Making an effective Architectural Agreement

Author: Akansha Upreti

What is an Architect’s Agreement?

“An Architect is one who drafts a plan of your house, and plans a draft of your money”.

–Ambrose Bierce An Architect’s Agreement has been designed for use by architects providing their services to business clients undertaking small to medium sized constructed projects. It also addresses key factors such as architect’s obligations in providing their services, and client’s obligations in using those services. Also, this agreement addresses the preparation of designs, plans, and liabilities of an architect.

Table of Contents

1.  What is an Architect’s Agreement?
2. Role of an Architect
3.  Contract between an Architect and Client/ Owner
4.  Clauses under Architect Agreement
   •  Copyright Clause
   •  Set-off Clause
   •  Cap on Liability Clause
5.  Liability of an Architect
6.  Termination and Damages
7.  Things to be kept in mind while drafting an Architecture Agreement
8.  Conclusion

Role of an Architect

“If you have ever wondered why Architecture is important – look up and around. You are likely surrounded by it right now”.

Architects in construction play an important role as they create designs for new construction projects, alterations, and are responsible for visual appearance of the structures and buildings before final structure design. Architect is a person appointed by the client, who develops a facility as per the design concept and the requirements specified by the client.

In recent case, Council of Architecture v. Mukesh Goyal, Section 37 (The Architects Act, 1972) Prohibition against use of title – the Supreme Court on March, 17, 2020, Tuesday ruled that unlike doctors and lawyers who need to get registered under relevant laws to practice, a person does not require to have a professional degree and be registered under the Architects Act to undertake work related to architecture and its cognate activities.

Contract between an Architect and Client/ Owner

A successful, efficient project considers the client needs, well-being, and budget. The Client, and The Architect have very specific and necessary roles:

• The Client/ Owner – has specific goals, expectations, and a budget that is in alignment with goals and expectations.
• The Architect – must guide the Client, propose reasonable, sustainable design solutions, and provide accurate, detailed drawings. These must meet the Client’s requirement as well as applicable building codes and zoning criteria.

“Architect’s Contract is based upon a standard of mutual trust, good faith and fair dealing. Architect’s services meet the “highest” standards of the community in preparation of the Construction Documents”.

Clauses under Architect Agreement

At a very first point, you want to make sure that all your design contractual terms are reasonable, fair, insurable, and most importantly legal. This is to say that all requirements should be within the scope of the Architect regarding the Architect’s expertise and experience. So, each clause should be reviewed in the context of the project as a whole for an effective agreement.

Copyright Clause

The copyright clause is one of the most important clauses that you’ll find in any Client Architect Agreement because it addresses the rights granted to the author, or creator of the work (the Architect), including the right to copy, distribute, and adapt the work.

Why is the Copyright Clause important for Design Professionals?

As an Architect your ability to build a brand and successfully practice architecture is heavily influenced by retaining ownership of the copyright in the designs created, which explains why the copyright clause is such a hot topic. This is not to say that clients shouldn’t have any rights. A fair copyright clause will grant the client a non-exclusive license allowing them to use the materials for which they were prepared and provided. However, such license should be subject to payment of fees and limited to the project at hand.

Set-off Clause

The second clause is a set-off clause. The reason I have chosen to discuss this clause is that it has the potential to impact the Architects ability to receive payment in a timely manner. The set-off clause serves as a vehicle by which the client may deduct money from an architect’s invoice. This is not a clause that is favored by architects and is therefore typically limited to client drafted agreements and larger projects.

Why do Architects consider the Set-Off Clause to be Unreasonable?

Many Architects consider the set-off clause to be unreasonable for two reasons:

• Firstly, because it allows too much opportunity for mismanagement by providing a vehicle for arbitrary deductions, and
• Secondly, because the client should believe that there is an oversight in the Architect’s services, then the dispute resolution procedure is available to handle such a situation.

Cap on Liability Clause

This clause is somewhat self-explanatory. A cap on liability requires setting a limit on the Architects liability and therefore, unlike the set-off clause, you’ll want to make sure that this clause is included in all your contractual agreements.

Most Architects will want to limit their liability as much as possible. A typical threshold is the level of required insurance, which should reflect a fair balance between the Architect’s fee and the possible exposure on the project.

All changes to your approved agreement will need your insurance providers approval so be sure to consult with your professional indemnity insurance provider when reviewing and negotiating contractual clauses. 

Liability of an Architect

As industries like construction, architecture, and engineering pick up pace again, those directly involved in these sectors are also becoming increasingly exposed to liability.

Liability, the obligation to compensate someone else for loss or damage, is a major concern for architects. The main types of architect’s liability are breach of the client-and-architect agreement (which is a breach of contract) and the tort of negligence (professional negligence). Other types of liability include breach of copyright and defamation.

Breach of Contract

• If an architect does not perform their obligations under a contract, they will have committed a breach of contract.
• Liability will be measured in damages, and the sum may exceed the architects’ fees.
• The extent to which the architect is liable may be limited by a limitation clause.
• Liability for breach of contract includes liability for consequential loss in so far as those losses are of a reasonably foreseeable type.

Tort of Negligence

• One area of liability that architects are often called up on is negligence and the standard of care being provided. In a negligence case, architects may be called upon to prove the existence of a duty of care, defend any alleged breach of that duty and look at any potential damages.
• If this occurs, firstly prosecutors will look at the plans and specifications made by the architect. They will see if your plan complied with all building codes to a satisfactory degree. If not, your own plans could be used against you as evidence of negligence, exposing you to liability.

An Architect shall be liable to client for all claims, damages, additional costs incurred by an client due to conflicts, errors, or omissions in the Construction Document, and expenses of any nature whatsoever arising directly or indirectly from any negligent, dishonest, criminal, or fraudulent act of any individual assigned by the Architect for the performance of the services under the Architecture Agreement.

Termination and Damages

If an Architect terminates its agreement prematurely or fails to perform and/or contravenes all, or any of the terms and conditions of the agreement the architect shall be liable to refund to client in the first demand of client without any demur/ protest.

In the event of damages incurred by the client, the architect shall be liable to reimburse/ compensate the damages as may be quantified by client, and in the event of failure of the Architect to do so within a period of seven days from a demand, the client shall be entitled to adjust the amounts so claimed as damages against the future payments due by client to the Architect.

Things to be kept in mind while drafting an Architecture Agreement

For an effective contract, the following things should be well mentioned between the agreement of client and an architect;

●      Scope of Work

Since a contract is communication between the two parties about the work that will be done. So, a full scope of work should be included in the contact. In that way both the parties can make sure they are agreeing to the same description of materials, quality of work, schedule, and other specifications.

●      Project Cost and Payment Terms

With a clearly defined cost of services, schedule, and terms and conditions, there can be no confusion from either party about how much should be paid and when payment will happen.

●      Schedule of Work

Include details like when the project will start, when milestones will be reached, and the project completion date.

●      Term of an Agreement

The Architecture Agreement shall enter into force on the date written by both architect and client and shall continue in force until such time the architect services are concluded to the satisfaction of client, and a completion certificate is given by the architect and endorsed by client.

●      Authority

During construction, with many decisions to be made, it needs to be clear who has the authority to make those decisions. Detailing it now in the contract will eliminate frustration or delays during the project.

Conclusion

To make an Architecture Agreement means to provide services in connection with the design of buildings and the space within the site surrounding.

The contracts should be in a standard form as they facilitate communications among all the parties involved in construction, which makes it easier to produce a high-quality project in a timely and economical fashion.

Never, ever use just a handshake (or Letter of Agreement/ Letter of Intent) as a contract. If you don’t have a good contract, create one. Look for any loopholes that could cause problems and close them up. Update your contract regularly to include issues that have come up in past projects because an effective agreement outlines the expectations for both the parties, gives clarity in constructional/ business relationships, and most importantly prevents misinterpretation of communications between client and an architect, and avoid disputes and litigation.