In previous posts, we addressed the risks to engineers and architects when “puffery” is read into the contract. We also identified certain “must have” contract terms. Without further ado, we present “must avoid” contract terms.
- Owner drafted agreements without modifications. These always present serious financial risks.
- Highway departments and major utilities are prime examples of this. Often the terms are unfair or uninsurable, or both.
- Job site safety. This is NOT a design professional’s responsibility. And neither are the means and methods of construction. Educate your staff that job site safety can be assumed by the acts of employees on the job site even if these actions are contrary to the terms of the contract.
- Permits and approval. You will only “assist” the Owner in obtaining such permits.
- Stop work authority.
- We would recommend that arbitration not be included in an Owner agreement. This can be agreed to voluntarily by the parties after a claim is made and is best suited for smaller claims. Please note that in the prior post we suggested a mediation clause as a preferred means of alternative dispute resolution.
- Liquidated damages. These are typically uninsurable under your professional liability insurance policy and should be deleted from any contract.
- Indemnity clauses are ok, BUT do not agree to “defend” your client in the event of a claim, only to indemnify and hold the client harmless. Defending a client requires the expenditure of funds prior to any finding of professional negligence a part of the design professional. This obligation to defend probably is not insurable; the indemnity should be limited to those damages arising from professional negligence only. An attorney should review any unfamiliar terminology you are given to sign.
- Certification/guaranties/warranties. Just say no.
- Assignment of your contract for design services should only be permitted with your written consent based on the creditworthiness of the assignee.
- Once a claim is made or threatened, a “litigation hold” should be placed on all significant records associated with the project. Automatic deletion programs or overwriting of documents must be prevented. Good practice is to copy these files onto protected discs or segregated on a server so that they cannot be accidentally deleted.
This article is not intended to be a definitive discussion regarding the complexities in drafting a professional services contract. Instead, we hope it begins a discussion and planning analysis. To continue a discussion of the issues presented in this article, or if you are facing a dispute now, please contact Greg Cafouros (firstname.lastname@example.org ), Brian Bosma (email@example.com), or Syd Steele (firstname.lastname@example.org ) or any of our attorney’s here. It would be our pleasure to assist you