Contracts: RAIC and CCDC documents

The binder on the conference table from the first week comes open in the sixth. Eberle explains that it holds the firm's standard contracts, each one tabbed and annotated with notes from the firm's lawyer and insurer, and that every project the firm has done in thirty years began with one of them. The guest this week is Amira Sandoval, a construction lawyer who represents architects, owners and contractors at different times and who says she has seen every kind of contract go wrong. She begins by asking the students what a contract is for. Wren says it sets the fee. Callum says it protects the firm. Sandoval says both answers are right, but that the main purpose of a contract is to make sure that two parties who want the same thing agree in advance on what each will do, so that they can remember it the same way when memories differ.

Why standard forms exist

Architects in Canada rarely write contracts from scratch. They use standard forms published by the profession and the construction industry, which have been drafted and revised over decades by architects, engineers, owners, contractors and lawyers. The Royal Architectural Institute of Canada publishes the standard form for the agreement between client and architect, known as Document Six. The Canadian Construction Documents Committee, a national committee that includes representatives of owners, consultants and contractors, publishes the family of construction contracts known as CCDC documents. Sandoval says that the great advantage of standard forms is that their wording is familiar to everyone, has been tested in disputes and courts, and allocates risk in a way that the industry broadly accepts. The great danger is that people change them without understanding what the changes do.

The client–architect agreement

Document Six, the Canadian Standard Form of Contract for Architectural Services, was last revised in 2018. It has five parts: a cover and table of contents, the Agreement form that the parties fill in, the definitions, the general conditions and a set of schedules. The definitions and general conditions are meant to be used without change; any amendments belong in separate supplementary conditions, so that everyone can see what was altered. The Agreement records the parties, the project, the services, the fee and the key terms. Schedule A lists the services and shows which party is responsible for each, and alternative schedules cover narrower scopes such as predesign, building condition assessments, custom houses and interior fit-ups. The RAIC publishes a guide that explains each clause. Document Six is intended for most project types and delivery methods but not for design-build or integrated project delivery, for which the CCDC publishes separate forms.

Sandoval walks the students through the terms that matter most. The scope of services defines what the architect will do, and everything not listed is an additional service. The fee and payment terms say how much the architect is paid and when, how expenses are reimbursed and what interest applies to late payments. The client's responsibilities include providing information about the site, a budget, decisions on time and, often, surveys and geotechnical reports; the architect is entitled to rely on that information. Ownership of documents and copyright usually stays with the architect, who gives the client a licence to use the drawings for the project; this matters if the client wants to build the design again elsewhere. Termination clauses let either party end the agreement for cause or, in many forms, for convenience, with payment for work done. Dispute resolution clauses set out negotiation, mediation, arbitration or litigation.

Limiting liability and allocating risk

Two terms deserve special attention. The first is the limitation of liability. Document Six limits the architect's liability to the lesser of the insurance available when a claim is made and an amount the parties agree in the Agreement, and it limits both parties to direct damages, excluding indirect and consequential losses such as lost rent or profit. The RAIC's guide advises against supplementary conditions that make the firm's employees or principals personally liable. The second is the standard of care. The architect promises to perform with the skill and care of a reasonably competent architect in similar circumstances, not to produce a perfect building. Clients' lawyers sometimes propose clauses that promise more, such as warranties that the design is fit for purpose or guarantees of cost, and insurers generally will not cover liability that goes beyond the normal standard of care.

Sandoval says that every change has a price, and that the architect's negotiating position is usually stronger than they think. A client who insists on an uninsurable warranty is asking the architect to bet the firm on a single project, and many clients will accept a reasonable alternative once the risk is explained. Eberle Moss sends every non-standard clause to its insurer's contract review service before signing, a service most professional liability insurers offer to their policyholders. Eberle says that the review has saved the firm more than once, and that the habit of reading every clause is worth more than any single negotiation.

The construction contract and the architect's role in it

The architect is not a party to the contract between the owner and the contractor, but the standard forms give the architect, called the Consultant in CCDC documents, a central role in administering it. CCDC 2, the stipulated price contract, is the most widely used. It was revised in 2020, and the new edition introduced a completion milestone called Ready-for-Takeover, which requires the Consultant to confirm that substantial performance has been reached, that an occupancy permit has been issued, and that final cleaning, operation and maintenance documents and as-built drawings are complete. The 2020 edition also ties warranty and insurance periods to Ready-for-Takeover, adds requirements related to prompt payment and annual release of holdbacks on long projects, confirms that statutory adjudication rights are not limited, and excludes indirect and consequential damages. Other CCDC forms cover cost-plus contracts (CCDC 3), construction management (CCDC 5 and 17), design-build (CCDC 14 and 15) and integrated project delivery (CCDC 30).

The architect's role in the construction contract is one of the hardest in practice, because the architect is paid by the owner but must interpret the contract fairly between owner and contractor. When the contractor asks for more money or time, the architect evaluates the request against the contract documents and decides, and either party can dispute the decision. When the architect certifies a payment, they confirm that the work has progressed to the point claimed, as far as they can tell from site visits; they do not guarantee its quality or check every detail. Lesson 10 and the next course on project delivery return to these duties in detail.

Agreements with consultants

Most architects engage the engineers and other consultants on their team themselves, under sub-consultant agreements. The key principle is that the terms should flow down: the consultant's scope, standard of care, insurance, schedule and limitation of liability should match the architect's agreement with the client, so that the architect is not left responsible to the client for something the consultant is not responsible to the architect for. Document Six requires the architect to ensure that consultants carry insurance. Payment terms matter too. Many sub-consultant agreements say that the architect will pay the consultant when the client pays the architect, which shares the risk of a slow client but must be written carefully to be enforceable.

# Check that key terms flow down from the client agreement to each consultant agreement.
prime = {"standard of care": "reasonable", "liability cap": 2_000_000, "insurance": 2_000_000,
         "payment days": 30, "copyright to client": False, "consequential damages waived": True}
consultants = {
    "structural": {"standard of care": "reasonable", "liability cap": 2_000_000, "insurance": 2_000_000,
                   "payment days": 30, "copyright to client": False, "consequential damages waived": True},
    "mechanical": {"standard of care": "reasonable", "liability cap": 500_000, "insurance": 1_000_000,
                   "payment days": 15, "copyright to client": False, "consequential damages waived": False},
    "landscape":  {"standard of care": "best efforts", "liability cap": 2_000_000, "insurance": 2_000_000,
                   "payment days": 30, "copyright to client": True, "consequential damages waived": True},
}
for name, terms in consultants.items():
    gaps = []
    for k, v in prime.items():
        c = terms[k]
        if isinstance(v, int) and not isinstance(v, bool):
            if k == "payment days":
                if c < v: gaps.append(f"{k}: pays in {v} but owes in {c}")
            elif c < v:
                gaps.append(f"{k}: {c:,} below {v:,}")
        elif c != v:
            gaps.append(f"{k}: {c} vs {v}")
    print(f"{name:<11}", "terms match" if not gaps else "; ".join(gaps))

structural  terms match
mechanical  liability cap: 500,000 below 2,000,000; insurance: 1,000,000 below 2,000,000; payment days: pays in 30 but owes in 15; consequential damages waived: False vs True
landscape   standard of care: best efforts vs reasonable; copyright to client: True vs False

The check finds two problems. The mechanical engineer's liability cap and insurance are lower than the architect's commitment to the client, and the engineer expects payment in fifteen days while the client pays the architect in thirty, so the architect would carry both the liability gap and the cash flow gap. The landscape architect's agreement uses a different standard of care and gives copyright to the client, which conflicts with the prime agreement. Each gap is a conversation to have before the agreements are signed, not after something goes wrong.

Letters, emails and the contract that was never signed

Sandoval ends with the problem she sees most often: work that starts before the contract is signed. A client asks the architect to 'get going on some sketches' while the lawyers review the agreement, and months later the project is in design development with no signed contract. If the relationship sours, the parties argue about what was agreed, and the architect may find it hard to collect the fee or to rely on a limitation of liability that was never signed. Her advice is to sign the contract before starting, or at least to sign a short letter of agreement for the early services that sets out the scope, the fee, the terms that will apply and the intention to sign the full contract. Emails and meeting minutes can also form or change a contract, so architects should write them carefully.

Exercise 6: reading a contract

• Obtain the RAIC's guide to Document Six and read the general conditions on limitation of liability, termination and dispute resolution.
• Find three clauses that allocate risk between client and architect and explain each in one sentence.
• Draft a short letter of agreement for early design services on a small project.

Self-check

• Do I know which standard forms apply to the client–architect agreement and the construction contract where I practise?
• Can I explain the standard of care and why warranties are dangerous?
• Do I understand why consultant terms should flow down from the client agreement?
• Will I sign a contract before starting work?