Contracts: AIA 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 the United States rarely write contracts from scratch. Most use the standard forms published by the American Institute of Architects, a family of more than two hundred documents that covers agreements between owners and architects, owners and contractors, architects and consultants, and many special situations. The AIA revises its core documents on roughly a ten-year cycle, and the current core family, including the owner–architect agreement B101 and the general conditions of the construction contract A201, dates from 2017. Other families exist: ConsensusDOCS, produced by a coalition led by contractors, and forms published by engineering societies and large public owners. 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

The AIA's B101, Standard Form of Agreement Between Owner and Architect, is the most widely used agreement for full architectural services. It sets out the architect's responsibilities and the owner's, describes the scope of basic services in five phases from schematic design to construction, lists supplemental and additional services, and contains terms on fees, insurance, copyright, termination and dispute resolution. Shorter and specialized versions exist for smaller projects, for interiors, for design-build and for other delivery methods, and the B102 agreement with the B201 scope lets the parties keep the terms and the description of services in separate documents. Each document comes with instructions and commentary, and the AIA's online software tracks any changes made to the standard text, so that everyone can see what was altered. Sandoval says that a client's lawyer will almost always propose changes, and that the architect's job is to understand each one before agreeing.

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 license 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 standard of care. B101 says that the architect will perform with the professional skill and care ordinarily provided by architects practicing in the same or a similar locality under similar circumstances; it does not promise a perfect building. Owners' lawyers sometimes propose clauses that promise more, such as warranties that the design will meet the owner's needs or that the building will be free of defects, and professional liability insurers generally will not cover liability that goes beyond the normal standard of care. The second is the limitation of liability. Many architects negotiate a clause limiting their liability to the amount of their fee or of their insurance, and B101 provides a mutual waiver of consequential damages, so that neither party can claim indirect losses such as lost rent or profit from the other. Indemnities, in which the architect promises to defend and repay the owner for losses, are another common point of negotiation.

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 AIA forms give the architect a central role in administering it. The owner–contractor agreement, such as A101 for a stipulated sum or A102 for cost plus a fee with a guaranteed maximum price, incorporates A201, the General Conditions of the Contract for Construction. A201 sets out the rights and duties of owner, contractor and architect: the architect visits the site, reviews submittals, answers questions, prepares change orders, certifies payments, determines the date of substantial completion and acts as the initial decision maker on claims unless another person is named. Other families cover construction management (the A133 and A134 agreements), design-build (the A141 family) and integrated project delivery. Sandoval stresses that the owner–architect agreement and the construction contract must be coordinated, because B101 describes the architect's duties during construction by reference to A201.

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 agreements such as AIA C401, Standard Form of Agreement Between Architect and Consultant. 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 owner, so that the architect is not left responsible to the owner for something the consultant is not responsible to the architect for. C401 is designed to be used with B101 for this reason. Payment terms matter too. Many consultant agreements say that the architect will pay the consultant when the owner pays the architect, which shares the risk of a slow owner 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 AIA's commentary on B101 and read the articles on the standard of care, 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 practice?
• 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?