Category Archives: Law Notes

Scope of your Design Services: Make Yours Detailed to Save Cavities Later! (Law note)

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I’ve written in the past about the benefits of having not only an explicit Scope of Work, but also a set of Exclusions from the Scope of Work, in your proposals and contract documents.  Recently, this issue has come up again for me in the course of advising clients who are now facing litigation over whether or not a particular service was to have been part of their lump sum design fee.

scope mouthwash versus scope of services
Do you know what is in your Scope of Services?

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The Scope of Services (and related Excluded services) should be as detailed as possible.  Consider all of the typical issues that can derail a project, and address them upfront, such as:

  • Additional Services: are they needed? How are they compensated?
  • The Proposal v. the Contract Description—which prevails?
  • Value engineering issues — does the designer share the credit?
  • Extended construction: Is A/E paid for extended delays leading to additional on-site administration?
  • Contingencies & Assumptions included in the design?
  • Number of bidding rounds included in the A/E’s fee before additional compensation is due?
  • Delivery of Owner equipment (Fixtures, Furnishings & Equipment) and delays associated with same?
  • Safe harbor provisions for expected errors & omissions?

This is just a short list of items to consider when drafting your Scope of Services. Remember, an ounce of prevention is worth a pound of cure, so make sure your proposals and contracts have thought through the entire scope of possible services prior to starting work.

 Thoughts? What issues have you run into on construction projects that could have been prevented with a good Scope of Services provision?  Share below.  
 
 
 
Photo (c) mandolux via CC.

Protecting your Copyright in non-standard Construction Contracts (Law Note)

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copyright symbol exploadingLast week I discussed copyright issues under ConsensusDOCS and AIA form contracts.  This week, we’re taking a look at how to protect copyright in your design documents when you are not using a standard form contract.

If I’ve learned one thing about working with a lot of design professionals over the past decade, it is that many of them– too many– are just plain too nice.  That’s right, too nice.  They send polite letters of proposal to the client, and then begin work on a handshake deal.  Or, they willingly sign on to the Owner’s contract without pushing to negotiate more favorable, mutually beneficial contract terms.  Under the maxim that “no good deed goes unpunished,” sometimes such clients are giving away their copyright ownership without being appropriately compensated.

Unscrupulous, or at least naive, owners sometimes believe that because they paid for design documents, they own them and can use them for any purpose.  This, of course, is *usually* not true.  However, sometimes the owner agreement states that the designer’s work product is created as a “work for hire” or otherwise provide that the owner has an unlimited ability to use the work product regardless of the circumstances.  Such clauses should either be removed altogether or negotiated up front, with appropriately compensation being provided for such copyright ownership.

If you are working under a letter proposal, it should at least include language indicating that the design team maintains ownership rights in the design documents.  Further, you should make explicit that the owner has no right to continue to use design documents in the event the owner terminates your contract unless and until full payment for such documents is given to the design team.  Even better would be a requirement that the owner indemnify the design team from any unauthorized use of the design documents.  (Hey, a girl can dream, can’t she?).

Most importantly, realize that without the built-in protections of the standard agreements, it will be much more difficult to enforce your copyright ownership in your plans & drawings.  For a few moments extra work on the front end tweaking your letter proposals or negotiating your owner contract, you can save countless hours of heartache on the back-end.

Do you have standard copyright ownership language in your non-form construction contract?  Ever had to fight copyright issues with the owner? Share in the comments below.  And, if you have not already done so, sign up for direct email delivery of blog posts right to your in-box.

Photo (c) Jens Rydén via Creative Commons license.

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

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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.

Is your Contractor’s Surety Company financially strong? (Guest Post)

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Today we have a guest post from JW Surety on how to find bonding companies, check their solvency, and see how each surety company compares to one another.  As the design professional of record, the architect is often faced with reviewing the bid applications and paperwork, including bonding information.  With the increasing number of failing companies, including insurance companies, over the past few years, checking the bonding company’s financials makes good sense.

Much is unknown about surety bonds and, more importantly, what bond types are required in order to start your shop. The following three steps can help customers [Ed. note: or architects conducting due diligence] determine the best surety company for their bonding needs:

hand signing surety bond application

1)     Are they licensed?

As required by law, surety organizations must be licensed in order to operate as per their state guidelines. These licensing requirements are strict and involve background investigations into each company’s history. The benefit for customers is knowing that those surety companies which are licensed to operate are not only qualified, but they are ethically secure to practice. Those beginning the surety search can look through the U.S. Department of Treasury’s list of licensed companies to get a better understanding of which companies to reach out to.

2)     How are they classified?

Customers should get a firm understanding of how each surety company ranks in comparison to each other. To help make this process more manageable, consumer protection organizations do their own investigation and analysis and publicize their findings for others. Although there are several of these agencies, one of the most respected is Dun & Bradstreet, who offer their findings for a nominal fee. Customers can search through thousands of surety companies, gauge how long they’ve been operating, and assess which agencies they believe are most reputable for their bond needs.

3)     Is a surety broker a more viable option?

Brokers are similar to surety bond companies in that they are able to produce and distribute bonds. Typically, these individuals have established relationships with several high-level surety bond organizations, and can help advise customers on what types of bonds to secure, and how much it will cost them up front and annually. Often times individuals prefer the one-on-one relationship brokers offer. Customers interested in finding a reputable surety bond broker should look through the directory of the National Association of Surety Bond Producers.

Thanks JW Surety, for your guest post.  Welcome to my new subscribers this week!  Please contact me with any of your thoughts or concerns regarding construction law, and I’ll address them in upcoming posts.

Photo (c) JW Surety

Why words matter (aka Shakespeare for Architects & Engineers) (Law note)

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“What’s in a name? That which we call a rose
By any other name would smell as sweet.”

Romeo and Juliet (II, ii, 1-2)

Romeo & Juliet balcony

Words do matter.  In the context of construction law, there are some words that you should avoid at all costs.  Top of the list is the word inspect.  If your contract gives you the responsibility of inspecting the contractor’s work, stop.  Do not pass go.  Do not collect $200.  Inspection (at least to some owners and juries) connotes that a thorough review will be provided, and that every fault will be identified.  Instead of Inspection, a better word for your construction contract is Observe.  You should not be providing periodic inspection.  Instead, provide periodic observation.  

Am I nit-picking? Perhaps.  But inspect implies a much stronger duty than observe.  (Just my personal observation!).  There are other words you should also avoid in construction contracts.

Instead of certify, try review

Instead of approving shop drawings, try No exceptions noted 

Instead of best (or highest) standards, try meet the professional standard of care

Instead of immediately, try without undue delay

This list is just a sample.  There are many other words to be leery of, including guarantee, warrant, insure, and ensure.  

In doubt about whether your contract contains dangerous words that may expose you to extra legal liability?  Write your contract as if your attorney is looking over your shoulder.  Keep in mind, both Romeo and Juliet learned the hard way that words do indeed matter.

Welcome to my new readers.  If you have not already done so, sign up for email delivery so you never miss a post from Construction Law in NC.  I welcome your comments & thoughts.

Photo:  (c) freefoto.com.