Orders of Precedence in Construction Contracts, and the conflict between architects and contractors

duking it outA few years back, we discussed the Orders of Precedence clause in Construction Contracts.  I wrote a post talking about how having such a clause in a contract can help the parties navigate in the grey areas where specifications and drawings may disagree.

My post generated a follow up guest post from Phil Kabza, a MasterSpec specialist, on what he saw as the problems with an order of precedence clause in truly protecting all parties to the contract.

This week, Phil’s guest post generated a new, and thought-provoking (flame-provoking?) comment from “Joe GC”.  Joe writes:

It is another very typical situation of the Architect and Engineer doing a poor job and then trying to seek relief of their error at the contractors expense. Phil’s comments are based on the fact that all contractors are not ethical, which is simply not true. If the subcontractor is the expert, then why are the drawings and specifications prepared by Architect’s and Engineer?

This is exactly why Design Build delivery methods are becoming more popular by the day.   Single source responsibility from someone who really is an expert, not someone who has a lot of education and therefore purports to be an expert.

In otherwords in laymen’s terms “If I have to verify everything you draw and specify Mr. Architect, then why do I need you in the process at all”? If you are not responsible for the review of the submittals then why do I need to send them to you? No more “approved” stamps just “reviewed” stamps; it’s becoming a joke!

When will the Design Community wake up? That is why so many Architects and Engineers are now finding themselves working for contractors.  You are responsible for the Design Mr. Architect, it is cut and dry, simple as that, not rocket science and you do not need to be AIA or P.E. to understand it.

AIA needs to do more training, especially when it comes to spending time in the field. They need to understand what they are designing, just as the contractor needs to understand what he is building.  They have never seen it that way because they think they are above the contractor or smarter than the contractor.

Until they learn they are not better or smarter because of classroom education things will not be improving and the lawyers will continue to be the most successful.

 

Interesting perspective as to why Design Build is becoming more popular.  I think Joe is correct that Design Build is more popular now, but I think it has less to do with concerns about design professionals avoiding liability and more to do with the economic value in having the “buck stopping” at one single entity.

Is there a perception that designers are classroom educated but not field trained?  Is it a fair one?  Share YOUR thoughts with Joe and me, below.

 

For Engineers & Architects: Top 10 Construction Law in NC Blog Posts

top10Since I have so many newer readers here at Construction Law NC, I thought a brief summary of some of the most popular posts might be helpful.  (I have also added this list to the About Me & Contact Info page, in case you want to refer to it later).

Presented below are the top 10 posts by popularity (although the list does fluctuate some):

  1. “Substantial Completion” on the Construction Project: How is it defined?  (always a popular post; owners want every last paint scratch fixed before they are willing to consider the project complete)
  2. The Sticky Statute of Limitations in NC  (the general rule: 3 years from date of service; however, there are many exceptions)
  3. Statute of Repose: Putting your Risk to Bed  (after 6 years, in North Carolina, even the exceptions to statutes of limitations don’t help)
  4. Planning Ahead for Additional Compensation  (money; cause, we all need to get paid!)
  5. Spring Cleaning: 6 Contract law tips for limiting risk on construction projects  (contracts are the first step in limiting your risk- read here to learn how to make them effective)
  6. How to Smartly Handle Project Documents  (your policies and procedures with documents can make or break a lawsuit)
  7. The Architect’s and Engineer’s “Standard of Care”  (note: perfection is NOT the standard!)
  8. Design Error and the Spearin Doctrine (why your designs must actually, you know, work!)
  9. Active vs. Passive Negligence (sharing the blame, unequally, when something goes wrong)
  10. Adding an “Additional Insured” in the Professional Services Agreement: an exercise in futility!  (for those times when you have an obtuse owner- show them this!)

Are there other posts that you think should be added to this “Best of” collection?  Wish I had written a post on your pet topic?  Share below.

Photo (c) Independent Association of Businesses.

Setting the Right Expectations for your Owner Client– Craft your Scope of Work well (law note)

belt & suspendersRegular readers of this blog know that you absolutely should have a written contract, and not rely on “gentlemen’s agreements.”  But what is the most important part of your agreement to provide professional services?  The dispute resolution provision? Payment terms? Change Order requirements?  All of those are important.  I’d argue, however, that the Scope of Work provision is, if not the most important term, one of the key terms.  Face it– once you  have a good set of standard contract terms, they rarely need to be drastically rewritten for each individual project.  But each and every time you start a new project, whether for a long-time client or a new owner, you are defining the Scope of Work.

This is where paying attention up front can save you headaches down the road.  I often refer to the belt & suspenders approach— you want to both be very clear in describing the scope of work, and equally clear in describing exclusions to your services.  That way, everyone knows what is expected up front, and you can hopefully avoid litigation pitfalls down the road.

Bill Beardslee of Davis Martin Powell has coined a nice mnemonic for Scope that is very apt:

S C O P E

Sufficiently

Control

Other

Peoples

Expectations

 

Your turn. Do you carefully craft your Scope of Work for each new Project?  You should.  If you need help in crafting your Scopes of Work, drop me a line. 

 

 

Betterment on the Construction Project (law note)

betterToday’s post is thanks to a discussion with an engineer following a talk I gave for the ASCE of North Carolina.  He asked about owners trying to recover for obvious mistakes, for which they’d have to pay anyhow.

That brought me to the topic of betterment.  What is betterment, and why is it important in the construction world?

Betterment is a legal concept that says, even if your plan is missing something, if the owner would have had to pay for that missing item anyhow, they cannot get money from you.

A real life example:  A designer’s set of plans showed sanitary sewer extending out 8 feet from the building footprint.  It did not show the sewer connecting to the city sewer line.  The owner later complained because it had to pay the contractor for a change order for the connection.  However, since the owner would have had to pay for the connection regardless, the owner could not recover from the designer for the missing sewer connection.  [Had the owner paid a premium due to the fact that the missing connection was discovered during construction, that premium over and above normal costs could have been recoverable.]

Betterment, then, is a defense to a claim of defective plans, because even if the plans are defective, the defect did not cost the owner any additional money.

It can be a tricky concept to explain–even some plaintiff’s lawyers that I’ve dealt with fail to understand the concept.  However, it is an important part of many defenses.

Questions?  Comments?  Ever experienced a “betterment” situation yourself?  Share in the comments section, below.

 

Is your design professional construction contract too friendly? (law note)

not friendlyMy husband often travels the back roads between Chapel Hill and Fuquay Varina to visit friends.  En route (a circuitous route that goes past Sharon Harris Nuclear Power Plant, among other places), he passes by the “Friendly Grocery”.  For those who haven’t had the pleasure, here is a photo of the side of the building in all its glory.

In case you cannot read the list of forbidden activities, I’m re-printed them here (complete with spelling error):

not friendly sign

I’m not sure which is the “friendly” part of that sign.  In fact, the sign seems to be the antithesis of friendly.

What does this have to do with your construction contracts?  Sometimes, in an effort to please the client and/or secure the project, architects and engineers have the habit of being too friendly in their contract language.  That is, you make promises or proposals that may promise too much of a good thing for the client.  This can cause big problems.  Bigger than being towed away from a rural grocery store in the middle of nowhere.  You could be putting your insurance coverage at risk.

Have you ever promised to use “best efforts” in your design or plans?  Promised to design to a specific LEED standard?  Guaranteed 100% satisfaction?  You might be putting your errors & omission coverage at issue.  By warrantying or guaranteeing something, you are assuming a level of liability well beyond the standard of care required by law.  By law, you only need to conform to the standard of care, and your insurance will only provide coverage up to that standard of care.  In other words, if you make guarantees or promise “best efforts,” you are contracting to something that will *not* be insured.  If something goes wrong, you will be without the benefit of your professional liability coverage.

Instead, make sure that your contracts, and proposals, are not too friendly to the client.  Sure, agree to work in accordance with the standard of care of professional architects/engineers.   But don’t make guarantees, or promise “best” efforts.  In fact, you might want to educate your client on why you cannot make such guarantees, and why anyone who does (i.e., your competition) is putting their insurance coverage at risk.  Owners want and need you to stay within the bounds of your coverage.  You need to, also.  Maybe the owner of the Friendly Grocery was on to something there.

Your turn.  Have you ever used language that jeopardized your insurance protection?  Uncertain if you have?  Drop me a line and we can talk.

Photo (c) Melissa Brumback  Creative Commons License

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