Contracts Flashcards
(141 cards)
1
Q
Actions contrary to designer’s recommendations
A
Level 1. You should not be responsible for actions or decisions made by the owner, contractor or any other party that are contrary to the advices and recommendations you have made for a project. This lack of responsibility should be communicated to the client. However, you should also be aware that if this contrary action relates to issues related to Health, Safety or Welfare of the general public, you may have a duty to advise the client that you may have to go further, and report any such deviations that do not meet code regarding HSW issues.
2
Q
Adequacy of Insurance Limits for Subs
A
Level 2. If you are the prime designer, we normally recommend that for certain disciplines such as AR, ST, CV, GT, you require at a minimum the same levels of insurance that you are required to carry.
3
Q
Addendums/Exhibits
A
Level 2: Frequently, addendums and exhibits restate clauses already existing in the contract. In order to achieve clarity of understanding, any time this occurs and the wording between the two clauses are different, there should be a notation indicating the clause in the contract is “deleted and replaced by” the wording of the addendum/exhibit. If not a complete restatement, then the addendum/exhibit should explain its intent to “modify” the intent of the entire document.
4
Q
Additional insured
A
Level 1. Compliance: Additional insured status is only allowed on Auto, GL and form following excess policies
5
Q
Additional Insured (PL)
A
Level 1: There are no additional insureds allowed on the professional liability policy.
6
Q
Additional Insured (Other lines)
A
Level 1: There are two conditions. 1) The coverage must be primary and non-contributory and be on a blanket basis. 2) The contract must be signed by both parties.
7
Q
Additional Insured (Contractor’s GL)
A
Level 2. Whenever possible, you should approach the client/owner to request that the contractor include you as an additional insured on the contractor’s GL policy.
8
Q
“Agents, assigns, affiliates, members, representatives as “additional insureds” or “indemnitees, or any other party requested.”
A
Level 2. We believe that this is an excessively broad range of “indemnities,” which can be expanded post-loss to a point where you owe duties to everyone on the project. Therefore, there should be a caveat that the agents be “named or identified,” pre-loss, or the word “agents, affiliates, members” be deleted. Even if your GL and Auto policy include a “blanket insured endorsement,” you still want control of those able to advance a claim under your policies.
9
Q
Alleged claims
A
Level 1: Your duty to indemnify should be for claims to the extent the damages are caused by your negligence. Alleged is a backdoor manner of getting a defense obligation.
10
Q
any, all, fully, completely, but not limited to, without limitation, of any kind or nature whatsoever
A
level 3) are examples of absolutes or warranty, and are identified in the documents. We may not separately address them as they appear, but this discussion is applicable to all the references. There are also words and/or phrases which create potential coverage issues by raising the standard of care or expanding the scope of services beyond the scope intended under the contract and your perspective of the scope as well. While it is our recommendation that these words and phrases be deleted if possible, we believe these potential exposures to be second tier concerns, which can be conceded in the hopes of negotiating other contract provisions which creates more direct coverage issues.
Level 1. When it comes to insurance coverage or provisions, these words and phrases create significant compliance issues. Every policy has terms, conditions, endorsements and exclusions that limit coverage. Therefore, no coverage can be unlimited.
11
Q
any act, error, omission or breach
A
Level 2: You should only be responsible for “negligent” breaches, acts, errors or omissions. Anything above that is above the standard of care.
12
Q
any and all laws, codes
A
Level 2. It should be understood that the only codes which apply to your work are those codes which were in effect when the plans and specifications were presented for permitting. The use of “any and all” could conceivably make you responsible for codes which change after the permitting process and bar you from collecting any additional fees for a material change in the contract. Also, conformance with all codes could be construed as providing services above the standard of care, which is a coverage issue.
Insert “applicable” where indicated. Changes in code after the project has started or different interpretations of the code after permitting should be considered “additional services.”
Future codes: Often, current codes are subject to multiple interpretations; therefore, when mention is made relative to future codes, it is difficult to discuss compliance since the interpretation of the new code could be significantly different based on subtle wording within the final drafting.
13
Q
Arbitration or binding dispute resolution techniques
A
Level 3. These types of dispute resolution techniques can be as time consuming and expensive as litigation without the benefit of the rules of evidence or appeal. Again, it is preferable to avoid leaving the fate of your firm with one person.
14
Q
Arising out of or resulting from, related to, based on, or in connection with, attributable to
A
Level 1. Claims arise from multiple causes, and given the fact it is your design that is being constructed, you can always be brought into the dispute even if your work is negligent-free. Using the “but for rule,” you can be dragged into a litigation because the claim would not have occurred “but for” your design. Recent case law would suggest that this “arising out of…” language is comparable to the defend obligation. We would prefer you use the language “to the extent caused by…”
15
Q
As-Built Drawings
A
Level 3. Be advised that the contractor is the one who should be supplying such documents. The designer should be providing “Record” drawings, which would be a synthesis of their personal observations in conjunction with the contractor records. This more accurately describes what your role is in this function.
16
Q
Assignment of the contract to a third party
A
Level 2. There are four issues that need to be addressed:
1) Transferee must have comparable financial standing and ability to pay for services provided under this Agreement.
2) You have the right to terminate the contract if the assignee is unacceptable.
3) You should retain ownership rights until project is completed and you are paid so as to ensure you have control of documents if contract assigned.
Relative to item 3, what if the party to whom the transfer is granted has a bad history with your firm? You could be stuck in a bad scenario.
17
Q
Assume all duties and obligations (Subconsultant)
A
Level 2: Your duty to all parties is to perform your work “to the professional standard of care for the scope of services assigned to you under the agreement.” These are the only duties you should be assuming. You do not assume all of the responsibilities for the prime designer since their scope of services is much broader than yours. Therefore, a statement should be added to indicate your duties and obligations are “confined to the scope of services as described in this agreement.” Also, you will have to be careful relative to any warranties or guarantees offered under the prime contract as those would not be covered under your Professional Liability policy.
18
Q
Assume all duties and responsibilities (Design-Build)
A
Level 1: This is significant because the Design-Builder assumed duties and responsibilities for which you should have no involvement: ex: warranties, guarantees and certifications relative to the work itself; means, methods, techniques, installation and sequencing of the work; jobsite safety. You should specifically have no responsibility for these issues. Therefore, it is imperative that you include language in the contract which states: “Designer will assume those duties and obligations described in the scope of services of this Agreement.” There should be specific attestations elsewhere in the contract that Designer not responsible for warranties, guarantees, certifications; means, methods, techniques, installation and sequencing of the work; jobsite safety. Also, you will have to be careful relative to any warranties or guarantees offered under the prime contract as those would not be covered under your Professional Liability policy.
19
Q
At Designer’s sole cost
A
Level 2. Argument could be made that at designer’s sole cost means the designer the only party responsible. This can be especially difficult in design build, or if the contractor and owner relationship is concerning. It is recommended that the wording read, “at no additional cost to the Owner.”
20
Q
Audit requirements
A
Level 2. If you are required to reimburse the Owner for “overcharges” or pay for the audit costs, or reimburse, plus:
1) payment for the audit itself
2) coverage will not apply to the return of fees or the interest since it is considered a return of fees.
From a risk management perspective, you should take certain precautions to ensure the audit is a fair and equitably exercise. We recommend the following:
1) You have the right to reject the selected auditor
2) You are involved in the drafting of the directives for the audit.
3) There are no ex parte meetings between anyone and the auditor. (You, owner and auditor should all be meeting at the same time.)
With the special interests groups watchdogging public projects, this may become even more vital.
21
Q
BIM Modeling
A
Level 2. When it comes to BIM, you can allow the client to keep ownership of the BIM model itself, but recommend that you have a cutout for your own work, especially your standard details and inventions or developments.
22
Q
Budget of Project
A
Level 2: If you are being provided with a requirement to guaranty the project budget, there should be a disclaimer for fluctuations in the cost of materials and labor. It should be understood that the prices fluctuate based on the cost or availability of materials or skilled labor, and that is something over which you have no control.
23
Q
Builders Risk/Performance Bond/Payment Bond/ Surety
A
Level 1: The insurance requirements call for you to have Builders Risk and Performance or Payment Bonds as well as sureties. These are coverages or financial instruments that are normally purchased either by the Contractor, and in the case of Builders Risk coverage, by the owner. You as a designer may not even be able to purchase these instruments, which could result in a determination of non-compliance with the insurance provisions.
24
Q
Carrier licensed in the state
A
Level 1. Compliance. The proper term for this is “Admitted.” Companies are either admitted or non-admitted.
25
Certified Copy of Policies
Level 2: This is not so much a coverage issue as an issue of time and effort. The process involves an executive level representative of the insurance company reviewing the contract for certification. Often these representatives are not available for long periods of time, and do not proceed with urgency unless the certified copy is necessary for litigation support. From a reasonableness perspective, a copy of the Certificate of Insurance along with applicable endorsements should be adequate for the needs to the client.
26
Change in applicable law or subsequent contradictory interpretation of law
Level 2: Within the professional standard of care, the laws to which a consultant should conform are those laws “applicable” at the time the Contract Documents are submitted for permitting. Any subsequent change in the law, or contradictory interpretation of law after the plans are permitted should be considered additional services.
27
Change in Scope/Services
Level 2. It should be required that any increases or decreases in scope, change orders, directives, or anything that changes your role or scope should be accepted only if presented in written format.
28
Change Order Review Contract Clause
Level 2. Upon Client’s request, Consultant shall review proposed change orders from Contractor or others, but solely for purposes of confirmation of consistency with the general intent of the Contract Documents prepared by Consultant. Consultant shall not be required to review such proposed change orders for causation, entitlement, cost, or schedule and shall have no responsibility therefore except as expressly stated by Consultant in writing.
29
Cleanup of Jobsite
Level 1. This falls outside your scope of services and is the sole responsibility of the contractor
30
Communication
Level 1: You should not be responsible for communications that are not directed through your offices.
31
Consequential Damages
Level 3. The waiver of consequential damages should be mutual
32
Constructability
Level 1: This issue is too subjective based on the relative abilities of the contractor selected to perform the work. It could be viewed as a means & methods discussion
33
Construction Manager at Risk
Level 1. The construction manager (CM) acts as consultant to the owner in the development and design phases, but as the equivalent of a general contractor during the construction phase. The CM at-risk is responsible for early coordination during the design phase, value engineering, and constructability reviews as well as the selection, scheduling, and sequencing of trade subcontractors. The term "at-risk" conveys that the CM under this method bears the risks of the general contractor, such as price escalation, delay, etc., that are not present in an agency CM situation. As such, there are coverage concerns relative to the exclusions addressing work that you do under the professional liability policy.
34
Consultant’s professional opinions of probable Construction Cost
Level 2. Opinions are to be made on the basis of Engineer’s experience and qualifications and represent Engineer’s best judgment as an experienced and qualified professional generally familiar with the construction industry. However, since Engineer has no control over the cost of labor, materials, equipment, or services furnished by others, or over contractors’ methods of determining prices, or over competitive bidding or market conditions, Engineer cannot and does not guarantee that proposals, bids, or actual Construction Cost will not vary from opinions of probable Construction Cost prepared by Engineer.
35
Constructibality Review
Level 1. While you may be called upon to clarify points or issues on the project in collaboration with the contractor, the ultimate constructability review should be performed by the contractor constructing the project. It must be remembered that you do not know the true capabilities of the contractor, and therefore cannot comment on its ability to construct the project as designed. However, you want to be involved in the collaborative process to determine the capabilities of the contractor, and be able to challenge any issues they raise relative to the constructability of the project.
36
Continue working during pendency of a claim
Level 1. There should be a corresponding requirement that the owner or client continue to pay for those continuing services.
37
Contractors or Attorneys as Additional Insureds/Indemnitees
Level 1: Neither contractors (unless a client) or attorneys should be considered as additional insureds or indemnitees. The contactor may be a contributing factor to the cause of the loss, and indemnifying them could be tantamount to reimbursing them for their own negligence. Attorneys draft the contracts under which you operate. As a fact witness as to your duties and obligations, they have a vested interest aside from representing their client. Any gaps in the contract language would be visited back on the attorney, who then has a conflict of interest.
38
Contractor, vendor, supplier
Level 3. You are a “consultant,” and the change should be made as there are inherent duties associated with each type of entity. Means and methods and warranties are two examples of such duties that could create coverage issues for the designer. We recommend an addendum to the contract clarifying your firm’s role.
39
Contractor-based contract
Level 1. Such, contracts incorporate duties and obligations throughout the document which fall beyond or outside your professional scope of services. As the document is so infused with non-professional requirements for issues such as jobsite safety and warranties or guarantees, we recommend you approach the client with your standard design agreement which more accurately describes your role on the project. If that is not feasible, our comments are set out below in this review.
40
Contractual liability under Professional Liability Policy
Level 1. This coverage doesn’t exist. It is directly excluded under the policy. Meeting the professional standard of care is a “legal” obligation, so is enforceable under the insurance contract. Any performance based contractual obligations are precluded from coverage.
41
Counsel of Owner’s choosing
Level 2. Most carriers want to retain the decision relative to what counsel to utilize. Even if they will allow for outside counsel, that counsel would have to be willing to agree to the carriers’ litigation management guidelines and fee rates. It should be understood that the eroding feature of the policy requires adherence to some sort of controls relative to rates or the limits could be prematurely exhausted.
42
Declaratory/Injunctive/Equitable
Level 1: An action in equity, injunctive or declaratory relief without monetary relief being sought does not trigger any of your insurance policies. Your PL policy is not triggered unless there is a demand for money or services. Therefore, non-monetary demands do not trigger coverage.
43
Deductible vs. Self-Insured Retention
Level 1. Compliance. The contract calls for you to have a deductible of no more than ____. You have a ______ deductible. The amount of the deductible should have no impact on the client because it is an agreement between the carrier and its insured. A deductible, by its very nature, must drop down and resolve the claim, at which time the carrier then pursues their insured for the unpaid balance of the deductible. Set out below is a commentary on this issue from the International Risk Management Institute in case you need an authoritative source.
Under an SIR, the excess insurer generally has nothing to do with losses that do not penetrate its attachment point. The insurer may, however, require notification when a claim is reserved for an amount that pierces the attachment point. Under a deductible, however, the insurer pays every loss (up to the maximum limit of liability), and is then reimbursed by the insured up to the amount of the deductible. In practice, small losses are simply paid by the insured to avoid the "dollar-trading" problem. (Int’l Risk Management Institute)
44
Defend, protect, be liable for, save, shall be responsibility for, keep, contribute to sums
Level 1. It should be understood that claims generally arise from multiple causes, and are rarely is resultant from just one cause. Therefore, the obligation to defend, save, protect, etc. is one assumed under contract only, and may be create a coverage issue for your firm. Coverage may not be available for the costs associated with that defense. In these instances, your obligation should be restricted to “indemnifying” the client “to the extent the damages are caused by the negligent errors or omissions of the design professional.”
A possible alternative for drafting the indemnification clause is to bifurcate the obligations based on the applicable policies. For instance, for GL or Auto exposures, the defense obligations can remain as a duty owed under the contract. However, if the claim is one based on professional negligence, then the obligation should only be to indemnify.
45
Delay by Owner in Notifying Consultant of Error, Defect or Omission
Level 1: if the owner discovers a defect, deficiency, error or omission, and delays or fails to report same to the consultant, then the owner should be responsible for damages, costs associated with the “delay” in notifying the consultant.
46
Delegated Design Contract Clause
Level 2. Where any design services are provided by persons or entities not under Consultant’s direct control, Consultant’s role shall be limited to its evaluation of the general conformance with the design intent and the interface with Consultant’s design and portion of the project. Except to the extent it is actually aware of a deficiency, error, or omission in such design by others, Consultant shall have no responsibility
for such design and may rely upon its adequacy, accuracy, and completeness in all respects.
47
Descriptions of Types of Claims to be Covered Under the Various Policies
Level 2: You are providing insurance policy forms which are standard in the market. It should be understood that coverage cannot be verified until there are allegations made against you in a claim or suit. The coverage is dependent on the allegations levied against you and not the type of claim it may be; therefore, committing to covering certain types of claims can creates some issues if there is a denial of a claim based on the allegations, and not on the facts. This could, in turn, create a breach of contract exposure for you for non-compliant insurance coverage. Therefore, we recommend deleting the claims descriptions.
48
Design/Builders
Level 2. You should make sure that they carry Contractor Professional Liability coverage for their changes to your work as well as for designs they may do themselves. It would also help should the design/builder retain other design consultants directly.
49
Dimensions & measurements
Level 1: Dimensions and measurements are laid out by the designer on the Contract Documents: however, the designer should have no duty to verify dimensions and measurements in the field.
50
Disclaimer Text
Level 2. Attached or Overstamped:
Consultant’s Professional Stamp and Seal shall apply only to the portions of plans, specifications, surveys, reports, or other documents specifically identified or described below. Consultant shall not be responsible for any other associated documents.
51
Endeavor to guard the Owner against defects and deficiencies of the Contractor
Level 2. Your role on the project site is to determine that when completed the project will be in conformance with the Contract Documents. It is infeasible to think that you are not continuously on the site, yet should be required to be responsible on this level. It draws you into “any” defect or deficiency, a far broader exposure than you anticipated.
52
Enforcing the indemnification provision of the Contract
Level 1. Your policy provides indemnity and defense for amounts you are legally obligated to pay as damages. Defense requirements in connection with enforcing the indemnity provision fall outside the coverage provided in your insurance policies.
53
Expenses in Addition to Policy Limits/Professional Liability
Level 1. Compliance. Defense costs for professional liability are within the policy limits. Expenses outside limits are not available in the U.S. Market.
54
Extended Reporting Tail/Extended Discovery Period
Level 1. Compliance. These types of coverages are only available to you if you cease design activities as a firm. It is used by designers that are retiring or leaving the industry. Therefore, you cannot provide a tail coverage. You can agree to “Maintain the coverages for a specific period of time,” but cannot continue the policy itself.
55
Fast-Track
Level 3: You may wish to have the owner acknowledge that there is a higher tendency for delays and additional costs on Fast-Track projects.
56
Fiduciary
Level 1. There is a reference that the relationship between you and the client is one based on “trust and confidence.” You should be an independent contractor in the relationship, but these words imply you have a fiduciary duty to the owner. You do not, and such wording raises your duty above the professional standard of care, creating a possible coverage issue. Your relationship is “arms’ length,” and your duty to the client is not to put their welfare above yours, but to meet the professional standard of care. In the context of the contract, if “trust and confidence” appear along with a description of you as an “independent contractor,” it should be understood that the two are mutually exclusive, and the “trust and confidence” should be deleted, or wording should be added indicating the agreement does not, nor does it intend to create a fiduciary relationship between the parties.”
57
Future Codes
Level 2: This is problematic because sometimes even existing codes are sometimes subject to varying interpretations. The inclusion of the phrase “future” before codes suggests that you need to anticipate future codes. You should only be responsible for applicable codes, or codes that were “in effect at the time the plans & specifications were submitted for permitting.”
58
Governmental Authorities
Level 2: Whenever there is mention that you must conform to the dictates of “any governmental authority,” it should be clarified that such governmental authority must have “jurisdiction.”
59
Hazardous Materials
Level 1. Exposure. There should be an affirmative statement in every contract indicating you are not responsible for the presence of “hazardous materials” on the jobsite. For example: The Consultant, its principals, employees, agents or consultants shall perform no services relating to the investigation, detection, abatement, replacement, discharge, or removal of any toxic or hazardous contaminants or materials. The Owner acknowledges that the CONSULTANT has no professional liability (errors and omissions) or other insurance for claims arising out of the performance or failure to perform professional services related to the investigation, detection, abatement, replacement, discharge or removal of products, materials or processes containing asbestos or any other toxic or hazardous contaminants or materials ("Hazardous Materials").
60
Highest (relative to Standard of Care)
Level 1: You are only required to meet the professional standard of care. Any reference to anything more than the standard of care creates a liability assumed under contract, and thus creates possible coverage issues. This also applies relative to “exercise best judgment.”
61
Indemnification
Level 1. Standard Clause example: The Consultant agrees, to the fullest extent permitted by law, to indemnify and hold harmless the client, its officers, directors and employees (Collectively Client) against damages, liabilities or costs, including reasonable attorney fees and defense costs to the extent caused by the Consultant’s negligent performance of the professional services described within this Agreement, and that of parties for whom the Consultant is legally liable. Consultant has no obligation to indemnify any party in any manner whatsoever for that party’s own negligence.
NOTE: Ideally, you would take this same clause and do the following, especially if the owner demands the right to retain consultants to do work described in your contract with them:
The Client agrees, to the fullest extent permitted by law, to indemnify and hold harmless the Consultant, its officers, directors and employees (Collectively Consultant) against damages, liabilities or costs, including reasonable attorney fees and defense costs to the extent caused by the Client’s negligent performance of the professional services described within this Agreement, and that of parties for whom the Client is legally liable. Consultant has no obligation to indemnify any party in any manner whatsoever for that party’s own negligence.
62
Indemnification is a legal duty, independent of insurance
Level 1: We do not disagree; however, an attempt to contractually transfer financial risk from one party to another is dependent on the transferee’s ability to fund the transfer. If the indemnification clause is drafted focusing on the legal obligations of the parties rather than the insurance considerations, the financial transfer may be legally sufficient, but fails to properly protect the indemnitee since the funding may not be available under the indemnitor’s insurance portfolio.
63
Indirectly
Level 2. This ambiguous reference is problematic is it is accompanied by a statement that you are responsible for the coordination of all design activities. Does the responsibility to coordinate render the owner retained subconsultant as being “indirectly” retained by you, thus giving your responsibility? See Delegated duties.
64
In-House Counsel
Level 2: The client is requesting that in-house legal counsel bills be considered an element of damages. In-house counsel is an overhead cost the client opted to take on as part of its operations; therefore, you should have no legal obligation to reimburse, indemnify or pay for in-house counsel fees.
65
Insurance Requirements for Subconsultants
Level 3: The contract requires all subconsultants to carry the same insurance requirements as far as limits and types of coverage as you carry as the prime consultant. We agree that for the major disciplines like structural or civil this is recommended, but for disciplines such as landscape architecture, there should be an accommodation for the reduced risk potential.
66
Insurance Requirements
Level 1: WTW handles only your professional liability coverage. Therefore, that is the only coverage upon which we can comment. We strongly recommend you refer this contract to your broker for the other lines of coverage to verify compliance.
67
Insurance for protection of the other parties
Level 1. Your insurance is to provide coverage for you only. It is not set up to “protect the client or any other party (including subconsultants you retain).” Even though an entity may be an additional insured under the policy, it is only to protect you from liability from them.
68
Intent of the design
Level 2: When the owner indicates a potential intent to proceed with work based upon your documents, but with another designer, you should memorialize and disclaim responsibility to the owner, indicating that your firm is the one that understands the intent of the design, and there could be delays or additional costs associated with a different party interpreting your intent.
69
Interests payments on fee refunds
Level 1. There is no coverage for the interest payments as they are a liability assumed under contract only.
70
ISO policy forms for the General Liability Policy
Level 1. Compliance. In such cases, the coverage required under these forms may require coverage types that either you cannot obtain, or would have to obtain at an increased cost. Therefore, we recommend you add wording which indicates you will obtain the required forms “if available, and at no additional cost to the consultant.” You can make the argument that no other designer will be able to provide these policy forms.
71
ISO 20 10, 20 26 & 20 37
Level 1. Compliance. You insurance portfolio includes in the coverages required in the contract; however, you do not have these endorsements because they are contractor-based endorsements which don’t apply to your work. We believe you should add a notation “If obtainable by at no additional cost to the consultant.”
Level 1: Compliance. While you have the ISO CG 20 10 form, you do not have the (11/85). Carriers no longer use the form, nor will they be willing to issue any equivalency document given the wording of the (11/85) form. Therefore, you will have a problem with this requirement, but so will everyone else.
72
Joinder (mediation/arbitration)
Level 2. This is more applicable relative to arbitration given that there is no right of appeal in most instances. The client/owner should only be allowed to join you into alternate dispute resolution sessions if there is some aspect of your work being called into question. Otherwise, especially in arbitration, you are being asked to contribute even though the “injured party hasn’t named you as a responsible party,” and irrespective of whether or not you are negligent.
73
Joint & Several
Level 1. Exposure. Most, if not all states are “modified” joint & several. A pure joint & several creates exposures to you that are not available under the law. If there is no legal obligation to pay as damages, then a coverage issues exists.
74
Joint & Several Liability Contract Clause
Level 1. Owner recognizes that the Contractor and Subcontractors will be in control of the Project site and solely responsible for construction means and methods, scheduling, sequencing, jobsite safety, and compliance with Contract Documents and official directions. Accordingly, Owner shall require all contractors and subcontractors to defend, indemnify, and hold harmless Owner and Architect from any and all claims, losses, suits, damages, and liabilities, including attorneys’ fees and costs, arising in any way from such contractors’ or subcontractors’ services or work product, except to the extent caused by Architect’s sole negligence. In support of this obligation, Owner shall require all contractors and subcontractors to include Owner and Architect as additional insured’s under its insurance policies on a primary and non-contributory basis applicable to the Project. Architect shall not be responsible for damages, losses, costs, or claims caused by contractors or subcontractors, except only to the extent caused by Architect’s sole negligence.
75
Joint Venture
Level 1. If you are part of a joint venture, from a legal standpoint you are jointly and severally responsible for the negligent acts, errors or omissions of the entire joint venture. However, your insurance coverage only provides coverage to the extent your negligent acts, errors or omissions cause loss or delay.
76
Jurisdiction
Level 2. For disputes relative to the project itself, the jurisdiction should be the one in which the project is located.
77
Law Changes or Subsequent Contradictory Interpretations After Permitting
Level 2: Law changes or subsequent contradictory interpretations after permitting should be considered additional services.
78
Liens filed by other parties
Level 2. The requirement to defend the owner against liens should be confined to parties contracted to you. Also, any such requirement should have a preamble which states, “Provided Consultant has been paid for the fees or services at issue…” This is especially true if there is a set-off provision. The reasoning is the owner/client should have to have paid for the fees that are the subject of a lien. The preamble does not alleviate the issue of coverage relative to defense costs, there is no coverage for the defense obligation; however, if had already been paid, you would not have had coverage for those fees anyway under the theory that it is not money to which you are legally entitled.
79
Limitation of Liability
Level 1. There is no limitation of Liability (LOL) for you in the contract. That means that your firm’s assets could potentially be at risk. We normally recommend that you get an LOL. It should be one of the following:
1) Limited to your fee
2) A stated amount
3) To the amount of “collectible” insurance.
80
Liquidated damages
Level 1. Insurance covers damages that the claimant/plaintiff can prove as “out-of-pocket” damages. Therefore, coverage would only apply to the extent the claimant can provide actual loss. If the daily liquidated damages stated in the contract is in excess of the claimant’s ability to demonstrate damages, the unsubstantiated damages would be considered a liability assumed under contract only, and would be precluded from coverage.
81
Material Change to the Coverage
Level 1: Compliance: This will be your responsibility. The carrier may not be willing to provide notice to all certificate holders of a change in the coverage
82
Material Data Safety Sheets (MSDS)
Level 1. The contractor should be responsible for producing these. You do not want to take on that responsibility.
83
Measurements & Dimensions
Level 1: You should be responsible for the dimensions and measurements within your documents, but the contractor should be the party responsible for verification of dimensions and measurements in the field.
84
Modification
Level 2: Compliance. It should be understood that the insurance carriers will only notify in the case of non-renewal or cancellation of coverage. Notification of “modifications” would be at the time of issuance of Certificates of Insurance. Therefore, it will be up to you to notify of any modifications of coverage.
85
No Personal Liability
Level 2. We recommend the following language:
It is agreed to by the parties to this Agreement that the Consultant’s services in connection with the Project shall not subject Consultant’s employees, officers, or directors to any personal liability or legal exposure for risks associated with the Project. Therefore, the Client agrees that the Client’s sole and exclusive remedy for any claim, demand or suit shall be directed and/or asserted only against the Consultant, (insert state of incorporation) corporation, and not against any of the Consultant’s individual employees, officers or directors.
86
Not less than, minimum, at least, Insurance requirements
Level 3. Delete: Your bid is based on several criteria, including coverage limits. With this wording, the owner can technically request more limits at your cost. This is a material change requested by the owner, and the cost of same should be borne by the owner.
87
Observation
Level 1: You are an observer on the jobsite. You do not supervise, inspect, monitor, control, or any other description which imparts some type of authority that you do not have on the jobsite.
It is only during Substantial and Final completion, or in a role as a special investigator that you actually conduct inspections.
88
Oral directives
Level 1. We strongly recommend against acting upon any oral directives by the owner’s representatives. If the issue is time sensitive, you should follow up in writing detailing the oral directives, and then requesting immediate approval to perform same.
89
Outside Scope of Services
Level 1: You cannot be responsible for activities outside your scope of services. These should be deleted from the contract.
90
Ownership: Inventions, discoveries, know-how, patents
Level 2: This goes beyond mere ownership. Inventions, discoveries, know-how and patents may be ways that you create a competitive advantage in the marketplace. Therefore, if the client is demanding ownership of these items, then you are potentially sacrificing future income for which you are not being compensated at the time.
91
Owner’s Counsel
Level 2: If you are going to be asked to indemnify and/or defend the Owner, the Owner should have the option to pick counsel unless it is at their own expense. If you opt to accept the assignment with the defense obligation and Owner’s ability to retain its own legal counsel, then the counsel must abide by the following: Regardless of the situation, the attorney selected must conform to “reasonable attorney fee rates,” or the rates you are paying for your own defense. If they insist on more expensive counsel, it should be at their own expense. Also, the attorney must abide by the insurance carrier’s litigation management guidelines. Failure to conform to this requirement should be construed as a waiver of the right to payment of legal fees.
92
Owner’s sole negligence
Level 2: The owner should be responsible for its proportional negligence as well. It is extremely rare that only one party is “solely” negligent, especially in the case of the owner. Therefore, by the insertion of the word “solely” the owner is basically escaping legal responsibility for its proportional negligence. We believe this is onerous.
93
Owner supplied information
Level 2: If the owner is not willing to represent that the information they are providing is accurate, the question remains “who will be responsible if your review of the information is performed to the standard of care, and delays or additional costs still result from the reliance on the owner provided information?” Those exposures should be borne by the owner.
94
Ownership of rights to the work (work for hire)
Level 2. We recommend the use of a License to Use, with your firm maintaining ownership rights. However, if this is a walk-away issue then we recommend the following:
1) An indemnification and defense agreement in favor of your for the use of the documents for any other purpose than the purpose for which they were created.
2) There are notes on your drawings that indicate the designs are only for the project for which they were created, and that there would be modifications or alterations that would be required to adapt the designs for any other, non-related use.
3) If you are intending to utilize subconsultants, then the contracts of those subconsultants should have ownership clauses that match yours. If a lower tier subconsultant does not relinquish ownership of their documents and you have done so, you may be subject to a breach of contract claim. You could be held responsible for the cost of purchasing the rights to the subconsultant’s designs.
4) Remove all stamps, seals or plates that identify your firm.
5) Ownership is transferred only after you have been paid your outstanding fees.
6) There should be a carve-out for basic detail that is a part of your firm’s normal work. We are talking about detail you may use in most if not all of your projects. Recommended language is as follows:
Notwithstanding the foregoing, the Architect/Engineer shall retain all common law, statutory and other reserved rights, including copyrights in its standard design elements and architectural/engineering details that are neither unique to the Owner or its affiliates nor related to the business of the Owner and the Owner shall be granted a non-exclusive license to reproduce such design elements and architectural/ engineering details.
95
Paid-If/When-Paid provision
Level 2. While the reasoning for this is sound, the question becomes “What if the reason for the non-payment is due to the prime contract holder and not you? In such cases, you should be paid, or the clause deleted.
96
Parties directly “or indirectly” employed by you, or others for whom you are legally responsible
Level 2. It is unclear what is meant by “indirectly.” If it is intended to mean lower tier sub-consultants, that is what it should say. Our concern here is that the client may be retaining separate consultants whose work you are asked to coordinate. In such instances, the “indirectly” could conceivably be construed to apply. Not only should the “indirectly” be deleted, but there should be an affirmative statement indicating you are not responsible for the technical accuracy of any consultants retained directly by the client.
97
Payment Certifications
Level 1: Add: The execution of payment applications shall not require the designer to make exhaustive or continuous on-site inspections to check the quality or quantity of the work. Subsequent to any on-site visit, designer shall reasonably advise the Client about the general progress and quality of the work completed to date, and report any noted deviations from the Contract Documents or open and obvious defects or deficiencies discovered in the work.
98
Per occurrence on Professional Liability Policy
Level 1. “Occurrence should be changed to “claim” to be consistent with the policy language.
99
Permits
Level 3: If your firm needs permits, you should be required to obtain those; however, if the permits are for the construction of the project, then you should only be assisting the client.
100
Phased occupancy
Level 1: The Statutes of Limitation and Repose should begin to run for each phase of the project, when the Owner takes occupancy. The running of the Statutes should not be dependent on the Final Completion of the entire project.
101
Prevailing Party
Level 1: There is no coverage for the prevailing party provision. Period. It is considered a liability assumed under contract only, and the policy only pays for legal, not contractual exposures. If this clause is a deal killer, then we recommend that you have “prevailing” defined so as to mitigate the exposure. Even if defined, the coverage issue still exists. Technically, if the owner pursued a claim for $1,000,000 and was awarded $1.00, the owner still prevailed. By defining prevailing, you reduce the requirement, but do not get rid of the coverage issue. The reason this is an issue is the tendency of the judges and juries to want to award damages to what they perceive to be an injured party. Therefore, our first preference is that the clause be deleted in total. If that is not feasible, then define or quantify “prevailing” in order to reduce the chance you will be forced to pay prevailing fees. We would recommend a high percentage, but probably caution against going under 75%.
102
Prime Agreement
Level 1: The contract requires you to conform to the terms and conditions of the prime agreement. A copy has not been provided; therefore, no comments can be made relative to whether there are any problematic issues with same.
103
Project Specific Limits on PL Policy
Level 1: Compliance: the limits on the PL policy do not apply per project as they do on the GL policy. If the coverage must be project specific, you may need to purchase an SJX.
104
Prompt Payment Statutes
Level 3. There should be concern on your part any time there is a request for a waiver of the prompt payment statutes. Such a waiver can effect cash flow considerations within your firm.
105
Reasonable attorney fees
Level 2. The reason for this is that it is not uncommon for the client or owner to select an expensive firm if they believe the cost will be someone else's to bear. With "reasonable," you have the ability to negotiate the rate if it becomes an issue. It is normally recommended that client defense costs be negotiated based on the rate you are paying for your defense in the hopes of preserving as much of your eroding limits as possible. Eroding limits is a good lever to get the fees negotiated.
106
Reasonably inferable
Level 2. This is problematic as it blurs the lines of the scope of services. What the client may believe to be “reasonably inferable” will probably be significantly different than what you believe. The scope of services should be clearly detailed in the contract, and there should be no ambiguities. If reasonably inferable is in the contract, it may also be more difficult to negotiate Additional Services.
107
Recommendations made by Designer
Level 1. The designer should not be responsible for delays or additional costs caused by the Owner’s decision to reject or not follow designer’s recommendations.
108
Request for Information Contract Clause
Level 2. With reasonable promptness consistent with the stage of the Project, Consultant shall respond to such Contractor’s requests for clarification or interpretation. If the Contractor’s requests for information, clarification or interpretation are, in the Consultant’s professional opinion, for information readily apparent from reasonable observation of field conditions or a review of the Contract Documents, or are reasonably inferable therefrom, or are untimely, Consultant may so advise Contractor and Client and shall be entitled to compensation for Consultant’s time spent responding to such requests.
109
Restore eroded limits
Level 1: If claims expense and payment partially or completely erode applicable policies, carriers may not be willing to restore limits. Therefore, there should be a disclaimer qualifying if such restoration is possible.
110
Retention of Geotechnical and/or Land Surveyor
Level 2: If you have no in-house expertise, then we recommend that the owner directly retain these disciplines. If required to do so, you should already have a strategic partnership in place for such retentions. It should be understood that if the owner does not agree to your selected geotechnical engineer or surveyor, then the owner should assume responsibility for the performance of same.
111
Satisfaction of the Owner, client, as required in the Agreement or Work Order, etc.
Level 2. It should be understood that your duty under the law is to design “to the professional standard of care,” which is “what a designer (Architect or Engineer) would typically do under similar circumstances.” If the level of performance is “to the satisfaction of the Owner,” the standard of care may be raised to a level above what is legally required.
112
Set-Off Provisions
Level 1. Coverage. The client withholds portions of your fees in anticipation of claims based on your work. It should be understood that this type of clause can create a scenario wherein the fees withheld to address the claim may not be considered covered by the insurance company as they are considered “waived fees” even if they are used as advance claim payments. Therefore, there needs to be modified procedures in place so you can negotiate claims and fees separately, and your fees will be paid upon resolution of the claim. (When you see this type of clause, check the lien wording as well as it may require you to defend for liens. If that is the case, you could potentially be defending a client based on their non-payment to you.)
113
Shop Drawing & Submittals Contract Clause
Level 2.Consultant shall review and take appropriate action on required Contractor submittals such as shop drawings, product data, equipment specifications, samples and other data, but only for the limited purpose of checking for conformance with the design concept and the information shown in the Construction Documents. Consultant shall not be responsible for the accuracy or completeness of details, such as quantities, dimensions, weights, fabrication, means, methods, sequencing, coordination with other trades, or safety, all of which are the sole responsibility of the contractor. Review of a specific item shall not indicate that the Consultant has reviewed the entire assembly or its components. Contractor shall remain solely responsible for compliance with the Contract Documents and manufacturer’s instructions except as expressly permitted in writing.
114
Site Duties
Level 1. When it comes to jobsite safety, the design firm is only responsible to the extent that safety protocols and practices apply to its employees. Therefore, we recommend that your contract have an affirmative statement that you are not responsible for means, methods, techniques, sequences, installation, scheduling or jobsite safety.
115
Site Duties (Intervals)
Level 2: The number and/or when to visit the site should be spelled out with as much specificity as possible. Therefore, the number of visits should be specified, or the milestones should be described.
116
Site Conditions
Level 2. While you perform your review of the site, you should not be responsible for hidden and unforeseen conditions on the site.
117
Solely Responsible
Level 2. The contract indicates that you are “solely responsible” for any errors or omissions. If the client has provided information or criteria under which the work is to be performed, then you should not be “solely responsible.”
Also, the Client should not be able to limit its culpability to “sole” negligence for the same reason.
118
Specific Job Excess
Level 1. You are limited in the amount of SJX endorsements you can add onto a policy at any one time.
119
Split Limits
Level 2. We generally recommend that you require split limits from your subconsutlants. With the combined single, a claim on subconsultant’s unrelated project could impair the limits applicable to this project. Therefore, we recommend that at minimum you have split limits of $1,000,000 per claim, and $2,000,000 in the aggregate.
120
Standard of Care
Level 1. The Consultant shall perform the professional services described in this contract in a manner consistent with that degree of care and skill typically exercised by members of the same profession currently practicing under similar circumstances at the same time and in the same general locality. What is being asked in this clause is potentially above the standard of care which could create a coverage issue as a liability assumed under contract.
121
Standard of Care (Green)
Level 1. If the Owner is looking for LEED Certifications, then there has to be a rewording of the standard of care to accurately reflect the risks to all parties. Sample wording: The LEED Green Building Rating System and other similar environmental guidelines (collectively “LEED”) utilize certain design and usability recommendations on a project in order to promote an environmental friendly and energy efficient facility. In addressing these guidelines, the Designer shall perform its services in accordance with that degree of skill and care ordinarily exercised by similarly situated members of the Designer’s profession involved in the design of similar projects in the same locale as the Project. The Owner acknowledges and understands, however, that LEED is subject to various and possibly contradictory interpretations. Furthermore, compliance may involve factors beyond the control of the Designer including, the Owners’ use and operation of the completed project. The Designer does not warrant or represent that the project will actually achieve LEED certification.
Designer shall use reasonable care consistent with the foregoing standard in interpreting and designing in accordance with LEED. Designer shall not be responsible for Contractor’s failure to adhere to the Contract Documents and any applicable laws, codes and regulations incorporated therein, nor for any changes to the design made by the Owner without the direct participation and written approval of the Designer. Likewise, the Designer shall not be responsible for any environmental or energy issues arising out of the Owner’s use and operation of the completed project.
122
Strict Conformance with Code
Level 2: There are codes that can render multiple interpretations. Therefore, “strict” compliance could be subject to the interpreter. Also, there may be subsequent contradictory interpretations of codes made by building officials, which should be additional services if the latter interpretation creates the need for additional design work.
123
Substitutions Contract Clause
Level 2. Upon the written request or direction of Client, Consultant shall evaluate and advise Client with respect to proposed or requested changes in materials, products, or equipment. Consultant shall be entitled to rely on the accuracy and completeness of the information provided in conjunction with the requested substitution. Consultant shall not be responsible for errors, omissions, or inconsistencies in information by others or in any way resulting from incorporating such substitution into the Project
124
Sub-consultant shall have all the duties and obligations to the owner to the same extent that the prime designer has duties and obligations to the owner
Level 2. You have the same duties and responsibilities to all parties, which is the perform your work to the professional standard of care. Your scope of services is only a portion of the design builders. Therefore, you owe all the same duties and obligations to the owner that the DB does in that you owe the duty and obligation to perform your work to the professional standard of care; however, that only applies to duties and obligations specifically described in the Agreement.
125
Sunset Clause
Level 1: Compliance. You cannot have a sunset clause on your policy. With a Sunset Clause there is a time limit on when a claim can be reported and considered for coverage. If you are not allowed to report a claim per the policy then there is no chance that coverage would apply regardless of when the occurrence happened. So if the policy has a 3-year Sunset Clause after three years no claims can be reported on the policy. Any damage that shows up after the three years would not be covered.
126
Supervise, monitor, inspect
Level 1: These words connote authority that you do not have at the jobsite. You “observe” until Substantial and Final Completion.
127
Suspension
Level 1. Non-contract issue. Have an expiration date on your fee schedule in case of extended suspension.
128
Termination
Level 2. Both parties should have the right to terminate based on a material breach by the other.
129
Third Party Beneficiaries
Level 1. The professional liability policy does not allow for third party beneficiaries.
130
30-Day notice of material change in the coverage
Level 1. Compliance. The carrier may not be willing to provide any other information except cancellation or non-renewal of the policy. Therefore, any material change may be yours alone to report.
131
Time is of the Essence
Level 2. This phrase creates contractual deadlines that are more strictly enforced than with the absence of such wording. There is the potential that these “artificial” deadlines could create coverage gaps as they could be construed as liabilities assumed under contract. Also, if there is no force majeure or “circumstances beyond your control” type clause, it should be added.
Force Majeure
Neither party shall be liable for any failure or delay in performance under this Agreement (other than for delay in the payment of money due and payable hereunder) to the extent said failures or delays are proximately caused (I) by causes beyond that party's reasonable control and occurring without its fault or negligence, including, without limitation, failure of suppliers, subcontractors, and carriers, or party to substantially meet its performance obligations under this Agreement, provided that, as a condition to the claim of non-liability, the party experiencing the difficulty shall give the other prompt written notice, with full details following the occurrence of the cause relied upon. Dates by which performance obligations are scheduled to be met will be extended for a period of time equal to the time lost due to any delay so caused.
It should be understood the Force Majeure wording does not solve the coverage issue; however, it does create a scenario wherein there must be a delay on your part which results in the loss or damage, which may be construed as a negligent act on your part.
132
Unless a higher standard applies
Level 1. Your standard of care is the legal standard of care. If there is a reference of possible “higher” standard, then agreement to same will create a coverage issue.
133
Use your best efforts
Level 2. The wording is problematic based on the use of the absolute “best,” but also creates a problem in which it can possibly negate any force majeure clause in the contract. It is preferred you simply say you will accomplish something, and then have the force majeure to protect you against situations beyond your control. With “use your best efforts,” you may have legitimate reasons why you cannot achieve the desired results, but now a plaintiff attorney can exploit whether you “used you best efforts.” This could be a costly issue to address in litigation.
134
Value Engineering Contract Clause (and documentation)
Level 2. [If] Client has elected to engage in value engineering of the Project, Client has established cost as a primary project objective over other programming, performance, and aesthetic objectives recognizes that in doing so, it has limited the available design and product options. These limitations may impact the overall project cost, schedule, and performance. Client has accepted these risks and impacts in recognition of the importance it has placed on project cost.
135
Waiving a jury trial
Level 3. Avoid if possible. Our experience is that bench trials are notoriously pro-plaintiff, many of the judges having come from the plaintiff bar. It is never advisable to leave your fate in the hands on one party, such as a judge.
136
Waiver of Consequential Damages
Level 2. We believe that these waivers should be mutual.
137
Waiver of Subrogation
Level 3. We recommend this be a mutual waiver.
138
Waiver of the State Fair Debt Collection Act
Level 2. When this clause is encountered in any contract, it raises concern that the project has adequate funding.
139
Warranties, guarantees, certifications
Level 1. You can warrant things that are either completely within your control, or where the duty exists even without the contract. Examples of this would be that you are licensed, have no known conflicts, solvent, and will perform the work to the professional standard of care. You cannot warrant the project performance. These are considered liabilities assumed under contract only, and are potentially precluded from coverage. Your PL policy has a direct exclusion for warranties, guarantees or certifications relative to the performance of professional services. “Free from defects,” and “shall accomplish the intended purpose” are examples of performance based warranties. . If you are required to do so, you should qualify it by stating, “Based on information currently known, and to the best of our knowledge, information and belief.” You should be required to represent and warrant that you work conforms to the Professional Standard of Care. Anything else would be considered a performance warranty.
140
Withholding of consent/information
Level 2: You should not be responsible for costs, delays or damages that are caused by the Client exercising its discretion, or withholding of consent or information, contrary to the interests of the consultant.
141
Work that you do
Level 1. If you perform actual work on the project (constructing/erecting/ excavating, etc.) your PL policy has an exclusion specific to these types of activities.
