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hello and welcome to the blue turtle management and consulting web-based forum you're watching episode 5 my name is ian and today we're going to discuss the subject to the client architect agreement today's episode would include the following the top 5 reasons why you should implement the contract with all your clients a brief look at where to get the latest client architect agreement published by the institutions the four most important issues to consider when reviewing an architectural agreement and where to get a concise summary and explanation of typical contractual terms and meanings now since starting blue turtle management and consulting I've had the fortune to speak with many architects who run their own small practice unfortunately however many of these architects have suggested to me that although in theory a written signed agreement with your client is great in reality it proves to be a waste of time especially on smaller projects now when addressing architects that are not implementing contracts on their projects I usually take this as an opportunity to ask them one simple question how is working without a signed contract working for you if you're being paid on time and in third if you're happy with the way the projects flows and you're not experiencing any cashflow problems there may be whatever you're doing is working for you new that needs change however unfortunately this is seldom the case so let's start by looking at my top five reasons why you as an architect should implement and understand your agreement with your client firstly typically all professional indemnity insurance policies require that the architect enters into a signed agreements with the client if you don't do this you may not be covered under your insurance policy secondly many architects I speak to are disappointed with the way clients view their profession and implementing a contractual arrangement between the parties is just one step that you can do to help provide a more professional and respectful service thirdly it's been my experience that few architects especially architects and large practices few of them actually read the client architect contract if you do read it and you can understand it then you will be a much more valuable member of the team and this will come in very handy if your annual appraisal or if your firm starts to downsize fourthly clients especially developers will always try and get the most after their architects if you understand your contracts then you can avoid completing additional work or providing expense related items for free and finally projects tend to be more possible when you get paid on time and in further if the project is more profitable you stand more chance of earning more money and if that's not a motivator I don't know what is so where can you get a copy of the most up-to-date client architect agreement well if you're cracked in architecture in Australia then you'll need to know that both the AIA 2005 long form and short form agreements have now been replaced with a new document called the 2009 client architect agreement the 2009 client architect agreement cost 35 Australian dollars for non-members and 15 Australian dollars for members plus posted postage and packaging and it's available through knowledge services now to purchase a copy go to the Australian Institute of Architects website www.att.com/biz link and then the contracts link you will then be able to download a mail order form and purchase a copy however if you're practicing architecture in the UK or would like to see the Reber agreements then you'll want to get a copy of RIBA standard agreement 2010 which recently superseded the RIBA standard form of agreement SFA 99 now to download a copy simply go to WWE my test agreement costs 30 to great British pounds to purchase which is approximately 60 Australian dollars and it can be downloaded from the site now before entering into a contract with a client you'll want to engage the services of good legal counsel this is even more important if you're thinking of being appointed under an amended version of a standard form agreement or if you're looking at working in a new territory or region it's always quite surprising and somewhat disturbing just how different construction laws can be for different places even within the same country for example about ten years ago I was working as a project manager for a builder in the United States and during that time I was involved in writing and managing subcontractor agreements now paid when paid and paid if paid contractual clauses were fairly common tools used by builders at that time and possibly still are for those of you not familiar with this clause have paid when paid cause basically states if the building is not paid by the owner that builder has no obligation to pay at subcontractors so as a builders quite a desirable clause to have so here's the catch in Texas pay one paid clauses are typically enforceable by law however in California they are not while working in Texas I help manage a project that experienced client pain issues and unfortunately I had the very undesirable task of settling the subcontractor accounts now if this project had been located in California the financial outcome would have probably been very different for all parties especially ourselves the Builder so the lesson here is is do not wait until the project is awarded make sure you engage the services of legal professional advice before submitting a proposal or signing any agreements as laws will vary significantly so let's take a look at a contract and get familiar with exactly what you should be looking for when reviewing an agreement that's either not a standard or it's a client drafted agreement or something of that nature now as a minimum or when reviewing contractual terms and conditions you should always be asking yourself the following question are these terms fair reasonable insurable and legal with respect to the size of the project the location and level or type of service to be provided by the architect so let's take a look at exactly what we mean by fair reasonable insurable and legal now by fair I mean that the contract is not unduly weighted towards the either side that provides terms that are both balanced and mutually acceptable what's one way of saying this is what's good for the goose should also be good for the gander and by reasonable I mean that the contractual terms take into consideration the type of project and level of service to be provided by the architects insurable simply means that the terms are sufficiently covered by the architects professional indemnity insurance if it's not covered by that insurance policy then there should be another policy that's easily attainable by the architect and by legal I simply mean that the contract for clause is taken in consideration all relevant laws applicable to the region which the work is to complete it so let's take a look at some typical clauses and see how we can address them let's start by looking at payment clause so that's perhaps one of the most important now when addressing payment clauses is both fair and reasonable that the patek should be entitled to receive regular payment for services rendered now point here is the regular part when deciding on what the regular part should be you may want to look for common payment precedence if both the architect and the client have obligations to pay staffing and overhead costs on a monthly basis and typical service fees are also paid on a monthly basis then it seems both fair and reasonable that the architect should also receive payment on a monthly basis still avoid agreeing to being paid at the end of a long work stage as this could be months later which would ultimately strain your cash flow and jeopardize your financial position now obviously if you're working on a very small project that only lasts for let's say a month it may be more appropriate to ask for 50% of the fee upfront and 50% at the end of the month so once again what may be considered fair and reasonable does depend on the size and type of project similarly things like termination and suspension clauses should apply to both parties not just the architect if the client has the right to suspend or terminate the agreement then it's only fair that the architects should also have the right to suspend or terminate its involvement in the project if it's only been necessary plus it's both fair and reasonable that the no disappears for things like termination and suspension causes be the same for both parties if suspension is upon seven days notice for the architect then it's fair that it's the same timeframe for the client now copyright clauses are also another big item that you'll want to address when discussing copyright clauses because an architect's ability to build a brand and develop a practice is strongly influenced by retaining a clock right it's unreasonable and unfair for the client to demand ownership of this however you all come across projects where the clients do request the copyright now if the client is paying for the work then it's fair that the client be able to use the work for which it was prepared and avoided so you should therefore provide a license agreement giving the client the right to use the design documents the intended purpose make sure however that any licenses that you provide are non-exclusive licenses and subject to payment of things jus when discussing insurance clauses the level of insurance we provided should reflect a fair and reasonable balance relative to the architect's fee and possible exposure if the architect is performing work on small project for a relatively small fee then it seems fair that the texe liability should also be smaller or less than that of a larger project with more work and a larger fee now one way you can limit your liability is by implementing what is known as a cap on liability clause similarly it's unreasonable to enforce clauses which need to extend the architect's liability beyond the architectural scope or hold the architect responsible for issues beyond his or her control indemnity clauses often seek to do both of these things and therefore need to be removed or restricted the tension and set-off clauses are also examples of unreasonableness in an architectural contract any clause that undermines the architects entitlement to appropriate remuneration for services should be removed or restricted there are however other issues that may not be so obvious for example many of the contracts I worked on in the Middle East required the architect to provide what is known as an on-demand formant bond now bonds of any type cost money to provide they impact me borrowing capacity and can prove to be difficult to release at the end of the project so if your firm has a strong history of performance and relevant or similar experience and is qualified to complete the work then recalling a bond could be considered by some as unnecessary and therefore unreasonable client written contracts will often seek to transfer risk and liabilities that are uninsurable for example I've seen many contracts that include clauses involving predetermine penalties one such example is a liquidated damages clause which would allow the client to charge the architect a predetermined amount of money as compensation for delay in service typically the architects professional indemnity insurance policy does not cover the architect for predetermined penalties like liquidated damages however in the event of a breach the pii policy will seek to cover the cost of the actual damage suffered by the client so not only are the predetermined penalties uninsurable in most situations but they also unnecessarily given that the client should already be covered under the architect's pii policy now fortunately there would also be times when a client drafted agreement may include clauses that are in conflict with a law or statutory rights for example in Australia there exists a securities of payment as which loosely translated means that any person or company who performs work or supplies goods under construction contract is entitled to receive and be able to recover progress payments for said work or goods any attempts by a client to modify or restrict this operation goes against the intended nature and purpose of the securities a payment Act and therefore should be addressed and removed from the contract once again when reviewing contractual clauses you need to keep asking yourself the same question are these terms fair reasonable insurable and legal with respect to the size of the project the location and the level or type of service to be provided by the architect now CH during today's episode we've covered many contractual issues in a very short period of time if you're not working with architectural agreements on a regular basis then you may not be familiar with all the terms that I'd use today if you'd like and easy to use reference guide that lists and explains the most commonly used clauses in plain simple English that I'd like to recommend purchasing a copy of the architects guides of fees and contracts chapter minor this book includes a long list of typical architectural contractual terms definitions and also a list of considerations now obviously understanding and deciding which terms in a client drafted agreement are unfair unreasonable uninsurable or legally questionable is just half the battle the next step is to take action and address the applauses with your client now it's important to understand that you as an architects have the opportunity to influence the terms in your agreement so once you have recognized which clauses are unacceptable make sure you take action it's also good to remind yourself that if you want to increase the quality of architecture and the industry as a whole then it's really important that you do your part and challenge or negotiate the unfair and unreasonable contractual conditions now the subject of negotiating architectural fees and contracts is very wide-ranging so we have dedicated a whole episode to the subject later in the series in conclusion implementing client architect agreements on all your projects is a requirement of most professional indemnity policies if you aren't happy with the way you're treated by your clients then it's up to you to change it and implementing and managing a project via an agreement is one step towards achieving this now when presented with a client draft agreement it's very important to challenge all unfair unreasonable insurable and illegal clauses and when we discussing more later in the series about how you can do that also when reviewing clauses make sure you consider the type of project the location level service to be provided always engage the services of profession even counsel especially when working with amended versions of standard agreements or when working in new geographical locations for a list of common contractual terms definitions and considerations go to chapter nine of the architects guides fees and contracts you can purchase a copy at WWI architects guide to fees and contracts com thank you very much for watching episode 5 bye for now