What's in Your Contracts?

A key component of running a successful architecture firm is staying in compliance with local, state and federal laws and regulations.

While the legal environment that architects find themselves in is difficult to navigate due to increasingly complex projects and the multifaceted relationships among a project's stakeholders, there are basic legal components that architects should be familiar with.

This article examines contract disagreements and what you can do to mitigate these disagreements. An upcoming article will focus on how technology can help architects meet their legal and compliance obligations.

Contract Disputes: From Miscommunication to Lawsuits

Miscommunication (or no communication at all) plays a central role in contract disagreements between parties that ultimately morph into lawsuits. If a contract dispute finally reaches the court system, the plaintiff often alleges either negligence - failing to meet a defined "standard of care" - or breach of contract against the architect.

Randy Lewis, a Denver-based vice president of loss prevention and client education at XL Group P.L.C., explains the importance of creating a paper trail when attempting to reduce a firm's exposure to legal liabilities.

"Overall, the lack of documentation of decisions - who made them, when they were made and what alternatives were presented to the client - is probably the single greatest challenge we have in extricating clients from a professional liability claim or dispute," Lewis explained in a recent "Business Insurance" article.

Crafting Contracts that Protect Architects

To guard against potential lawsuits, Don Doeg, principal at the law firm, Updike, Kelly & Spellacy in Connecticut, recommends that a contract includes, among other elements, the following three sections:

1. Time frame of the project: The architect's client wants every project completed quicker and cheaper. Be sure to list, in detail, every benchmark of a project and the anticipated completion date. If you have to push back the completion deadline, obtain some sort of documentation that your client has received this information.
2. Scope of the project: When in doubt, spell it out. Every step of work that needs to be completed should be in writing. Also include, when appropriate, work that will NOT be done that may be expected by the client.
3. Fees: How will payments be made (i.e. lump sum vs. installment)? When will the payments be made?

Never assume all parties will interpret a contract the same way. If there's a chance that a word or phrase may be misinterpreted, then elaborate to the point where there is no confusion. It's common for many architects to use AIA form documents when crafting their firm's contracts. Consult your legal team to find the best contract template for your firm.