ties, and limitations of the authority of the architect’sproject representative, the owner/constructionmanager agreement, and the architect’s qualifica-tion statement are published in this series.

C Series: Architect/ConsultantDocuments

These include forms of agreement between thearchitect and consultants, including the engineer,and joint venture forms.

D Series: Architect/IndustryDocuments

These cover procedures for calculating area andvolume of buildings and a project checklist.

G Series: ConstructionAdministration Documents

This series includes land survey requisitions,change orders, certificates of substantial comple-tion, applications for payment, and severalother formats developed to assist architects in the

internal running of the practice and in dealingswith specific projects.

The AIA also publishes the Architect’s Hand-book of Professional Practice, which is highlyrecommended for all practicing architects.

THE ARCHITECT’S DUTIES

Once the building contract has been signed, thearchitect’s role in the construction processchanges, together with the architect-owner rela-tionship. During the design development phases,the architect is seen (by some courts of law) to ful-fill the role of independent contractor, whereasduring the construction stage, this role becomesthat of a limited agent (see page 20). The limits ofthis role are expressed within the owner-architectand owner-contractor agreements, and great careshould be taken by the architect not to exceed ormishandle the powers necessary for the adminis-tration of the contract. If the architect’s powersare exceeded, such acts can be ratified by theowner, but it is obviously preferable to avoid thesituation if possible.

The architect’s duties can be loosely groupedinto three categories:

● Performance evaluation● Certification● Adjustment

Performance Evaluation

A major part of the architect’s work during theconstruction phase of a lump sum contract con-cerns ensuring that the work carried out conformsto the detail and quality required by the drawingsand specifications. There are no powers granted tothe architect which enable him or her to tell thecontractor how to do the work, but certain provi-sions within the building contract enable thearchitect to provide a quality control measure onbehalf of the owner. These provisions can be cate-gorized as:

● Observation● Inspection● Approval

Access to Work

Contained within the provisions of the GeneralConditions are a number of clauses that enablethe architect to undertake the required duties.The contractor agrees to allow the architect accessto wherever the work is in progress, whichincludes workshops where components or fittings

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are constructed, as well as visits to the buildingsite (AIA Document A201, Article 3.16.1).

Site Visits

The architect should visit the site at appropriateintervals to ensure that the work is compliantwith the contract documents (AIA DocumentA201, Article 4.2.2). Frequency of visits willdepend on a number of factors, including:

● Type of project● Site conditions● Complexity and size of project● Stage of construction reached● Type of owner● Knowledge of the contractor● Location of the site from the architect’s office● Whether an on-site architect or construction

manager is being employed● Whether additional fees are being charged for

inspections● Unforeseen events (e.g., bad weather)● Specific events (e.g., covering-up)

On arrival at the site, the architect should reportto the contractor or the named superintendentand should communicate project matters solelywith that person for the duration of the site visit.A record should be kept of all visits, noting anyobservations, information supplied, and actionsthat should be taken.

In the normal progress of the work, site visitscan arise either during, at the commencement, orat the completion of some of the following activi-ties, depending upon the project:

● Establishment of datum points, bench marks,and building layout

● Dimensions and grade establishment● Safety and security provisions● Protection of trees or existing buildings● Fences, hoardings, and signs● Siting of storage areas● Excavation and soil underfootings● Public utility connections (telephone, gas, elec-

tricity, etc.)● Foundations, reinforcements, and pile-driving● Concrete tests, formwork, reinforcement, and

pouring● Structural frames● Floor openings, sleeves and hangers, floor laying● Quality and placing of concrete● Weather precautions● Masonry layout and materials● Bonding and flashing● Frames and prefabricated elements

● Partition layout, lathing, and drywalling● Temporary enclosures, heat, light, and sanita-

tion during site operations● Protection of finished work● Fittings and cabinetwork● Tiling, electrical work, wiring, pipework, and

installation of hardware and equipment● Roofing installation● Painting, varnishing, and surface finish● Equipment/plumbing tests and inspections

required by public authorities

Inspection

At certain stages during the construction process,the architect will appraise the work completedand issue a written judgment upon it. Appraisal isrequired for:

● Progress payments (AIA Document A201,Article 9.3.1, 9.6)

● Substantial completion (AIA Document A201,Articles 4.2.9, 9.8)

● Final Inspection (AIA Document A201, Article9.10.1)

Approvals

In addition to the above inspections or in respectof other duties required under the building con-tract, the architect may be called upon to makecertain judgments on aspects of the work in theform of an approval or rejection (AIA DocumentA201, Article 13.5). Such instances include:

● Tests and inspections (13.5)● Uncovering of work (12.1)● Approvals of samples and shop drawings (3.11,

3.12, 4.2.7)● Schedule of values (9.2)● Names of subcontractors (5.2.1)● Supporting data for payments (9.4.2)

Certification

At the stages in the construction process whereinspections are carried out, it is often necessary tocertify approval in writing. Such approval has theeffect of releasing payment to the contractor, andshould be undertaken with the greatest of careand diligence. Certification may take the form ofa letter sent to both the owner and the contractor,or one of the standard forms produced by the AIAspecifically for the purpose (see page 96).

Payment

In certifying payment, the architect must be satis-fied that the amount of payment represents the

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stated value of the work (which must be reason-ably accurate), less the agreed retainage and lessthe total of earlier certificates. In addition, thearchitect should be sure there is nothing to pre-vent the certificate being granted (i.e., defectivework not remedied: A201, Article 9.5.1) andrequire such evidence substantiating the contrac-tor’s right to payment as considered necessary(Article 9.3.1).

Adjustment

This category of architectural service is the leastdefined in the contract documents, although pro-visions for its implementation can be foundthroughout the General Conditions. Basically, thepowers connected with this category ensurethat, in the event of confusion or disagreementbetween the owner and contractor, or in the eventof unforeseen changes or conditions occurring,the architect can act to maintain the continuedprogress and quality of the work. The architect’sduties in this respect fall into two main categories:

● Interpretation● Modification

Interpretation

Article 4.2.12 of the General Conditions gives thearchitect authority to render interpretations of theintent of the contract documents in the event ofthe parties failing to agree. This helps to solve anyambiguities, and to keep minor disagreements orunclear requirements from delaying the project.Either the owner or the contractor can require thearchitect to interpret an aspect of the contractdocuments, and the architect should make thedecision in writing within a reasonable time(A201, Article 4.2.11).

In the role of interpreter, the architect isexpected to act as arbitrator and “to secure faithfulperformance by both the Owner and Contractor.”To help the architect assume an unbiased positionin this, a quasi-arbitral immunity is granted fordecisions made under this provision, removingany liability for the results of the interpretation,rendered in good faith by the architect. Con-sequently, the architect should undertake inter-pretive duties with a totally unbiased attitude, andnot allow employment ties to the owner to affectthe outcome of decisions.

Modification

Where circumstances or new requirements meanthat the contract documents need to be amended,

the architect is empowered to make certain minorchanges (Article 7.4.1, see page 92) or issue (butnot approve) Change Orders permitting newwork to be undertaken (Article 7.2.1). Otheractions in this respect may be carried out ifprompted by the acts or omissions of either party(e.g., acceptance of nonconforming work by theowner, Article 13.3.1).

Authority to Reject Work

Work that does not conform with the contractdocuments may be rejected (Article 4.2.6).

PROGRESS APPRAISAL

A proportion of the architect’s duties during theconstruction phase concerns the checking of thework to ensure that it will be completed bythe agreed date of completion.

Several mechanisms may be used by the archi-tect to monitor building progress throughout theproject. These include:

● Site visits and reports● The contractor’s work schedule● Schedule of values● Meetings

Site Visits

Visits to the building site should be made at inter-vals appropriate to the stage of construction tofamiliarize the architect with the progress and qual-ity of the work. Observations made during these vis-its should be recorded and copies sent to the partiesinvolved, who may include:

● The owner● Consultants

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● Field architect, if appropriate● Construction manager, if appropriate

Although any type of record will be sufficientfor noting the outcome of site visits, standardizedformats are recommended for the sake of consis-tency and conformity of files. The AIA publishesDocument G711, Architect’s Field Report (seepage 90), which provides categories to note andcomment upon the following:

● The stage of completion● Temperature, weather● Date● Work in progress● Persons present● Conformance with schedule● Any observations● Items to verify● Information or action required● Photographic or video material may also pro-

vide a useful record of the stage of completion

The Contractor’s Work Schedule

(See page 71.) This schedule represents the con-tractor’s intended plan of work established at theoutset of the construction phase. Comparisonbetween the projected progress and actualadvancement of the work provides a means ofassessing the overall conformity of the project tothe original timetable.

Schedule of Values

Similarly, the Schedule of Values which allocatesvalue to various amounts or portions of the workcan be used to a lesser degree to establish how wellthe original estimates of cost allocation match upto actual certification.

Meetings

Meetings between various parties concerned withthe construction process may be held periodically.Types of meetings include:

● Practice meetings● Contractor meetings● Site meetings

Practice Meetings

Meetings between partners and/or employees maybe held at intervals to discuss practice policy or aspecific project that is in progress or scheduled tobegin.

Contractor Meetings

The contractor and representatives may wish tomeet with the subcontractors at intervals to dis-cuss coordination of work on site. The architector construction manager may be invited to attendwhere relevant.

Site Meetings

Meetings between parties representing differentelements of the construction process could benecessary at intervals throughout the project.

They may be held:

● At regular intervals● At specific times during the construction process● When problems occur● When it seems necessary to provide an impetus

Those attending, in addition to the architectand the contractor (and/or the project representa-tive) might include:

● The owner● The construction manager (if one is employed)● Consultant● Subcontractors● Others (e.g., the building inspector)

However, the nature of the project will largelydetermine the makeup and nature of the meeting.

Procedures

Although there is no standardized format involvedin setting up and running meetings, certain basicguidelines are suggested for adoption.

Whoever takes responsibility for chairing themeeting—and this role may be taken by the con-struction manager, the owner’s representative, thecontractor, or the architect—should prepare anddistribute the minutes of the previous meetingand notify parties of the next one.

Parties should be notified well in advance ofthe time and date of the proposed meeting, andbe sent a copy of the previous meeting’s minutesfor consideration and filing. Parties unable toattend should notify the chair of their situationsas soon as possible so that, in the event of theirpresence being necessary at the meeting, a newdate may be scheduled which is amenable to allconcerned.

The Agenda

The agenda of a typical site meeting might be setout in the following way.88

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The chair should:

● Call the meeting to order● Take the names of those present● Give the names of those sending apologies for

their absence

The rest of the meeting might include:

● Agreeing the minutes of the last meeting, ordealing with any problems arising from them

● The architect’s report● The construction manager’s report● The contractor’s report● Any consultants’ reports● Discussion of project progress● Procedures and communications necessary (any

actions required, by whom, etc.)● Any other business● Time and place of next meeting

CONTRACT CHANGES

During the construction phase, it may become nec-essary to amend the original contract documentswith addition, alteration, or deletion as a result of:

● Unforeseen or unexpected events● New requirements● New circumstances invalidating parts of the

contract documents

The AIA General Conditions provide for changesto be made, but care should be taken to identifythe nature of the change sought, and deal with itin the appropriate manner. Changes may fall intothe following categories:

● A modification● A cardinal change● A constructive change● A change● A minor change● Other forms of change

Modifications

At any time during the contract period, the ownerand contractor may mutually agree to change theintent or substance of the contract between them. Asthe contract is a voluntary agreement between theparties, any joint acquiescence as to its content isacceptable, but great care should be taken in themodification of documents and the revised provi-sions for payment, work definition, etc.

Cardinal Changes

If the owner demands a change in the contractdocuments which goes beyond the intent of the

original contract, this may be construed as amajor change or, to use the federal procurementexpression, a “cardinal change.” Such a changemay give the contractor sufficient justification tostop work and to claim damages for the owner’sbreach of contract. In privately funded projects,the contractor may wish to renegotiate payment fora new contract, whereas in publicly sponsoredwork, it may be necessary to re-advertise the project.

Constructive Changes

“Constructive changes” are referred to in federalprocurement projects, and occur when the con-tractor is asked to undertake work:

a. which is different from that required by thecontract;

b. which speeds up the project;c. which requires added expenditures as a result

of incorrect specifications.

If forced to make a constructive change, thecontractor may require the contract sum to beadjusted accordingly.

Changes

If the AIA contract is used, as long as changesrequired by the owner are within the generalscope of the contract, the contractor will berequired to undertake the work, with or withoutthe latter’s consent. The contract time and thecontract sum may be adjusted to compensate forthe extra work. Payment for changed require-ments could be:

● By mutual agreement on a lump sum● By unit prices (either agreed upon, or previ-

ously stated in the contract documents)● By an agreed cost of the work plus a fixed or

percentage fee● By determination of the architect

Ordering a Change

In the event that time is of the essence and there isabsence of agreement on the terms of a ChangeOrder, prior to requiring a change, it is oftenadvisable to establish the final cost of the workinvolved. AIA Document G709, ProposalRequest, may be sent to the contractor to ask foran account of the increased cost and/or time thatwill be necessary. If the owner decides to continuewith the changed requirements, the architect willprepare and sign a Change Order (see page 95)and send it to the owner for signing before pass-ing it on to the contractor.

Under the AIA General Conditions, theChange Order (AIA Document G701) is the only

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AIA Document G711: Architect’s Field Report

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AIA Document G710: Architect’s Supplemental Instructions

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acceptable means by which the contract time or thecontract sum may be altered. When signing theChange Order, the contractor indicates agreementwith the proposed changes and becomes entitled toany justifiable extra payment (see page 89).

In the event that time is of the essence in thecontract, and to prevent delay due to the adminis-trative procedures involved, the process may beexpedited by use of a Construction ChangeDirective (A201, Article 7.3). This is not aChange Order, but an authorization to the con-tractor to proceed with the work prior to theissuance of the Change Order.

Minor Changes

When alterations to the contract documents areconsidered necessary, but are sufficiently small asnot to change the contract time or the contractsum, the architect is empowered to order suchalterations which are referred to as “minorchanges” (AIA Document A201, Article 7.4.1).Both the owner and the contractor will be boundby such written orders which are usually issued onAIA Document G710, Architect’s SupplementalInstructions (see page 91).

Other Forms of Change

Due to the unpredictable and complex nature ofmany building projects, certain changes are some-times necessary to provide for specific contingen-cies which include:

● Emergencies (AIA Document A201, Article4.3.5)

● Concealed conditions (AIA Document A201,Article 4.3.4)

● Escalation and fluctuation of pricing

Emergencies

If the safety of persons or property is threatenedin any way, the contractor may act at his or herdiscretion to prevent loss or injury. The architectmay then determine the effects of the emergencyon the project, and reflect them in a subsequentchange order regarding contract time and con-tract sum.

Concealed Conditions

Because of the unpredictable nature of subsurfaceconditions, some contracts provide remedies toequitably adjust the contract sum and time if con-ditions prove to be materially different from thoseanticipated. The AIA General Conditions containsuch provision, requiring that claims in respect ofconcealed conditions by either party be madewithin twenty-one days of their discovery.

Escalation and Fluctuation

Inflation and price escalation may make the esti-mation of a stipulated sum price difficult, possi-bly causing the contractor to overbid to protectagainst financial loss by erosion of profit. It is pos-sible to add to any contract a fluctuations clausewhich provides an agreed method of calculationin the event of sudden price variations.

TIME AND DELAYS

Many stipulated sum building contracts aredrafted on the basis that time is an important fac-tor. The AIA General Conditions, for example,are drafted to include the provision that “time isof the essence” (Article 8.2.1). Such provisionsmake it important for the contractor to completethe work in conformance with the contract docu-ments, on or before the date of substantial com-pletion stipulated in the contract.

If the contractor fails to finish within the specifiedtime, the contract is breached and several mecha-nisms may come into effect as a result, such as:

● Liquidated damages● Termination● Refusal of further payment● Variations● Extensions of time

Liquidated Damages

These basically represent a pre-agreed formula thatcan be used as a basis of penalty against the con-tractor for late work. They are usually determinedas a fixed sum per day, payable for every workingday beyond the date of substantial completion.

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Schematic

AIA work phases

Designdevelopment

Constructiondocuments

Bidding/negotiation Construction

Liquidated damages

Termination

Variations

Extensions of time

Workuncompleted

Date ofsubstantial completion

Figure 6.2

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The extent of the financial amount involved foreach day’s delay will depend upon how criticalprompt completion is considered by the owner.

The requirement is generally expressed in thebidding documents, and may affect the contrac-tor’s bid. If very high penalty clauses are used,they are often supplemented with a correspond-ing bonus clause. The bonus is often expressed asthe same amount as the penalty and is payable tothe contractor for every day saved prior to theSubstantial Completion date.

Termination

In certain extreme circumstances of delay, there maybe justification to terminate the contract betweenthe owner and the contractor (see page 115).

Refusal of Further Payment

In some cases the contractor may be denied fur-ther payment. However, this should be handledcarefully, as it may provide grounds for termina-tion on the part of the contractor.

Note: Delay on the part of the contractor neednot necessarily result in penalty if sufficient causecan be shown to substantiate a legitimate alter-ation to the contract documents.

Variations

If changes are made to the contract requirementsby the owner, the architect can issue a ChangeOrder which may provide for extra payment tothe contractor, as well as extra time for comple-tion (see page 89).

Extensions of Time

In some cases, unforeseen or unavoidable occur-rences will delay the progress of the work throughno fault of the contractor. The AIA General Condi-tions provide for extensions to the contract time tobe granted by the architect for delays caused by:

● Act or neglect of the owner or architect (oremployee of either)

● Act or neglect of a separate contractor (but notsubcontractor: see page 77)

● Changes ordered to the work● Labor disputes● Fire● Unusual delay in transportation● Adverse weather conditions (not reasonably

anticipatable)● Unavoidable casualties● Any cause beyond the contractor’s control (or

acts of God, including: earthquake, landslide,hurricane, tornado, lightning, flood, etc.)

● Delays authorized by the owner pendingarbitration

● Any other cause that the architect determines tobe justifiable

Claims for Extensions

Should the contractor feel that an extension iswarranted, an application must be made in writ-ing to the architect within twenty days of discov-ery of the event likely to cause delay. Anindication of the probable effect of the delay uponthe construction work should be included, andthe contractor should be encouraged to makeevery reasonable effort to minimize the impact ofthe event on the general progress of the project.

The granting of an extension is not automatic;for example, bad weather alone may be insuffi-cient to warrant extra time. It must be shown(e.g., by reference to meteorological records) thatthe weather in question was far worse than thenorm for the year, and actually delayed operationson site.

Similarly, a claim for delay due to labor dis-putes may be disallowed if the dispute was inprogress at the time of contract formation. Theonus, therefore, is on the contractor to show boththe justifiable reason for an extension, and itsimpact upon the progress of the work.

If there is sufficient cause to justify the grant-ing of an extension, there may also be groundsfor additional compensation. Such claims oftenarise from owner delay and decision, and mayinclude:

● Site not ready in time for contractor occupation● Delays in progress payments● Delays in issuing change orders● Delays in approving submittals● Errors in drawings and/or specifications● Administrative delays (poor coordination of

separate contractors, inspection delays, etc.)

Claims can be made by the contractor to com-pensate for:

● Labor costs (including subcontractors’ costs,wages, overtime, insurance, etc.)

● Equipment costs● Material costs (additional and escalation costs)● Overhead (field and office)● Insurance and bond costs● Other losses (seasonal problems, congestion on

site, etc.)

Other factors relating to the time elements of theconstruction process include:

● Acceleration● Stopping the work● Impossibility

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Acceleration

This can be defined in two ways:

1. Actual acceleration2. Constructive acceleration

Actual Acceleration

This may take place if the contractor is requestedto complete the work before the date establishedin the contract documents. Actual acceleration isat the contractor’s discretion and may provide thebasis for increased costs.

Constructive Acceleration

This is less clear in its definition, and may occurwhere the contractor has experienced delay, buthas not been granted an extension of time.Consequently, the contractor must make up thelost time in order to finish by the agreed date, andeffectively accelerate the pace of the work.

Although acceleration was essentially a federalprocurement matter, it has become more applica-ble to private construction contracts.

Stopping the Work

Under certain circumstances, the work may bestopped, as opposed to delayed. This may be as aresult of:

● Owner’s instruction● Circumstances forcing a construction suspension

Owner’s Right to Stop the Work

AIA General Conditions (Article 2.3.1) providethe owner with the right to stop the work:

a. If the contractor fails to correct defective workb. If the contractor persistently fails to carry out

the work in conformance with the contractdocuments

The architect does not have the power to stopthe work unless expressly authorized to do so bythe owner in writing. Previous editions of the AIAcontract included the architect’s right to stop thework, but this was discontinued in the 1997 revi-sion of the AIA Documents.

Suspension of Construction

This may take place:

● If the contractor is not paid● If notices and/or information are delayed

excessively● If change orders are delayed● If certificates are unreasonably withheld or delayed● If the construction documents are defective

Constructive suspension allows the contractorto stop work (AIA Document A201, Article 9.7.1),and to claim extra compensation for the costs in-volved in shut-down, delay, and recommencement.Some suspensions may eventually lead to the ter-mination of the construction contract by eitherparty (see page 115).

Impossibility

A further reason which may be claimed as thecause of delay, and possibly lead to the termina-tion of the contract, is impossibility of comple-tion. If sufficient cause exists to prove that thework cannot be finished, the contractor may beexcused from further performance, and might beable to recover damages from the owner.

Impossibility of completion is generally classi-fied as either:

1. Actual2. Practical

Actual Impossibility

This arises when events occur which actually preventperformance from taking place (e.g., acts of God, ordetermination by a governmental department).

Practical Impossibility

In this case, completion of the work is technicallypossible, but only at excessive cost due to subsequentevents making the original contract sum inadequate.If it is unreasonable for the contractor to assume thehigher costs, or where it would cause excessive diffi-culty, loss, or possible damage, the parties may bereleased from their contractual obligations.

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Normal progress of the work

Disruptive event

Impossibility

Stopping the work

Acceleration

Date ofsubstantial completion

Figure 6.3

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AIA Document G701-2001: Change Order

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96 ● Law and Practice for Architects The construction phase

AIA Document G702: Application and Certificate for Payment

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WHEN LEGAL LIABILITY LOOMS—WHAT TO DO FIRST

After reading reports of many such cases one is forced to the conclusion,that with few exceptions, those who find themselves at law are the stupid,the negligent, the dishonest and the unreasonable. The average architect,endowed with honesty and a fair degree of skill … is not likely to becomeinvolved in litigation.

(The AIA Handbook of Architectural Practice, 1923)

These comforting words from the 1923 AIA Handbook of Professional Practicereflect a world long since gone.As every architect is uncomfortably aware, thethreat of legal liability is an unfortunate but ever-present part of modern-daypractice.While that threat has diminished since its high point in the 1980s, thereis still enough evidence of legal action to keep architects awake at night wor-rying about the angry call or the hand-delivered subpoena.

Of course, attorneys are there to help out but they may not always be nec-essary and can be expensive. Here then is a six-point guide for dealing withthat nasty moment when legal action is threatened. It will not remove thethreat, but may help you to work through the initial stages more rationally, sav-ing time, energy and money in the process.

1. Don’t Panic

Received a nasty letter from a former client, his or her lawyer or, even worse, asubpoena, threatening legal action? It’s not a pleasant feeling and your initialurge will be to try and fix things as soon as possible—make a call, set up ameeting, sort things out. Be careful as that may be the intent of the communi-cation—to make you jump into a hasty course of action that you may laterregret. While it’s not pleasant waiting for a dispute to be resolved, there is nohurry, despite any hectoring demands that may be made of you. Dispute reso-lution is a time-intensive business, and even the supposedly faster process ofarbitration can take months (or longer) to conclude.

Resist the temptation to rush into action. Acknowledge correspondence byall means, but be prepared to go slowly and thoroughly at this stage.

2. Check the Files

Both as a means of reassurance and to some degree as a displacement activ-ity, thoroughly check the documentation involved in the dispute. Pore over thedrawings, read the letters and contract documents to see if there are anyinherent problems—design errors, procedural irregularities, etc. If nothing else,the process will reacquaint you with the details of the project in question andhopefully reassure you that there are no really big errors in the files.

Of course, this process will be made immeasurably easier if you have beenkeeping excellent records.A professional “paper trail”of each project, includingrecords of telephone calls,E-mails, letters, forms and contracts—anything in factthat affects time, money and the nature of the work—gives great credibility tothe design professional in any case.As a matter of course,always look over yourown shoulder during project procedures and wonder how what you are doingwould look to an uninvolved third party several years from now—the actual situa-tion should a court case emerge.Memories of the details of complex events fade

PRACTICE OVERVIEW

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seover time and perceptions can vary widely, even about something as simple asa face-to-face conversation, so commit everything to writing and store the fileswell for at least the length of the statute of limitation or repose established ineach state.

3. Inform Your Insurance Carriers

There is always a residual doubt about contacting insurance carriers too earlyin a dispute. If it all clears up without recourse to the courts—and a lot of prob-lems do—was it wise to alert the company of your close call, causing them toregard you as a greater risk and possibly raise your premiums?

While it may not be the first call you make, be sure to inform your carrier in atimely fashion for your own safety. Insurance contracts are established on thebasis of “uberrimae fidei,” or “in utmost good faith,” which means that if youdon’t keep your agent fully informed of your legal escapades, they may havegrounds to vacate the policy and leave you without coverage protection.

4. When You Need Information

When problems occur, there is a tendency to try to find out as much as possibleabout the issue in question. While legal advice is going to be high on the list,there are other forms of information which may prove useful as well. Does yourinsurance carrier provide an information service? Some universities or profes-sional organizations likewise may be able to help. It is unlikely that they will giveyou specific advice,but they may be able to point to individuals or sources thatcould be valuable for background purposes. Similarly, consumer advice agen-cies, public agencies (such as building inspection) and libraries may all be use-ful in certain circumstances in providing expert, and often free, information.

5. When You Need a Lawyer

At some point, it may be advisable to engage legal experts to advise you on howto proceed. In addition to selecting your counsel well,prepare yourself before thefirst meeting. Try to organize the main issues in dispute in a clear narrative, prefer-ably in writing. This should be accompanied by a chronological account of thesalient events that led to the dispute. While attorneys tend to be quick learners,the complexity of a construction dispute may take a while to explain,and sortingout the issues in your own mind before you start saves both time and money.

Take any important documents with you to the meeting in an accessible for-mat (like a file folder or disk), chronologically arranged and clearly labeled. Ifthere are a lot of documents, an index will help the attorney to work throughthe details quickly and efficiently.

Finally, work out before the meeting any questions or points of clarificationyou want answered by your attorney and commit them to writing.Otherwise, inthe heat of discussion, you may forget to raise them.

6. Consider the Options

While the subpoena sitting on the desk seems to indicate that a courtroomappearance is in your future, there is plenty of time to explore alternativemethods of dispute resolution. Arbitration is an attractive option that might bepossible, and mediation should also be explored as an alternative to litigation.Settlement is another alternative, of course, and needs to be discussed fullybefore any formal action is taken.

In any event, react as calmly as possible should legal action loom, use themany information sources and options available to you and, in a deliberate,calm manner, select an approach to dealing with the issues that is rational andthe least wasteful in time, money and nervous energy.

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●99

There is so much information around thesedays on the Web, in the mail and on mydesk. Surely I don’t have to know all of it?

Despite a plethora of information availableon the Web and generated through newtechnological achievements, the architect isexpected to have an extensive and up-to-date knowledge of data relevant to the designand construction processes (see page 10).

In the early design phases, the architect’srole of advising clients also implicitly involvesmaking sure that clients are aware of theirresponsibilities too. This means that, while theAIA contract specifies that the client is respon-sible for the program, site surveys, easements,

etc., the architect should ensure that the infor-mation necessary for a successful project isavailable.Are the client’s needs fully expressedin the program? Are the site surveys up todate? Will any easements be necessary toconstruct the project, or are any restrictivecovenants in place likely to affect the design?Can the decisions of the consultants be reliedupon (because if you hired them, you are vic-ariously responsible for their actions)?

While architects are not necessarily expectedto know everything, it is reasonable to expectthat they will know what they don’t know andtherefore ask some questions, do someresearch, hire appropriate experts, or at leastalert others to the need to find out more facts.

Question & Answer

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7Completion

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COMPLETION

When the contractor is nearing completion of thework, a number of procedures are recommended toensure smooth completion of contractual perfor-mance. These procedures are the same for full com-pletion, and partial completion where a designatedportion of the work may be ready for occupation.

Substantial Completion

As soon as the contractor decides that the projecthas reached a state of substantial completion (i.e.,when the owner can occupy or utilize the workfor its intended purpose), a punch list is prepared.The punch list contains details of all outstandingitems that the contractor intends to complete orcorrect, and it is sent to the architect who maythen make arrangements for inspection.

The architect can amend the punch list and addextra items, if necessary. In the event that thearchitect feels that the work is not substantiallycomplete, the contractor will be informed, and thearchitect need not return to reinspect until suffi-cient evidence is available to suggest that the workhas reached the required standard. When the archi-tect’s inspection indicates that substantial comple-tion has been reached, the Certificate of SubstantialCompletion will be issued (AIA Document G704,see page 108). This is prepared by the architect andsent to the owner and the contractor. TheCertificate of Substantial Completion is an impor-tant document which has an effect upon:

● The contractor’s warranty period● The architect’s liability period (in some

instances: see page 109)● The responsibilities of the owner and the contrac-

tor in respect of site security, insurance, heat andutilities, damage to the work, and maintenance

The architect should take care when issuing thecertificate to ensure that the work has in fact beensubstantially completed. The certificate will estab-lish the date of substantial completion and indi-cate the time allowed to complete the outstandingwork. Following receipt of the certificate, the con-tractor can apply for payment in the normal way(see page 96). This payment should take accountof the retainage agreed upon in the contract docu-ments.

Final Completion

When the items on the punch list have beencompleted, the contractor should notify thearchitect in writing. The architect must thenpromptly inspect the work and, if it appears to bein conformance with the contract drawings and

specifications, will issue a final certificate for pay-ment, which is usually in the form of a letter.Upon issuance of the final certificate, the contrac-tor becomes entitled to payment for all outstand-ing sums. However, certain states’ lien laws maymake it desirable to withhold a percentage of theretainage for a period of time. If this is considerednecessary, it should be stated in the bidding docu-ments and in the owner-contractor agreement.

Before final payment is made, the owner andarchitect should carefully check that:

● all required certificates of inspection, bonds,record drawings, and warranties have beendelivered to the owner;

● keying schedule has been delivered (if notalready undertaken);

● any instructions regarding operation of equip-ment have been supplied;

● all accounts have been adjusted (contract sums,deductions, change orders, deductions foruncorrected work: AIA Document A201, 9.10).

Before the final payment is made, it is also usualto take certain safety measures. These include:

● ensuring that the owner is protected from allpossible lien claims (AIA Document G706A:see page 105);

● requiring an affidavit that all wages, and billsfor materials and equipment (or other debtsconnected with the work which might conceiv-ably revert to the owner) are paid in full.

If any payments by the contractor are still out-standing, the owner may require indemnificationagainst third party claims. As an added precaution,the consent of the contractor’s surety should beobtained prior to final payment (AIA DocumentG707a, Consent of Surety to Reduction in orPartial Release of Retainage, may be used).

Additional safety measures may be taken by theowner depending upon:

● The contractor’s reputation● Customs and practices of the area● State lien laws● Owner requirements

If there are any exceptions to the normal proce-dures recommended by the AIA relating to finalsafeguards, a payment or bond by the contractorcan be used to discharge further responsibility.

The 1997 edition of B141 also provides fortwo meetings between the architect and theowner at this stage. One is held after SubstantialCompletion to review the need for facility opera-tion services, and the other takes place within oneyear of Substantial Completion to review thebuilding’s performance.

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Final Payment

Final payment by the owner of the balance ofthe contract sum, plus any remaining retainage,constitutes a waiver of all claims against the con-tractor except for:

● Unsettled liens● Faulty or defective work appearing after sub-

stantial completion● Failure of compliance with the contract

documents● The terms of any special warranties that may

have been provided

Similarly, acceptance of the final payment by thecontractor waives all rights to any further claimsagainst the owner, with the exception of any claimsmade in writing at the time of the final applicationfor payment. At the completion of the construc-tion work, the architect submits a final account tothe owner for outstanding payments. Any workundertaken beyond this time forms the basis foradditional compensation, and may include:

● Furnishing a set of amended “as-built” drawingsfor the owner’s records, which may be useful iffurther work or adaptation are anticipated.

● Site visits and advice to the owner concerningwork to be undertaken by the contractor dur-ing the 12-month warranty period

● Inspection of the project prior to the expirationof the warranty period, and compilation of areport listing necessary repairs or corrections. Aninspection may be arranged by the architect tocheck the work when complete (see A201.2.7).

● Maintenance advice or reports may be under-taken, possibly on the basis of an annual retainer.

● Post-occupancy evaluations may be carried outonce the building is in use to judge its successand general performance.

At the completion of the project, the contractualrelationship between the architect and the ownercomes to an end. However, a period of continuingliability follows under the law of tort, during whichtime the architect may still be liable for negligentacts or omissions. The length of this continuing lia-bility period is established by individual state law,and may vary considerably (see page 109).

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for inspection

Inspection forsubstantialcompletion

Issue certificateof substantialcompletion

Contractorapplies forpayment

Buildingoccupancy

permit

Checkcontractor'sdocuments

Final inspectionrequired

Notifyowner

Final paymentto contractor

Final inspection

No

No Yes

No Yes

Reinspect Yes

No Yes

Reapply

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Figure 7.1

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●105

AIA Document G706: Contractor’s Affidavit of Payment of Debts and Claims

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AIA Document G706A: Contractor’s Affidavit of Release of Liens

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●107

AIA Document G707: Consent of Surety to Final Payment

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AIA Document G704–2000: Certificate of Substantial Completion

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●109

LIMITATION OF LIABILITY

A survey of prominent cases involving design professionals over time indicatesa broad range of areas within practice where litigation has arisen, some ofwhich, a few years ago, would have appeared unlikely areas of vulnerability.However, the increased duty of care expected of design professionals to thelevel where “reasonable” behavior has been raised to new heights ofexpected performance, has given rise to claims in some quite unexpectedareas. For example, negligent specification of materials has become an areaof concern, while approval of shop drawings has also resulted in legal action.In the most extreme cases, there were reports of the engineer who inspectedthe roof of the Hyatt Regency, Kansas City, being enjoined in a law suit for thecollapse of the skywalk despite no inspection on his part of the faulty structure;similarly a firm of architects in Philadelphia were sued for designing a shoppingmall “conducive to kidnapping” following a crime committed there.1

Beyond these incidents, however, there is one area of concern which, whenviewed in context, has increased in prominence and magnitude. In a studyundertaken in Wisconsin over a twenty-year period, it transpired that 23 per-cent of the cases involving architects taken to the Supreme Court concernedthe question of limitation of liability. Similarly, a review of other cases nationallyindicates a considerable degree of debate and activity within this area.

A limitation period is expressed in statute form in each state, after the expira-tion of which no legal action can be brought by an aggrieved person. It wasdeveloped and expanded largely in the 1950s as the doctrine of privity of con-tract was eroded to give the design professions some degree of protectionfrom indefinite legal threat. As the statutes are enacted on a state-by-statebasis, they vary considerably both in the time periods they specify, and in theallocation of time for specific actions. For example, differing limitation periodsmay be specified for slander, bodily injury, property damage, etc. (althoughsome actions may fall under two or more categories), and may vary in durationfrom two to fifteen years,depending upon the state in which they are enacted.

Some states enact statutes of repose as opposed to statutes of limitationspecifically for work undertaken by the design professions. The central differ-ence lies in commencement of action; for the latter, an event establishes thedate from when the time period for action begins; in a statute of repose, how-ever, a specific date will activate the period, irrespective of any fault or actionon the part of the designer. This may, of course, mean that the limitation periodcould have expired before building failure or damage have occurred, thusdepriving the aggrieved party of a remedy.The potential problems of constitu-tionality here, the deprivation of the plaintiff’s “day in court” as opposed to theaffording of some degree of legal protection to the design professional, hasled to a number of challenges to these statutes, and a number of interpreta-tions as to their meaning and purpose. Although these cases have beendecided in various states, they collectively provide a broad picture of the vari-ation in interpretation which presently exists in relation to when the statutoryperiod begins. If AIA contract documentation is used, provisions are includedto establish the date at the end of the construction of the work upon certifica-tion of substantial completion, although in some cases legal action against thearchitect has been allowed where the limitation period was conceived asbeginning at the end of the professional relationship, which could include a

PRACTICE OVERVIEW

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nperiod where the architect gives the client post-completion advice on prob-lems arising from the construction.2 Architects providing continuing services ona number of projects are particularly ill served by this ruling. Furthermore, somecourts have accepted the Injury Rule as being applicable, establishing theconstruction of the limitation period as commensurate with the actual failureof the building, as would be the case in any third party injury case.3

However, perhaps the most worrying development in this field for design pro-fessionals concerns the “Discovery Rule.” Here, the date of commencement isestablished at the time the plaintiff discovers, or should have discovered, thefault. The rationale for the rule lies in the complexity of building construction,the potential difficulties involved in determining faults which may be coveredover or be underground and the potential time lag from completion to discov-ery. In such cases, by the time the plaintiff has realized the impact of the fault inthe absence of the Discovery Rule, he or she may be statutorily deprived of aremedy. The Discovery Rule allows for both fault and damage to be taken intoconsideration and has been used successfully in a number of states.

The implications of the Discovery Rule have had a dramatic impact uponarchitectural practice. Buildings completed years previously may suddenlydevelop signs of failure:4 from this point, the client will have a statutorily setnumber of years in which to make a claim, thereby providing the architect withthe prospect of virtually unlimited future liability. In the past, architects whoinsured against potential legal suits could allow coverage to lapse at the expi-ration of the statutory period related to each project; retiring professionals alsocould terminate the coverage after this period, confident of no further claimsagainst them. With the emergence of the Discovery Rule, however, such time-related protection no longer exists,and architects may be faced with potentialclaims long after their retirement. This point is most forcibly brought home in anEnglish case, where an architect was sued eleven years after his death, and hisestate, which supported his wife in old age, was threatened.5

There have, fortunately, been some developments in the past few years thathave given some relief to the situation. Analyses of the problem of longevity ofexposure have yielded some comforting findings. For example, the majority ofclaims (95 percent) are typically raised in the first ten years following comple-tion. Beyond that, natural deterioration, poor maintenance and a hazier recol-lection of events by witnesses and relevant parties make building a convincingcase less easy. Consequently, the idea of a long-stop statute has been suc-cessfully initiated in many states and other countries.

In Scotland, for example, the Prescription of Limitation (Scotland) Act 1973provides a statutory period of twenty years for claims to be made. In the UnitedStates, some jurisdictions have extended the period during which architectsmay be held accountable (in Wisconsin, for example, from six to ten years), buthave specified that it begins upon the date of substantial completion. This pro-vides an extended period of time in which a suit may be initiated, but providesthe architect with a guaranteed date of limitation expiration. Statutes ofrepose have still been legally challenged, but provide a measure of pre-dictability to architects in dealing with their liability exposure.

References

1. Wall Street Journal, 6 December 1983, 21.2. County of Milwaukee v. Schmidt Garden and Erikson 4 3 Wi 2d 445, 168 NW

2d SS9 (1969).3. Abramowski v. Wm. Kilps Sons Realty, Inc. 80 W.S. 2d 468; 2S9 N.W 2d 306

(1977).4. Rosenberg v. Town of Bergen, 61 NJ 190, 293 A2d 662 (1972).5. Cecil, R.,“Writing your Will to Defend your Estate from Eternal Liability,” Royal

Institute of British Architects Journal, December 1982.

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Seems like every other client I have is slowto pay bills on time. Are there any strate-gies I could use to speed things up and getpaid more regularly?

Getting paid can be a headache for archi-tects. Almost a third of legal cases involvingarchitects concern fee collection and esti-mates have run as high as $70 million a yearfor uncollected fees.

In some ways, it’s not surprising that this issuch a problem. Many projects do not passbeyond the design phase—too expensive,insufficient financing, changes of plan, etc.—and clients might be reticent to pay for ideaswhich they will now never use.

Hopefully, a good contract and regular pay-ment schedule can minimize problems but if allelse fails,some states allow for a mechanic’s liento be placed on the owner’s property to forcepayment. Of course, if no construction hasbegun it may not be enforceable, so the archi-tect may have to consider other strategies tocoax payment from a recalcitrant client:

A Firm Request

A polite but increasingly firm series of letters thatrequest payment, outlining the services pro-vided and a schedule of necessary paymentcan lay the foundations for a successful claim ifit ultimately fails. The tone of the letters shouldbe professional, and remember that you arelaying a “paper trail” that will hold up in court inlater years should your blandishments fail.

Dispute resolution

The courts are always an option, althoughtime and expense make them a last resortrather than an opening strategy. Rememberthat alternatives exist in both arbitration andmediation as possible means of dispute reso-lution,but be reassured that studies show that,when an architect sues for fees, the likelihoodof success, if decided cases are anything togo by, has been as high as 75 percent.

Collection Agencies

Many architects avoid the option of collec-tion agencies, believing them to be incom-patible with a professional service. They canbe effective, however, although expect topay a significant percentage of the amountto the agency.

Forget it

If a client refuses to pay, despite every effortto settle on your part, you will at some pointhave to decide—do we sue or not?

Legal action is expensive (even arbitrationand mediation have their costs), time-consuming and potentially damaging to areputation, and some practices chooseto “eat” the loss rather than pursue a clientin the courts.

While the least palatable choice for archi-tects unjustly denied their fees, it is still a realisticoption that must be considered.

Question & Answer

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8Dispute resolution

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TERMINATION

For a number of reasons, not all building contractsare fully performed as intended. A contract can beterminated in a variety of ways, e.g., by agreement(see page 63), but the AIA General Conditionsmake special provision for the unilateral termina-tion of the contract by either the owner or thecontractor in the event of specified circumstances.

Termination by the Owner (AIADocument A201, Article 14.2.1)

The owner may be permitted to terminate thecontract:

● if the contractor is adjudged bankrupt;● if the contractor makes a general assignment for

the benefit of his or her creditors;● if a receiver is appointed on account of the

insolvency;● if the contractor persistently or repeatedly fails to

supply properly skilled workers or proper materi-als (unless an extension has been granted);

● if the contractor fails to make prompt paymentto subcontractors and/or suppliers;

● if the contractor persistently disregards laws,rules, ordinances, regulations, or orders of apublic authority;

● if the contractor is guilty of a substantial viola-tion of one of the provisions of the contractdocuments.

Procedure

Under the AIA General Conditions, the ownermust seek from the architect certification that suf-ficient cause exists to justify termination of thecontract. It should be noted that the UnitedStates Bankruptcy Code provides that trustees inbankruptcy may assume or assign contracts pro-vided that any pre-bankruptcy defects have beencured. As a result of this change in the law, theAIA has advised that Article 14.2.1 has beeneffectively invalidated insofar as it relates to bank-ruptcy. Termination by the owner, therefore,should only be undertaken with the assistance oflegal counsel, who should carefully review the cir-cumstances in the light of the contract itself, andrelevant state and federal law.

If the decision is made to terminate, seven daysafter written notice has been sent to the contrac-tor and any surety, the owner may:

● Terminate the contract with the contractor● Take possession of the site● Take possession of all materials, equipment,

tools, construction equipment, and machineryon the site owned by the contractor

● Finish the work in the most expedient way

The contractor will not be entitled to any fur-ther payment of outstanding fees until the projectis complete.

Costs

If the monies owing to the contractor exceed thecost of finishing the work (including additional feesof the architect), the contractor will be reimbursedthe difference. However, if the cost of finishing ishigher than the amount owed to the contractor, thecontractor will be liable to pay the excess, the sumof which must be certified by the architect.

Termination by the Contractor (AIADocument A201, Article 14.1.1)

The contractor may also have the right toterminate the contract under the followingcircumstances:

If the work is stopped for a period of thirty daysdue to:● Order of the courts● Public authority intervention● The result of an act of government (e.g., decla-

ration of national emergency, making materialunavailable)

● Through no act of the contractor or his or hersubcontractors or agents

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Architect certifiessufficient cause

Written notice byowner to

contractor's surety

Take overmaterials,tools, etc.

Finish work

Settlepayment with

contractor

Take oversite

Termination

TerminationCause for

7 days

Figure 8.1

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Or, if the work is stopped for thirty days because:

● The architect has not issued a certificate forpayment

● The owner had not paid the amount certified

Procedure

After seven days’ written notice to the owner andthe architect, the contractor may terminate thecontract and recover from the owner:

● Payment for all work executed to date● Proven loss sustained in the expenditure for

materials, equipment, tools, constructionequipment, and machinery

● Reasonable profit● Damages

Termination is a drastic step to take in theevent of contractual disputes, and should be givenextremely careful consideration. The aggrievedparty should ensure that all procedures requiredby the contract documents and by relevant lawsare strictly adhered to in order to prevent success-ful counterclaims.

DISPUTE RESOLUTION

If all other contractual mechanisms fail to providesatisfactory resolution of a dispute between thecontracting parties, the introduction of a thirdparty may be necessary to settle the matter. Inaddition to litigation, both arbitration and medi-ation can be effective in resolving disputes.

ARBITRATION

The third party could be a civil/court judge, if thenormal court procedures are followed (see page 4).

Alternatively, a dispute could be settled by the rel-atively less formal procedures of arbitration ormediation.

AIA Document B141 (1.3.4.1) states that dis-putes must first be attempted through mediationbefore resorting to arbitration or other legal pro-ceedings.

Whereas the courts form part of the UnitedStates’ judicial system and are, therefore, subjectto all of its procedural and administrative rules,disputes submitted to arbitration can be settled byan informal private hearing in the presence ofwhoever the parties choose. If agreement is notpossible, a designated third party may select thearbitrator.

The arbitrator is usually someone with specificknowledge and experience in the field in whichthe dispute has arisen. In the building sector, thismight be an architect, engineer, or other profes-sional person who is usually a member of theAmerican Arbitration Association, a national orga-nization which operates a commercial panel thatserves, among other things, the building industry.

Advantages of Arbitration

The major advantages of submitting a dispute toarbitration are:

● Privacy● Convenience

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Written notice toowner/architect

Termination

TerminationCause for

7 days

Paymentfor work

completedLoss Profit Damages

Figure 8.2

Agreement

A B

Conflict

a. Litigation

A B

Conflict

b. Arbitration

The courts

Arbitrationor

mediation

Figure 8.3

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● Speed● Expense● Informality● Expertise

Privacy

Trade secrets and reputations may be shieldedfrom the public in a private arbitration. Thecourts, however, are public forums and privacy isgenerally not possible.

Convenience

Arbitration hearings can be held anywhere to suitthe parties, such as at the site of the dispute.

Speed

Disputes can be handled quickly, without theinconvenience of having to fit into a court’sschedule. In projects where time is of the utmostimportance, this can be a decisive factor.

Expense

Money might be saved in two ways:

1. The potentially lower cost of the hearing2. The speedy resolution of the dispute

Informality

Courtroom procedures may be dispensed with ormodified at the direction of the arbitrator.

Expertise

Difficult construction-oriented problems may bemore readily understood by an arbitrator experi-enced in the construction field than by a profes-sional judge.

Disadvantages of Arbitration

The disadvantages of arbitration are:

● Cost● Lack of legal expertise● No binding precedent

Cost

Aside from the expense of legal counsel, expertwitnesses, etc., the arbitrator’s fees must be paidtogether with the cost of hiring the place of thehearing. In the court system, the services of thejudge and the use of the courtroom are not addi-tional expenses.

Lack of Legal Expertise

Though knowledgeable in the field of the dispute,the arbitrator may be less well informed withregard to the law than a professional judge.

No Binding Precedent

Each case submitted to arbitration is decidedupon its own merits, without necessarily anyregard to previous cases. This can make it difficultfor the parties to ascertain the strength of theirarguments.

When to Arbitrate

Parties may go to arbitration:

● After attempting to resolve the dispute throughmediation (B141, Article 1.3.4.1)

● By agreement after the dispute has arisen● By agreement before the dispute arises (i.e., as a

condition of the contract)● By order of court (many states will enforce an

agreement to arbitrate)

Agreement to arbitrate prior to a dispute occur-ring is the preferable method, and most buildingcontracts provide for arbitration proceedings bystating that the parties agree to be bound by thedecision of an arbitrator in the event of disagree-ment (AIA Document A201, Article 7.9.1). ManyAIA standard forms of contract provide for arbi-tration, including the owner-architect agreements.

In addition to the agreement to arbitrate, bothparties to AIA construction contracts agree toabide by the Construction Industry ArbitrationRules which are published by the AmericanArbitration Association. However, some state lawsregarding arbitration vary, and this should betaken into account at the contract formation stagein case any modifications may be necessary tomatch state requirements. The assistance of legalcounsel is advisable.

Arbitration Procedure

Either party to the AIA construction contract (notnecessarily with the consent of the other party atthe time of the dispute) may initiate arbitrationproceedings by writing to the other party, with acopy to the architect, within the time allowed bythe contract documents (AIA Document A201,Article 2.2.12). This letter usually includes:

● The reason for the dispute● The amount involved● The remedy sought

It represents a Notice of Demand forArbitration under the terms of the AIA contract.

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Two copies of the notice should be filed withthe American Arbitration Association (AAA)within seven days of the notice, sending a copy ofthe answer to the originator of the proceedings. Ifthe respondent chooses not to reply, there isnonetheless an assumption that the claim is denied.

Although arbitration proceedings are inprogress, both parties are constrained by the con-tractor to meet all their contractual obligationsunless otherwise agreed in writing, or unless thereason for the arbitration is the breakdown of thecontract itself.

Selection of the Arbitrator

An arbitrator may be selected:

● By agreement of the parties before the dispute● By agreement of the parties during the dispute● By reference to the American Arbitration

Association

In the latter case, the AAA sends a list of possi-ble arbitrators to both parties who are given sevendays to delete any names they consider to beunacceptable, and list the remaining names inorder of preference. The AAA then contacts anarbitrator (or arbitrators: a panel of three is some-times selected) on the basis of the amended lists.In the event that none of the names are accept-able, the AAA will appoint an arbitrator withoutsubmitting new lists.

Prior to accepting the appointment, prospec-tive arbitrators should assess their suitability forthe case, and disclose all potential conflicts ofinterest (e.g., personal knowledge of one of theparties, or a financial interest in the dispute).

Pre-Hearing Procedures

A pre-hearing conference may be arranged at theparties’ request, or if the AAA believes such a con-ference would be useful. The pre-hearing confer-ence allows for an exchange of information, thestipulation of uncontested facts, and the agree-ment of administrative details such as:

● Locale: This may be mutually agreed upon, butin the event of disagreement between the par-ties, the AAA will make binding decision.

● Use of legal counsel: This is acceptable in manystates, but if one party decides to engage a legalrepresentative, the other party and the AAAmust be notified at least three days prior to thehearing.

● Stenographic record: If one of the partiesrequests a record of the proceedings, therequesting party must bear the costs unless bothparties agree to share the expense.

● Time and place: The arbitrator decides the timeand place of the hearing, and the AAA willnotify the parties at least five days in advance.

The Hearing

The hearing should only be held when all the req-uisite documents have been exchanged. In theevent of the refusal of one party to participate, orif there is an attempt to deliberately obstruct theproceedings, the arbitration may continue exparte (i.e., on the proof of one party only) pro-vided that the absent party has been notified inwriting of his or her right to attend. An awardmay not be made simply on the basis of theabsent party’s default, and all relevant evidenceshould be heard by the arbitrator prior to makingthe award.

The hearing generally comprises the followingstages:

● The oath of the arbitrator (if required by theparties)

● Recording of time, place, date of hearing, theparties present and statements of claim andresponse

● The arbitrator may ask for statements fromboth sides outlining the issues involved in thedispute

● The claimant will then present the claim, sup-ported by proof in the form of testimony,exhibits, etc.

● The claimant’s witnesses will be examined,cross-examined (by the respondent or counsel)and then re-examined by the claimant

● The respondent must then follow the same pro-cedure for the defense and counterclaim (if any).

Inspection of property may be required, andboth parties are generally given the opportunityto accompany the arbitrator. If no other proof isrequired or forthcoming, the arbitrator will closethe proceedings and make a decision within thespecified time (usually not later than thirty daysafter the hearing). No communication betweenthe arbitrator and the parties to the disputeshould take place, except through AAA.

The Award

The award should be made in accordance withrelevant state law and will be sent to both partiessimultaneously by the AAA. Typically, the partieswill be asked to deposit a sum with the AAA atthe beginning of the arbitration proceedings toensure payment of the arbitrator.

In the event that one of the parties refuses toaccept the arbitrator’s decision, application maybe made to the courts to enforce the award.11

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Although arbitrations are carried out largelyindependently of the court system, the courtsmay have statutory power to reject or vacate thearbitrator’s award in the following circumstances:

● If the arbitrator exceeds his or her authority● If there is evidence of corruption, fraud, or

partiality● If the arbitrator refuses to hear evidence of

either party● If the arbitration agreement is improper

Modifications to the award may be allowedby the arbitrator if a party considers that a mis-take has been made. However, awards are usuallyreaffirmed.

MEDIATION

While dispute resolution has tended to focus onlitigation and arbitration and their relative advan-tages, a new alternative is growing in use in theconstruction industry.

Despite their differences, litigation and arbitra-tion use basically the same principle to resolve adispute. Parties refer their differences to a thirdparty who, after reviewing the evidence, usuallydeclares one side a winner, the decision being sub-ject to appeal under certain conditions.

In the mediation process, disputing parties willengage the services of a third party, but the medi-ator will have no authority to make a decision

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Arbitratorselection

a

Architect Other party AAA

AgreementPreviousagreement

AAA list toparties

Returnpreference

Select andnotify

Agreement

Suitability

Conference

Exchange ofinformation

The Hearing

Award

AAA selects

Yes

Yes

No

No

Rep

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7 d

ays

Proceedingsinitiated

b

Figure 8.4

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which is binding on the individuals involved. Infact, the mediator’s role is to enable the parties tovoluntarily explore settlement options and jointlycraft a resolution that resolves the dispute.Mediators have no authority beyond their powersof persuasion and creative problem-solving, andthe process relies on the will of the disputing partiesto resolve their differences without resorting to themore formal options of arbitration and litigation.

Despite the lack of mediator authority, theprocess has proven to be very effective if partiesagree to try it, yielding a success rate of between85 percent and 95 percent.

Initiating Mediation

Parties can agree at any time to submit their differ-ences to mediation, although some contracts, suchas the AIA Standard Form of Contract, nowinclude a mediation clause as a prerequisite to arbi-tration or litigation. If one of the parties to such asigned contract tries to go directly to court withoutattempting mediation, the courts will likely delaylegal action until a mediation has taken place.

The Benefits of Mediation

The primary advantages are:

● Disputing parties can create their ownsettlement.

● The mediator is a neutral third party, and cantherefore help both parties explore alternativesolutions.

● Mediation is very informal and can be arrangedquickly.

● Costs can be dramatically reduced in legal fees,time and expended energy.

● There is a greater possibility of maintaining theworking relationship between the parties.

● The free-form nature of the process allows forcreative solutions to be explored.

Selection of the Mediator

Mediators in the construction industry are usuallyexperienced professionals—architects, engineersand attorneys—who are trained in dispute resolu-tion. If they are part of a recognized organizationspecializing in resolving problems, such as the

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n American Arbitration Association, AdministratorCommercial Arbitration Tribunal

Wesmey-Shovelgon Construction Co.and

Acme Estates Inc.Case Number 4136-1321-88

AWARD OF ARBITRATOR

I, THE UNDERSIGNED ARBITRATOR, having been designated in accordance with the ArbitrationAgreement entered into by the above-named parties, and dated May 14, 2003, and having been dulysworn and having heard the proofs and allegations of the parties, AWARD as follows:

1. Within fourteen (14) days from the date of transmittal of this Award to the parties, Acme EstatesInc. shall pay to Wesmey-Shovelgon Construction Co. the sum of FOURTEEN THOUSAND THREE

HUNDRED AND FORTY-SIX DOLLARS ($14,346.00) plus interest thereon at the rate of eleven andone quarter per cent (11.25 per cent) per annum from the date when construction work wasstopped by Acme Estates Inc., that being May 15, 2004, until August 21, 2004.

2. The counterclaim of Acme Estates Inc. against Wesmey-Shovelgon Construction Co. is herebydenied.

3. The administrative fees of the American Arbitration Association amounting to SEVEN HUNDRED

AND FIFTY-FOUR DOLLARS AND THIRTY FIVE CENTS ($754.35) shall be borne entirely by AcmeEstates Inc.

4. This award is in full and final settlement of all claims and counterclaims submitted to the arbitration.

Signed: _______________________________________________

Arbitrator _______________________________________________

Date: _______________________________________________

Notarized: _______________________________________________

Note: The execution of the award may vary according to the legal requirements of the state inwhich the arbitration takes place.

Figure 8.5

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American Arbitration Association, they will berequired to undertake regular training and instruc-tion to ensure continued competency and place-ment on the AAA’s Construction Mediation Panel.

While parties choose anyone they wish tomediate their dispute—the process is entirelyvoluntary—if they use the services of a group likethe American Arbitration Association, they willbe sent the details of a qualified mediator whoserves on the Construction Panel. Either partymay object to the mediator until a suitable candi-date, who both sides feel will be fair, impartialand effective, is found.

The Process

While the informality of the mediation processenables the discussions to follow any directionappropriate to the parties and their dispute, theprocess usually involves a conference where every-one comes together to attempt resolution.However, there may be some sharing of docu-mentation and outlining of the relative positions(and possibly desired outcomes) ahead of time toallow the mediator to become familiar with thedetails of the case.

At the conference, the mediator outlines theprocedures and basic ground rules involving:

● Presentation of each party’s case● Order of presentation● Decorum● Discussion of unresolved issues● Use of caucuses● Confidentiality

Each party is given an opportunity to presenttheir case to enable the mediator to gather asmany facts as possible. Following any decisionbetween the parties and the mediator, the groupswill often move to separate rooms, and themediator will caucus with each party separately,shuttling back and forth between them andpotentially bringing them back together again,searching for a solution.

During the caucuses, the mediator’s role is to:

● Clarify each party’s version of the facts

● Establish relative priorities and positions● Question assumptions and loosen fixed stances● Explore and possibly forward alternative

solutions● Seek trade-offs, face-saving strategies and

win/win solutions● Probe and challenge the validity of each

position

The Settlement

If, with the assistance of the mediator, a workableresolution is reached, it is usually committed towriting and signed by all parties as soon as possi-ble. The agreement may also be put in the form ofa consent award if the American ArbitrationAssociation is involved. The AAA will then makethe necessary arrangements.

THE ARCHITECT AS ARBITRATOR ORMEDIATOR

As noted earlier, the architect has a quasi-arbitralrole in the administration of the constructioncontract. In addition, the architect’s professionalqualification and experience in the constructionfield imply a knowledge and expertise whichmight provide the basis for arbitration or media-tion work. The American Arbitration Associationhas regional offices throughout the United Stateswhich may be contacted by architects wishing toapply for training and inclusion on the CommercialPanel.

THE ARCHITECT AS EXPERT WITNESS

It is possible that an architect may be called asexpert witness at an arbitration or mediation togive professional opinions regarding a buildingdispute. The expert witness is not usually person-ally involved in the dispute, and is paid for objec-tive expertise and opinion which may be givenin a written report or by oral testimony (seepage 125).

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SOLVING DISPUTES—IS THERE AN EASIER WAY?

Unfortunately, many architectural practices are no strangers to legal disputes.Construction is, after all, a messy, high-risk business with huge amounts ofmoney involved. Problems, unanticipated outcomes and misunderstandingsall too often end up in some form of dispute resolution. While the incidence oflegal action has lessened in past years, there is still a noticeably high level of lit-igation involving architects, which should give the profession reason to look formore effective alternatives in resolving their disputes.

The civil court system provides the most traditional means of sorting out legalproblems, but has some sobering consequences. Going to court can bebreathtakingly expensive and, of course, painfully slow. In the months—some-times years—that it takes to work through the process of taking depositions,waiting for court dates and enduring the legal proceedings, huge amounts ofnervous energy and valuable work time can be consumed.

Arbitration is often touted as a viable alternative to litigation, and can befaster, cheaper and more convenient. It also has the advantages of privacyand possibly the expertise of an arbitrator familiar with construction proce-dures who can understand the complex, often technical, facts of the case.However, its detractors point out that the general lack of an appeals proce-dure and the possibility of getting an arbitrator ignorant of broader legal issues(this is a particular beef of attorneys, naturally) can make the outcome of theprocess uncertain, and that costs and delays can run about as high in arbitra-tion as in a comparable legal case. Sadly, this can sometimes be the case.

However, in the experience of many arbitrators, the win/lose nature of theoutcome of each case has been its most frustrating drawback. As the onlypowers that an arbitrator wields are the ability to deny or uphold a claim andorder a monetary award, there is always a winner and a loser and, frankly, con-struction disputes are often a lot more complex than that.

As both litigation and arbitration ultimately involve the judicial determinationof a dispute on a win/lose basis, it has been encouraging to see the develop-ment of a new field of dispute resolution taking effect in the construction indus-try. Mediation is a relatively new phenomenon, but one that has begun tocatch on. It differs from the other two forms of dispute resolution in one impor-tant way—the mediator, unlike the judge or arbitrator, has no powers to makea judgment. His or her only role is to facilitate discussion, help the partiesexplore alternative resolutions to their problems and ultimately work with themto craft an agreement that is mutually acceptable. Ideally, they strive for awin/win situation. It’s often not quite as rosy as that, but at least avoids theknock down, drag-out battle that leaves one side victorious, but both sidesfinancially and emotionally bruised.

Mediation has been remarkably effective in construction-related disputes,yielding a 90 percent success rate when it has been employed. Its principaladvantages are speed, flexibility and economy. If it works, parties are sparedcrippling legal fees and long periods of uncertainty and concern. They mayeven salvage their professional relationship, not just on the project in disputebut in future years, a phenomenon less likely after legal action.

Of course, not all disputes lend themselves to mediation—multiple partymediations are a particular challenge—and not all parties possess the attrib-utes to work through the process. However, if parties are willing to agree to try

PRACTICE OVERVIEW

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to sit down and discuss the issues (the single biggest factor in the high successrate of mediation), and look for ways to resolve their differences, they have astrong chance of walking away at the end of the day—that day—with the dis-pute behind them. Of course, this will require an open-minded approach, awillingness (albeit grudgingly) to compromise and an ability to see the otherparty’s point of view, however annoying and unpalatable. If all else fails, arbi-tration and the courts are still available, but at least the parties have tried toresolve their differences themselves, often with success. Typically, once partieshave committed to the concept of mediation, the success rate is impressivelyhigh, even if the hearings take many hours to complete.

When a nasty dispute looms, architects should consider a serious discussionwith their legal counsel as to the advisability of setting up a mediation beforemore formal action is taken. Here are the attributes needed to approach theprocess positively and productively.

1. Be willing to sit down with “the other side” and talk about the dispute calmlyand constructivelyEasier said than done, if the dispute has already turned nasty. I have beeninvolved in arbitrations and mediations when I have had to physically sepa-rate parties, request one of them to leave the room (once when it was in hisown house!) or suspend the discussion until tempers calm down.Sometimes,it’s too difficult for an aggrieved party to even be in the same room with theother side, let alone amicably discuss solutions with them. However, experi-ence shows that if parties can initially agree to try to discuss the matter infor-mally, that simple agreement can set them on the path to resolution.

2. Be open-mindedListen to the other side’s perspective on the matter—things are rarely black-and-white in the complex world of construction—and try, for the sake ofargument, to see their point of view. Maybe they have a point as well, andthat may affect your perspective on the case.

3. Forget revengeHowever personal the dispute has become, you have to leave emotion atthe door. If you want to see personal retribution or are focused on a pointof principle, the mediation will fail. A dispute has to be seen as a tangledmess that the parties can unravel if they approach it professionally anddispassionately—leave personality out of it.

4. Think out of the boxMediation provides the parties with the freedom of choice—they canresolve their dispute any way they like and can look to less conventionalways to create a solution. Can a settlement be spread out over time in aseries of payments? Can an ongoing professional relationship—the promiseof future work—be maintained? I have even known a simple, sincere apol-ogy to be the lynch pin in a dispute. Again, a willingness to both proposeand consider nontraditional ideas can really help the process. Remember,once the informality of mediation is abandoned for more formal methods,your fate is in the hands of a third party judge or arbitrator and you have lostcontrol of the decision-making process.

5. Be prepared to compromiseNo one likes to lose,but sometimes settling for less at this stage,even if you’reconvinced you have an ironclad case, may save you money in the longrun. Balance the merits of a quick solution against even the best-casescenario—a clear win (never a certainty in either courts or arbitral hearings,despite what you believe or your attorney tells you) tempered, of course, byconsiderable legal bills. Is a compromise worth it, not just for the money, butfor the time, effort and continued worry of a lawsuit you have saved? In thisway, a compromise can be viewed as a win too.

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n6. Look beyond the conflict

Sure, you aren’t that fond of the other party (client, contractor, etc.) now,but the construction world is small and life is long.You may well have had agood previous working relationship and, this dispute aside,will work togetherin the future. Does it make sense to preserve the relationship? Do you fore-see working for or with them again? Sorting out a long-term strategy canhelp in going into a mediation with a view that transcends the dispute inquestion.

7. Don’t sweat the small stuffAvoid pettiness in the discussions. Don’t let a resolution of the dispute beheld up over a minor sticking point (quibbling over who said what in a con-versation, for example). Keep thinking Big Picture—if I settle today I am freeof further costs or worry about this matter and can get back to the businessof architecture.

Mediation may not be the universal panacea for all construction disputes.Parties are not usually hugging after a resolution, but at least they can nowmove on, and often rebuild their relationship once things have calmed downand before any further acrimony has been exchanged. And while the successof mediation lies predominately in the attitudes of the parties to take control oftheir own settlement, it is important to involve an experienced mediator tomanage the discussions between the parties, keeping discussions going, sug-gesting alternatives and being the catalyst for a productive settlement.Mediations can be lively occasions, involving shuttle diplomacy by the media-tor, caucus meetings with the attorneys and even one-on-one exchangesbetween the two protagonists. A skillful mediator will orchestrate the pace ofsettlement, keep tempers under control, focus on positive settlement strategiesand ultimately help the parties forge an agreement that clearly and irrevoca-bly ends the dissent between them. While the sword of justice wielded in litiga-tion and more quietly in arbitration is just as effective in creating a solution, theoutcome is no longer in the parties’ own hands. Isn’t it worth giving mediationa try first?

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I’ve been asked to serve as an expertwitness on a construction case. Is thissomething architects can get involved in?

Some architects become involved in courtcases or arbitrations as expert witnesses,particularly where a professional opinionis necessary to help a judge, arbitrator orjury to decide whether certain levels ofexpected performance have been achieved.The use of an expert witness is common innegligence cases, where the standard ofcare—that is, the level of ordinary and reason-able skill usually exercised in practice—has tobe established through professional opinion.

Being an expert witness is not always an easyrole. Your opinions, which are remunerated,may carry the appearance of the “hired gun”and credibility will be judged against your cre-dentials and experience relevant to the field ofthe dispute.

An expert witness’s role might include:

● Helping the lawyer who retained you toreview the case and develop case strategies

● Making site inspections● Presenting a written report of your finding● Giving deposition testimony to opposing

counsel● Advising on the use of technical construction

terms● Preparing questions for use in cross-examina-

tion of the opponent● Listening to the opposing side’s experts and

recommending questions to underminetheir testimony

Expert witnesses can refer to their notes dur-ing hearings. They should avoid jargon orbeing overcomplicated in their responses.They should not be patronizing or boring tothe judge, jury or arbitrator, and should notexaggerate or provide inconsistent answers.To be as effective as possible,expert witnessesmust be as accurate and honest as possibleto avoid speculation during testimony upontheir impartiality.

Question & Answer

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ab initio from the beginning

bona fide in good faith

caveat emptor let the buyer beware

ejusdem generic of the same type

estoppel a rule of evidence which prevents a person from denying or asserting afact owing to a previous act

ex parte upon the application of

ignorantia juris non excusat ignorance of the law is no excuse

in personam against a person, i.e., not against everyone

in rem against a thing, i.e., applicable to everyone

inter se among themselves

obiter dicta things said by the way

per se by itself

prima facie on first view

quantum meruit as much as he deserves

ratio decidendi reason for the decision

res ipsa loquitur the thing speaks for itself

stare decisis to stand by past decisions

sui juris of legal capacity

tortfeasor one liable for a civil wrong, except regarding a contract or trust

uberrimae fidei of the utmost good faith

ultra vires beyond one’s power

volenti non fit injuria no wrong can be done to one who consents to the action

Glossary of common legal terms

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Index

Note: a numbered list of AIA standard forms appears at the front of the book.

Absolute and acquired rights in land, 49Acceleration, 94Access to work, 85–6Accessibility guidelines, 55–6Adjustments, 87Administration, 32–3, 37, 39Advertising, 42–3, 44–5Agents, 20–1Agreements:

see also Contractsarchitect/owner, 25–7, 34–8construction management, 23–4consultants, 22partnerships, 18

AIA (American Institute of Architects), Codes of Conduct, 42–4AIA documents:

agreement, owner/architect (B141), 35architect’s field report (G711), 90architect’s supplemental instructions (G710), 91bid bond (A310), 72certificate of substantial completion (G704), 108construction phase, 85contract change order (G701), 95contract termination (A201), 115–16payment application/certificate (G702), 96payment of debts/claims (G706), 105performance/payment bonds (A312), 75–6release of liens (G706A), 106standard forms, 22, 24, 34, 36supplemental attachment (G715), 73surety to final payment (G707), 107

Appeals, 53–4, 57Approvals, 86Arbitration, 116–19, 122

advantages and disadvantages, 116–17award, 118–19, 120procedure, 117–18

Architects:arbitrator/mediator role, 121bidding process, 80, 82duties, 85–7expert witness role, 121, 125field report form, 90liability, 5–7payment certificate, 96professional relationships, 20–3, 25–7, 33–41progress appraisal, 87–9selection, 33–4supplemental instructions form, 91

Architectural programming, 39Associations, 17–20Award of arbitration, 118–19, 120

Behavior codes, 31–2, 42–5Bid bonds, 72, 74Bidding for contracts:

instructions, 68–71, 80lowest bid, 69, 80–1procedural guidelines, 79–81selection, 67, 69

Bonds, 7, 72, 74, 75–6Breach of contract, 6, 63–4Bridging, 67Budget evaluation, 39Building contracts, 64–5Building control, 54–6Building industry, 15–28

insurance, 9ownership and associations, 17–20professional relationships, 20–4

Building permits, 56–7, 74

Care, standard of, 7Certification:

construction process, 86–7insurance, 74occupancy, 56, 57payments, 86–7, 96substantial completion, 108

Changes to contracts, 89–92, 93, 95Checklists:

completion, 104contracts, 34–6, 65OSHA, 51

Civil law, 3–4Claims, 8, 10–11, 93, 105Clients’ relationships, 25–7, 33–41

see also OwnersCodes:

building, 54–6conduct, 31–2, 42–5development, 52

Compensation, 19–20, 26, 38Competitively bid contracts, 66–7Completion, 101–11

continuing liability, 104, 109–10

final payment, 104impossibility, 94post-completion services, 104

Compromise, 123Conduct codes, 31–2, 42–5Conservation, 53Construction managers, 23–4Construction phase, 83–99

architect’s duties, 85–7contract changes, 89–92delays and stopping work, 94documents, 40–1progress appraisal, 87–9

Construction procurement services, 37Consultants, 21–2, 80

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Contractors:see also Subcontractors; Suppliersannouncement, 69–71architect relationship, 22–3bidding, 67–71contract termination, 115–16payment application, 96payment of debts and claims, 105qualifications, 67–8, 70release of liens, 106selection, 66–7, 69–71, 79–81work schedule, 71, 88

Contracts, 61–82see also Agreementsadjustments, 87administration services, 37bidding, 67–71, 79–81bonds, 72, 74, 75–6breach of, 6, 63–4building contracts, 64–5changes, 89–92, 93, 95documents, 22, 24, 26–7, 68, 69of employment, 33insurance, 7, 9law, 63–4negotiated and competitively bid, 66–7negotiations, 25–7obligations, 26–7procedures, 71–4single and separate systems, 66standard forms, 65supplementary conditions, 65termination, 93, 115–16time extensions, 93

Copyright, 58–9Corporations, 18–19Cost-type contracts, 64Costs:

dispute resolution, 117, 122insurance, 11, 13savings, 60

Courts, 4–5Covenants, 49Criminal law, 3

Damages, liquidated, 8, 92–3Debt payment, 105Delays in construction, 92–4Design phase, 47–60

copyright, 58–9litigation, 10, 11, 25, 109services, 36, 37, 40

Design-build work, 24, 67Discharge, contracts, 63–4Discovery Rule, 110Dispute resolution, 113–25

arbitration, 116–19, 122mediation, 119–21, 122–4termination of contract, 115–16

Documents:see also AIA documentsaccuracy, 79, 97–8construction phase, 40–1, 85contracts, 22, 24, 26–7, 68, 69

Drawings, 40–1, 68, 79

Easements, 49Employment contracts, 33Engineers, 23

Environmental impact statements, 53Equity, 3Ethics, 31–2, 42–5Expenses, 38Expert witness role, 121, 125

Facility operation services, 37Fast tracking, 67Federal courts, 4Fees, 26, 38Field report form, 90Final completion, 103Final payment, 104, 107Financial management, 32Fixed price/stipulated sum contracts, 64Foreign contracts, 65

Government agencies, 20Governmental restraints, 51–2Guarantees see Bonds; Warranties

Hearings, arbitration, 118

Impossibility of completion, 94Indemnity, 8Information, 98, 99Inspections, 86, 103Insurance:

carriers, 98certificates, 74contracts, 7, 8–9costs, 11, 13liability, 9, 11, 13office, 32supplemental attachment form, 73

Joint ventures, 19–20Judicial system, 3–5

Land:ownership and rights, 49zoning, 52–4

Law structure, 3–4, 63–4Legal experts, 98Legal system, 3–5Letter of intent, 71Liability:

advice and action, 97–8continuing, 104, 109–10insurance, 9, 11, 13limitation, 109–10litigation, 10–13occupiers, 50–1types, 5–7, 8, 9

Licenses, 31, 46Liens, 8, 106Limitation period, 109–10Limited liability companies (LLCs), 19Liquidated damages, 8, 92–3Litigation:

advice and action, 97–8alternatives, 122–4liability, 10–13, 25, 109–10payment, 111

LLCs see Limited liability companiesLocations, 51–2Lowest bid, 69, 80–1

Mandatory codes, 31, 43Material costs saving, 60Mediation, 119–21, 122–413

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Meetings, 88–9Model Land Development Code, 52

Negligence, 6Negotiated contracts, 66Negotiations, clients, 25–7Notices, 68, 71Nuisance, 50

Occupancy certificates, 56, 57Occupational Safety and Health Administration (OSHA), 51Occupiers’ liability, 50–1Office administration, 32–3Original work, 58OSHA see Occupational Safety and Health AdministrationOwners, 20–1

bids, 80–1contract law, 63–4contract termination, 115professional relationships, 25–7, 33–41right to stop work, 94

Ownership, 17–20, 49

Partnerships, 17–18Payments:

bond form, 76certification, 86–7, 96consent of surety document, 107construction, 86–7contractor’s affidavit, 105final, 104, 107methods, 38refusal, 93regular schedule, 111subcontractors, 77–8

Performance:bonds, 74, 75evaluation, 85–6standards, 55

Permits:building, 56–7, 74zoning, 53

Personnel policy manual, 32–3Planning and evaluation services, 37Post-completion services, 104Practice, 29–46Privacy, 117, 122Privity, 63Profession, 31–2, 42Professional associations, 20Professional corporations, 18–19Professional liability insurance, 9Professional relationships, 20–3

architect/consultant, 21–2architect/contractor, 22–3architect/owner, 20–1, 25–7, 33–41disputes, 122, 124

Programming, 39Progress:

appraisal, 87–9schedule of, 71

Project administration services, 37, 39Project manual, 40Proof, standard of, 5Property law, 49–51Public liability insurance, 9Punch list, 103

Qualifications, 31, 46, 67–8, 70

Relationships, 20–3, 25–7, 33–41Remedies, 7–8Restraints, official, 51–2Retentions, 8Rights in land, 49

Safeguards, 7–8Schedule of values, 71, 88Schedule of work, 71, 88Security of bids, 68Selection:

arbitrators, 118, 121, 122architects, 33–4bidders, 67, 69contractors, 66–7, 69–71, 79–81mediators, 120–1, 124procedural guidelines, 79–81subcontractors, 77

Separate contracts, 66Services, scope of, 36, 37–8, 39, 40Settlement, mediation, 121Single contracts, 66Site meetings, 88–9Site visits, 87–9Small claims court, 5Sole practitioners, 17Specifications, 41, 68, 79Spite fences, 50Staffing, 32–3Standard of care, 7Standard forms see AIA documentsStandard of proof, 5Standards, buildings, 55State courts, 4–5Status, contracts, 63Stopping work, 94Strict liability, 6Subcontractors, 27, 74–8Substantial completion, 103, 108Supplemental attachment form, 73Supplemental instructions form, 91Suppliers, 78Supreme Court, 5Surety bonds, 72, 74, 75–6Surveys, 39–40

Termination of contracts, 93, 115–16Time limits:

litigation, 8, 109–10penalty mechanisms, 92–4

Trade unions, 20Tree ordinances, 50Trespassers, 50–1Turnkey contracts, 67

Unethical behavior, 44

Variances, 52–3Variations, bids, 68–9Vicarious liability, 6

Waivers, 8Warranties, 7–8, 11, 49, 104Work:

schedules, 71, 88suspension, 94

Zoning, 52–4

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