Tag Archives: risk avoidance

Don’t say Please– Threaten to Tow! (aka Contracts matter)

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No parking please sign No parking tow sign

 

I was wandering through downtown Wilmington, North Carolina the other week after a trial was pushed off of the court docket.  Not two feet away from each other I saw these two signs.

Ask yourself—if you were looking for an (illegal) parking spot to run a quick errand—which spot would you park in?  The one with the sign that nicely asks you not to park there, or the one with the sign that says they will tow you if you do?  I think we can all agree that in this case, being nice does not help that parking spot’s owner.  You know the other guy means business, so you take him seriously. 

What does all this have to do with architecture or engineering? 

It is a stark reminder that words can be powerful.  Your contract language can make the difference between getting what you want (the empty parking spot) versus having to live with something you don’t (someone in your space).  It can mean the difference between the dispute venue you favor or the right to additional compensation.

When it comes to your livelihood, don’t chance it to be nice.  Gentlemen’s agreements and saying “please” just don’t cut it any more.

Which parking spot would you use? Do I even have to ask?  Saying please is all well and good, but stating your rights upfront will get you farther.  Sign up for email updates directly to your inbox, so you never miss a post here at Construction Law NC!

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Photos in this post: Creative Commons License

ENR’s Top 500, the Economy, and Lawsuit Fever

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Engineering News-Record logo

Engineering News-Record (ENR) has released its annual list of the largest 500 design firms in the United States.  The list is based on design revenue generated by the firms, and covers both public and privately-held companies.

The bad news?  According to ENR, overall design revenue of the top 500 firms ($79.8 billion in 2010) was down 0.2% from 2009.  I know my clients have been hit hard. 

One thing that construction lawyers see in down markets is more lawsuits.  Whereas in good times people will let something go to move on to their next project, in slow times contractors and owners sometimes look for a scape-goat.  That scape-goat, more often than not, is an insurance-carrying design firm.  Sad, but true.  Now, more than ever, make sure that you are practicing good risk avoidance, documenting everything, and communicating thoroughly.

There is some good news:  “There is a general feeling among the Top 500 firms that the markets will recover over the next 12 months.”  Let’s hope they are right.

What do you think?  Will the market improve this year?  How is your company weathering the economic storm? 

Planning Ahead for Additional Compensation

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money for additional services for construction administration

Does your designer contract have provisions in it for additional compensation in the event the construction project takes longer than the parties anticipate?  If you use the AIA 201 (2007) general conditions for the Contractor, it may.  The AIA provisions include:

 

 § 1.1.2 THE CONTRACT

The Contract Documents form the Contract for Construction. The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. The Contract may be amended or modified only by a Modification. The Contract Documents shall not be construed to create a contractual relationship of any kind (1) between the Contractor and the Architect or the Architect’s consultants, (2) between the Owner and a Subcontractor or a Sub-subcontractor, (3) between the Owner and the Architect or the Architect’s consultants or (4) between any persons or entities other than the Owner and the Contractor. The Architect shall, however, be entitled to performance and enforcement of obligations under the Contract intended to facilitate performance of the Architect’s duties.

The language that I bolded is very important language.  It may provide a mechanism to recoup additional service fees for extended construction administration services.  Note, however, that I said “may.”

If your fees are based on a set number of construction days, what happens if the project gets extended?  Do you simply go without pay for extra months of CA services?  Do you re-negotiate with the Owner at that time?   You should consider this issue in advance to avoid disputes later on. 

Best practice?  A clause in the Owner-Designer contract that states that additional services compensation will kick in after a certain date,  at a set value per month.  

If you wait until the issue comes up during the final phase of construction, you have much less bargaining power.  You also run the risk of the Owner claiming errors and omissions against you when you present a bill for extra services.  Deal with the issue up front, in much the same way that unit prices for rock overages are provided for upfront in the contractor’s contract. 

Do you have experience with getting additional compensation after construction delays?  What worked best for your company?  Share below. 

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 Photo (c) Freefoto.com via Creative Commons license.

 

Spend Less Time with Your Lawyer with these Tips (Tue Tip)

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 “The best time to plant a tree was 20 years ago.  The next best time is now.”  ~Chinese Proverb

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If you haven’t yet acted to streamline your contracts and your new client procedures, do so now.  Unless, that is, you like spending time with your lawyer.  Lawsuits take time and money.  Avoid them (and your lawyer) through good risk avoidance practices.  

Last year I wrote a post on 6 Ways to Limit Risk through effective use of contracts on your Projects.   Included in that list were such tips as:

  • Always, always, always use a contract for each new project.  (Verbal agreements are very hard to prove in Court).   Without a written contract, you are trusting yourself to laws you may not agree with or giving up valuable protections.   
  • Get your contract reviewed by your insurance carrier.  Insurance check-ups through your agent or broker are usually free.  Why risk it? 
  • Have your contract reviewed by your attorney.  ( I happen to know someone who does this regularly for her clients.)
  • Establish a new client protocol.  Make sure all new clients sign proposal or engagement letters.  Document now; worry less later.

These are all extremely important ways to minimize your risk.  Of course, if you are reading this blog, I recognize that I am probably preaching to the choir.  But it is worth repeating.  Just do it.

Do you have procedures that minimize your company’s risk?  Tell me in the comment section, below, what has worked for you.

If you need help creating or revising your contracts or client protocols, drop me an email at [email protected].  

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

Owner Drafted Indemnity Provisions: Kryptonite for designers?

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be careful sign
Be careful with indemnity provisions (and small animals)!

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Are you being asked to sign contracts that are prepared by the Owner?  If so, do you have a policy in place to have each such contract, Master Agreement, or Statement of Work be reviewed by your attorney?  You should.  An ounce of caution is worth a pound of cure, as they say.

One of the most important contract terms to review in any contract is the indemnity provision.  I’ve discussed how indemnity provisions work in the past.  If you haven’t already read that post- do it now.  (Go ahead, I’ll wait).

Today, I want to address indemnity in the context of non-form contracts presented to you by an Owner for execution.  Generally these are presented with no expected negotiation on your part.  Remember, however, that everything can be negotiated.  A few small changes up front can save you lots of time and expense later if there is ever a lawsuit. 

Because these contracts are drafted by the Owner (or, rather, his horribly biased zealous attorney), they tend to be overreaching and broad.  Recent contracts I have reviewed ask the architect to indemnify the owner for the design team’s negligence, “regardless of whether or not other parties are also negligent.”  That phrase is very troubling, and should be stricken.  Otherwise, the Owner will have an argument that because the design team was negligent, they must indemnify the Owner for all negligent acts (other than the Owner’s own negligence), including those by other parties.   

A better, proportional indemnification provision should include indemnification “to the extent the claim is found to be caused by the negligence of the design team.”  (Even better, of course, would be a limitation of liability based on your design fees, but I recognize that it is often impossible to negotiate such a limitation with some blood-sucking sophisticated Owners.)

Do you have comments about indemnity provisions in contracts you have been asked to sign?  Drop me a note in the comment section, below.

Photo via Creative Commons License.