Is Your Client Willing to Pay You?
from the desk of Nahom Gebre
One of the most basic responsibilities of the client is to pay the design professional in a timely manner for services provided. Your firm’s ability to survive depends on this. Payment terms should be clear and specific. In a recent contract review we came across the following provision:
The Dangers of Proceeding Without a Signed Contract
from the desk of Judy Mendoza
A recently reviewed agreement between an architect and a subconsultant illustrates the importance of having a signed agreement in place prior to performing services for a client or receiving services from a subconsultant. The architect’s subconsultant agreement had been revised by the subconsultant to include the following language:
- Continue to negotiate with the subconsultant.
- Attempt to negotiate a corresponding limitation of liability in the prime agreement (noting that it’s probably too late to do so).
- Conduct a risk management analysis based on the project type, location, client, and extent of the subconsultant’s services to evaluate the probability and cost of a potential claim to determine whether or not the architect is willing to assume the risk of a claim that exceeds $500,000.
- Discuss with local legal counsel the legal status of limitation of liability provisions in the local jurisdiction.
- Analyze, with advice from legal counsel, the risks of walking away from the agreement with the subconsultant and starting over with another firm. Might this action result in delay claims from the owner? Could this result in a fee claim by the subconsultant?
- Consider, with input from local legal counsel, the option of not signing the agreement but continuing to pay the subconsultant. This might force the subconsultant to turn over its deliverables without the protection of a contractual limitation of liability.
The AIA's Next-Generation Contract Documents Service
The AIA recently celebrated 100 years of contract documents during their 2011 convention. The convention gave a glimpse into the future, with a preview of the AIA’s next-generation contract documents service. The online, cloud-based service will be available in early 2012. It will allow users to digitally search, edit, share, and store contracts. This new service should be a welcome change for AIA contract users, as none of the current options for obtaining AIA contracts allow for digital editing or easy storage.
New Frontier for Sustainability Ratings: Infrastructure Projects
The American Council of Engineering Companies (ACEC), the American Society of Civil Engineers (ASCE), and the American Public Works Association (APWA) have joined forces to form a new Institute for Sustainable Infrastructure (ISI). ISI is intended to be a non-profit entity with broad-based membership of owners, practitioners, and related stakeholders who will promote sustainability in infrastructure development and redevelopment. ISI intends to create a rating system that will verify engineering projects as sustainable by examining the economic, environmental, and social impacts of the projects.
Clients assigning contract rights to lenders
from the desk of Nahom Gebre
In the last two weeks we have seen a marked increase in design professionals being asked to consent to their client assigning their contractual rights to the lender. These consent forms often state that the design professional agree that the client, who has borrowed money from the lender, assign their contractual rights to the lender so that the lender has the ability to exercise these rights if the borrower (client) defaults on their obligations. Most of the issues concern business-related issues and have limited impact on the design professional’s professional liability risks. However, the assignment language should be reviewed carefully to make sure that the design professional is not extending its liability through the statements to the lender.
Working with Railroads Requires Special Coverage
Despite the economic downturn, some professional service firms are keeping busy on railroad-related projects. Usually, an engineer or surveyor is involved with providing services that require access to the railroad’s right-of-way. At times, even architects and landscape architects have projects that involve railroad land. The standard contracts used invariable call for Railroad Protective Liability (RPL) coverage. Many design firms—and at times their insurance representatives—are confused about this coverage.
Railroads are subject to the federal laws creating strict liability for harm that results on their rights-of-way. Therefore, federal entities always pass on their risk on to anyone entering upon the property for any work or services. RPL coverage addresses this requirement. Through RPL coverage the independent contractor such as a professional firm assumes the cost of the railroad's liability resulting from the contractor's work. The RPL policy is issued in the name of the railroad and no coverage is included for the firm providing the services on the right-of-way. Coverage applies to the work and job site and only until the work is complete. RPL is similar to owners and contractors protective liability coverage except RPL includes railroad contractual and Federal Employer's Liability Act coverage. There is coverage for liability for bodily injury and property damage to third parties and physical damage to railroad property.
Firms that carry both professional liability and their commercial general liability through Schinnerer can obtain an endorsement to the commercial general liability coverage that includes the RPL project-specific obligation. Firms insured through Schinnerer for their professional liability coverage can obtain through Schinnerer special coverage – known as monoline coverage – that provides Railroad Protective Liability insurance for the specific project. For more information, go to www.schinnerer.com/industries/railroad/Pages/Railroad-Homepage.aspx.