TOP 10 CLAUSES TO WATCH IN YOUR ARCHITECT APPOINTMENT
1. Indemnities – signing up to an indemnity is like signing away a blank cheque. You want to avoid entering into these as they will allow your client to sue you without resorting to the usual arguments regarding reasonable foreseeability and mitigation of loss. While copyright indemnities and those relating to employment contracts might be lower risk, it is always best to get these out of your appointment or have them watered down.
2. Fitness for purpose – these types of clauses basically mean that you are on the hook for a guaranteed outcome or result in the performance of your design obligations. They are often seen in Building Contracts designed for Contractors to provide a building that achieves a specific purpose, but they ought to be avoided if possible. An architect under common law, which essentially means in the absence of any contract, ought to carry out their obligations exercising reasonable skill and care - the golden standard or benchmark by which you ought to be able to measure the performance of your services and obligations. Imagine if you have to obtain a planning permission and something happens outside your control. FOP obligations mean you will have little wriggle room to explain why the planning consent isn’t there.
3. Specification of materials – post-Grenfell and the Building Safety Act regime, it is more important than ever to ensure that any obligation relating to the specification of materials is tied into the time of the performance of your services rather than the completion of the project. If they are tied into the completion of the project, many years could elapse since your specification to the time of actual use. This could lead to changes from your original specification such as when a building is value engineered and a contractor uses a completely different material.
4. Caps on liability – a cap on liability protects you from getting sued beyond the level of your professional indemnity insurance cover or fee. It is up to you what figure you put in there, but the level of your PII cover is usually what is commonly accepted. Be mindful that if the figure is too low, it could be struck out as being unreasonable by the courts. It also does not deal with what I’m going to move on to next.
5. Net contribution – this used to be a taboo for clients until they slowly realised that it was unfair to put the architect on the hook for what parties on a construction project might or might not do, but then disappear into the night by reason of insolvency. The architect does not choose the project participants so why should they be burdened with all the risk. The argument that it hasn’t been tested by the courts is one of those myths that spooks clients. There is case law such as Langstane Housing v Riverside where the judge said it was a “fair and reasonable requirement” to have an NCC in a consultant’s appointment. It is also included in the government endorsed NEC3 professional services contract (although admittedly the wording is pretty weak).
6. Copyright – you want to ensure that your client only has a licence to use your design and does not actually own the copyright in your design. You may want to water down any copyright indemnities although these are of lower risk than full blown indemnities relating to your architectural design.
7. Collateral Warranties – Third Party Rights – these mean the same thing and create a contract where otherwise none would have existed. A CW should be collateral to the appointment and not extend your obligations and liabilities beyond it. Third Party Rights are sought under the Contracts (Rights of Third Parties) Act 1999. They are used on construction projects to tie up all the dots between parties such as third party funders, purchasers and tenants who would otherwise have no recourse to the architect if things go wrong. You need to ensure that you are not liable to numerous parties and that an NCC is included to ensure you are protected in the event some of the other parties on a project go bust.
8. Services – of course you want to ensure that these reflect what you are actually going to perform on a project. Anything you are not carrying out (structural engineering services anyone?) should not be in there. Be wary of client administrators including “traditional” type services in a “design and build” project. You don’t want to have classic contract administration duties if your appointment will be novated to a building contractor.
9. Payment and Set-Off – you want to ensure that there are no “pay when paid” clauses which are illegal in the UK (save for some insolvency exceptions) and that the client does not try to set-off your liabilities in the contract with other project contracts or any other contract you might enter into. If in doubt refer to a RIBA standard form of appointment for an industry-standard benchmark – as long as it isn’t fundamentally amended by a client’s lawyer!
10. Lastly, the Principal Designer Role under the CDM and Building Regulations You want to ensure that these are kept in a separate form of appointment as the role is so different from your architectural services despite the moniker of “Designer” in the title. The first role should be about coordinating health and safety. If you are a BRPD, then this is a much more onerous role ensuring that the design complies with all the Building Regulations. Both roles deserve careful review and I will cover them separately in a future article.
The above is not intended to be an exhaustive list nor should be relied upon as legal advice and is for information purposes only. Specific contractual advice should be sought in relation to proposed projects.
If you are being asked to sign an amended appointment or collateral warranty, we offer fixed-fee contract risk reviews sparvez@contract-review.co.uk
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