Better by Design
Contracts to Manage Architects' Professional Liability

Arguably, one of the most important risk management tools architects or engineers have at their disposal are their client contracts. No other document will do as much to limit your liabilities from the outset.

A contract is, at its most basic level, a written agreement between you and your client. It outlines exactly what you are offering in terms of services or products, how much it will cost, and when the project will be completed. Because both parties have to agree to the terms of the contract to make it official, contracts can help determine the outcome of a professional liability lawsuit. Furthermore, a legally sound contract can prevent most disputes from becoming lawsuits in the first place.

Let's go over some tips for creating client contracts for your architecture business.

Where to Start: Writing Contracts

Where to Start: Writing Contracts for an Architecture Firm

If you're starting a business and don't have much experience writing contracts, it's a good idea to hire legal counsel to draft boilerplate contracts. "Boilerplate" refers to standardized provisions that will make up the majority of your contracts.

You'll need to tailor these boilerplate contracts for your different projects, but the legal language should stay the same and address the common issues you'll come up against, such as…

  • Revision requests.
  • Timeframe adjustments.
  • Non-disclosure issues.
  • Work-for-hire issues.
  • Copyright issues.
  • Dispute resolution.
  • Missed payments.
  • And more.

When hiring an attorney, look for one who is familiar with the architecture or design industry so they can use the appropriate language for your business.

You can also use the contract service offered by The American Institute of Architects. The service costs a membership fee, but it allows you to download and edit nearly all the contracts from their library. If you have experience editing contracts, this service is well worth the price.

Points to Hit in a Client Contract

Points to Hit in a Client Contract

It may sound simple, but a contract should outline what exactly you and your client agree upon. This includes…

  • The fee for services.
  • The scope of work.
  • Limits to liability (i.e., indemnification clauses).
  • Deadlines or work schedules.
  • Insurance requirements.
  • Definition of the signing parties (i.e., individuals or organizations).
  • Penalties or ramifications for breaching the contract.
  • Dispute resolution.

Remember: a contract isn't legally binding until there's an exchange of value (your services in exchange for the client's payment) and signatures from both parties.

When you don't use contracts, a client may assume certain things about your services. They may have unrealistic expectations or misunderstand certain decisions. In fact, according to XL America, 26 percent of negotiation and contract issues between architects and clients are a result of unclear and inappropriate scopes of services. If the client brings a lawsuit, a court is likely to side with them because you are responsible for educating the client about the extent of your services.

To prevent such a situation, it's crucial you include a clear scope of services in your contract. The scope of services is the meat of the contract, and should include all of the following:

  • Services that you will provide for a fee.
  • Services available to the client for an additional fee.
  • Services that you will NOT perform because the client doesn't want them, you don't provide them, or the client has sought those services from a third party.

Touching on all these points helps you educate your clients and establish a good working relationship because they understand what you can offer. It prevents clients from having bloated expectations and gives them a reference point in case they're confused down the road. And if written correctly, a contract may prevent a client from successfully suing for something they mistakenly thought you'd provide.

It might be intimidating at first glance, but using contracts in your work is just good business sense.

Why You Still Need Liability Coverage

Why You Still Need Liability Coverage

When a project goes south, a client will sometimes try to challenge your contract even if it is legally sound and properly addresses your liabilities. For those instances when a contract can't stave off certain liabilities, Professional Liability Insurance can cover settlements or judgments and lawyer fees. If your architecture or design firm needs coverage, fill out an online application.

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