Consequential Damages: What are they? Should I waive them? (law note)

A client asked me about a contract he was asked to sign in which consequential damages were being waived.  Consequential damages are those things that cost money which arise indirectly out of a failure of a party on a construction project.   dollar signsThey can include:

  • loss of use
  • loss of rent
  • loss of profit
  • loss of bonding capacity
  • extended overhead
  • extended equipment rental fees
  • increased material costs
  • interest

Note that this is not an exhaustive list, and other consequential damages may be applicable depending on the project.

Often, like my client, you may be asked to waive consequential damages.  This is a double edged sword.  If the waiver is mutual (something on which you should insist), then the provision may save you money in the event your design or services delay the project.  The Owner has agreed that it cannot seek to recover indirect, consequential damages.  On the other hand, if you are the one suing the Owner, it means that there may be costs that you cannot be compensated for if a project goes awry.

The standard industry contracts all have at least some waiver of consequential damages, as noted in this chart.

waiver in form contractsBottom line: waiver of consequentials can be a good thing or a bad thing, but you will not know which when you are signing on the dotted line.

Just make sure that if there is a waiver, that it is mutual on both sides.  Good luck, and “be safe out there

Your turn.  Have you ever waived your right to consequentials?  Horror story to share about paying someone else’s costs?  Share in the comment section.

Dollar Photo (c) sivlen001.
Chart (c) Melissa Brumback Creative Commons License

AIA Triangle Home Tour (this Saturday!) (Tue Tip)

AIA Triangle House TourThis Saturday, make plans to attend the annual Triangle Tour of Residential Architecture. This year’s tour showcases award-winning, architect-designed homes throughout the North Carolina Triangle region.
  
What:  AIA Triangle Home Tour
When:  October 6th, 2012 (this Saturday)
 
   
Featured residences including homes by the following Firms:
Will you go?  Even if you cannot tour, check out the photos and details of the homes on the AIA Triangle Home Tour website.  And congrats to the participating, award-winning Firms.

Copyright Protection under ConsensusDOCS and AIA–which is better? (Law note)

Large copyright sign made of jigsaw puzzle piecesWhich standard form contract provides “better” protection for copyright issues- ConsensusDOCS or AIA? The ever-so-hepful ”it depends” is, as usual, the answer. 

Are you the owner looking to use the plans you paid for even after you terminate an architect, or are you the architect looking to protect your work product?  If you are the owner, you will probably prefer ConsensusDOCS.  If you are the architect, your best bet is still the AIA documents. 

Consider the following:

Under ConsensusDOCS 240,

  • the Owner receives ownership (except copyrights) of all documents, drawings, and data prepared by the architect or consultants for the Project, upon final payment for all sums due in the event of termination (Article 10.1). 
  • the Owner has the option of being granted copyright ownership, contingent on making all payments required, including a stated copyright fee. (Article 10.1.1). 
  • whether termination is for convience or for cause by either party, the Owner can use the documents to complete the project, provided he pays all sums due (Article 10.1.2). 
  • the Owner agrees to indemnify the architect for post-construction use of documents.  (Article 10.1.3).

Under AIA B101,

  • the architect and consultants are the owners of their respective instruments of service, retaining all rights, including copyrights (Article 7.2).
  • the Owner is granted a non-exclusive license in the instruments of service, soley for use in constructing, using, maintaining, altering and adding to the Project, provided the owner substantially performs, inclduing making prompt payments of all sums due (Article 7.3). 
  • if the Owner does not pay all sums due, if the architect terminates the contract for cause, or if the Owner does not pay an extra fee after a termination for convenience, the Owner’s non-exclusive license terminates. (Article 7.3; Article 11.9). 
  • the Owner must indemnify the architect against third party claims arising from the owner’s unauthorized use of documents. (Article 7.3.1).  
  • if the Owner properly terminates the architect for cause, there is no indemnity against third party claims and no release of the architect from the owner’s claims arising from the use of the docuemnts (Article 7.3.1). 

Do you have experience in managing copyright issues under either contract?  Which do you prefer?  Leave your thoughts in the comments section, below.

Next week, I’ll address copyright issues in non-standard construction contracts, including letter proposals.

 Photo (c) Horia Varlan via Creative Commons license.

Free AIA Home Tour Ticket Giveaway (Tue Tip)

Mark your calendar now and make plans to attend AIA Triangle‘s 2nd annual Tour of Residential Architecture on October 1st, 2011.  The Tour is will showcase 6 homes designed by 6 local architects.  The selected homes reflect a wide variety of housing options - including urban infill, adaptive reuse, historic preservation, new construction, renovations, and additions.

broken down house

Win FREE tickets to the Tour, courtesy of New Raleigh, by entering their AIA Home Tour Ticket Giveaway contest here during the next week.

If you aren’t the lucky winner, you can purchase tickets ($15)  here.   Good luck!!!

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 h/t to my wonderful colleague Angela Allen for letting me know about the giveaway!

Photo:  “Benton, Pennsylvania” via Jayu/Creative Commons license.

Lien Law Unlikely To Change– Yet

detour signFor those of you following the proposed revisions to the NC lien law that is currently at the NC House Judiciary Subcommittee B, a quick update:  the proposed bill (HB 489) is unlikely to be voted on this legislative session due to its unpopularity with several constituency groups, including both the AIA-North Carolina and the NC Home Builders Association.

According to NC Bar Association Construction Law section chair, Nan Hannah, a vote is unlikely in this legislative session.  However, there is the potential for a study commission to continue the conversation and discuss alternative lien law changes that might satisfy all constituents.

Such a study commission will only occur is Subcommittee Chairman Paul Stam hears from those in the industry that such a study commission is desired.  In addition to the Construction Section of the Bar, the American Subcontractors Association of the Carolinas supports the idea, as do other industry groups.

If you want to add your voice of support for a study commission, contact Representative Stam  or Co-chairman Representative Grier Martin.

Do you believe that the proposed lien law revisions adequately protect designers? Is a study commission worthwhile?  Share your thoughts in the comments section, below.

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Photo: (c) freefoto.com via Creative Commons License.

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