Negotiating Client Clauses


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Negotiating Client Clauses

  1. 1. Negotiate For Success: Suggestions for Your Client’s Commando Clauses
  2. 2. Agenda <ul><li>Legal Liability for Design Professionals </li></ul><ul><li>Contract Essentials </li></ul><ul><li>Select Contract Clauses </li></ul>
  3. 3. Agenda <ul><ul><li>Certifications </li></ul></ul><ul><ul><li>Dispute Resolution </li></ul></ul><ul><ul><li>Indemnification </li></ul></ul><ul><ul><li>Standard of Care </li></ul></ul><ul><ul><li>Warranties </li></ul></ul>
  4. 4. Legal Liability <ul><li>When a “failure” occurs, liability may follow when four elements are present: </li></ul><ul><li>Duty </li></ul><ul><li>Breach </li></ul><ul><li>Causation </li></ul><ul><li>Damages </li></ul><ul><li>* A legally sanctioned obligation. </li></ul>
  5. 5. Sources of Duty <ul><li>Common Law </li></ul><ul><ul><li>What is expected of you as a professional? </li></ul></ul><ul><li>Statutory Law </li></ul><ul><ul><li>What does the law require of you? </li></ul></ul><ul><li>Contract Law </li></ul><ul><ul><li>What did you promise this client? </li></ul></ul>
  6. 6. First Law of Contracts <ul><li>“ You get what you negotiate – not what you deserve” </li></ul><ul><li>Anonymous </li></ul>
  7. 7. Contract Essentials <ul><ul><li>1. Determine who is in the best position to carry out each responsibility & assign responsibility accordingly. </li></ul></ul><ul><ul><li>2. Assign responsibilities with the authority to fulfill them. </li></ul></ul><ul><ul><li>3. Assign each responsibility to only one party . </li></ul></ul><ul><ul><li>4. Use language that creates realistic expectations. </li></ul></ul>
  8. 8. Types of Contracts <ul><li>Oral Agreements </li></ul><ul><li>Letter Agreements </li></ul><ul><li>Purchase Orders </li></ul><ul><li>Standard Form Agreements </li></ul><ul><li>Custom Agreements </li></ul>
  9. 9. Certifications CLIENT’S COMMANDO CLAUSE Design Professional shall provide certifications of Project design, Project completion, and other Project details as necessary for the benefit of Owner or as required by government agencies, lenders, or others.
  10. 10. Certifications RESPONSE Certify facts known from the services provided or issue a professional opinion based on “knowledge, information, and belief” related to services provided to preserve ethical practice and minimize exposure.
  11. 11. Certifications B101-2007 RESPONSE: (Article 10.4) If the Owner requests the Architect to execute certificates, the proposed language of such certificates shall be submitted to the Architect for review at least 14 days prior to the requested dates of execution. If the Owner requests the Architect to execute consents reasonably required to facilitate assignment to a lender, the Architect shall execute all such consents that are consistent with this Agreement, provided the proposed consent is submitted to the Architect for review at least 14 days prior to execution. The Architect shall not be required to execute certificates or consents that would require knowledge, services or responsibilities beyond the scope of this Agreement.
  12. 12. Certifications <ul><li>E-500 RESPONSE: (Article 6.01 (G)) </li></ul><ul><li>Engineer shall not be required to sign any documents... that would result in the Engineer having to certify...the existence of conditions whose existence the Engineer cannot ascertain. </li></ul><ul><li>Owner agrees not to make resolution of any dispute with the Engineer or payment of any amount due to the Engineer in any way contingent upon the Engineer signing any such documents. </li></ul>
  13. 13. Dispute Resolution CLIENT’S COMMANDO CLAUSE All disputes shall be resolved through litigation with prevailing party entitled to recover all legal fees and costs. Owner shall have the option to mediate any claim through its choice of mediators or demand arbitration, which shall involve all parties involved in any way in the dispute.
  14. 14. Dispute Resolution RESPONSE Owner and Consultant agree that they shall first submit any and all unsettled claims, counterclaims, disputes, and other matters in question between them arising out of or relating to this Agreement to mediation in accordance with the Construction Industry Mediation Rules of the American Arbitration Association, effective as of the date of this Agreement.
  15. 15. Dispute Resolution <ul><li>B101-2007 RESPONSE: </li></ul><ul><li>Article 8.2 </li></ul><ul><ul><ul><li>Mandatory mediation </li></ul></ul></ul><ul><li>Article 8.3 </li></ul><ul><ul><ul><li>Mandatory arbitration if mediation fails…can select litigation </li></ul></ul></ul><ul><ul><ul><li>Consolidation or joinder allowed if common question of law or fact </li></ul></ul></ul>
  16. 16. Dispute Resolution <ul><li>E-500 RESPONSE: (Article 6.08) </li></ul><ul><li>Owner and Engineer agree to negotiate all disputes between them in good faith for a period of 30 days </li></ul><ul><li>If the parties fail to resolve a dispute through negotiation ...either or both may invoke the procedures of Exhibit H. If Exhibit H is not included, or if no dispute resolution method is specified in Exhibit H, then the parties may exercise their rights under law. </li></ul>
  17. 17. Dispute Resolution <ul><li>E-500 RESPONSE: (Exhibit H) </li></ul><ul><li>Mandatory mediation </li></ul><ul><li>Mandatory arbitration if mediation fails </li></ul><ul><li>Parties are allow to select their own mediation/arbitration rules and governing body. </li></ul>
  18. 18. Indemnification CLIENT’S COMMANDO CLAUSE Design Professional shall defend, indemnify, & hold harmless Owner from any & all claims arising out of the project caused in whole or in part by the consultant, excluding only those caused by the sole negligence of any of the Indemnities.
  19. 19. Indemnification To the fullest extent permitted by law, Consultant shall indemnify Client, its officers, directors, partners, employees, and representatives, from and against losses, damages, and judgments arising from claims by third parties , including reasonable attorneys’ fees and expenses recoverable under applicable law, but only to the extent they are found to be caused by a negligent act, error, or omission of Consultant or Consultant’s officers, directors, members, partners, agents, employees, or subconsultants in the performance of services under this Agreement. RESPONSE
  20. 20. Indemnification <ul><li>B101-2007 RESPONSE: </li></ul><ul><li>Not in B101-2007 </li></ul><ul><li>Obligation exist under common law even if not in the contract </li></ul>
  21. 21. Indemnification <ul><li>B103-2007 RESPONSE: (Article 8.1.3) </li></ul><ul><li>New Language </li></ul><ul><li>The Architect shall indemnify and hold the Owner and the Owner’s officers and employees harmless from and against damages, losses and judgments arising from claims by third parties, including reasonable attorneys’ fees and expenses recoverable under applicable law, but only to the extent they are caused by the negligent acts or omissions of the Architect , its employees and its consultants in the performance of professional services under this Agreement. The Architect’s duty to indemnify the Owner under this provision shall be limited to the available proceeds of insurance coverage . </li></ul><ul><li>. </li></ul>
  22. 22. Indemnification <ul><li>E-500 RESPONSE: (Article 6.10) </li></ul><ul><li>Engineer indemnifies the Owner to the extent caused by any negligent act or omission of Engineer </li></ul><ul><li>Requires the Owner to indemnify the Engineer </li></ul><ul><li>Each party agrees to indemnify the other in proportion to the harm they caused </li></ul>
  23. 23. Standard of Care CLIENT’S COMMANDO CLAUSE The Design Professional’s services shall be consistent with the highest professional standards and shall be for the sole benefit of the Owner.
  24. 24. Standard of Care RESPONSE The standard of care for all professional services performed or furnished by Consultant under this Agreement will be the skill and care used by members of Consultant’s profession practicing under similar circumstances at the same time and in the same locality. Consultant makes no warranties, express or implied, under this Agreement or otherwise, in connection with Consultant’s services.
  25. 25. Standard of Care B101-2007 RESPONSE: (Article 2.2) Perform services with the skill and care ordinarily provided by architects practicing in the same or similar locality under the same or similar circumstances
  26. 26. Standard of Care E-500 RESPONSE: (Article 6.01(A)) Standard of care will be the care and skill ordinarily used by members of the subject profession practicing under similar circumstances at the same time and in the same locality
  27. 27. Warranties CLIENT’S COMMANDO CLAUSE Design Professional shall prepare Contract Documents to assure Owner that Project shall be fit for its intended purpose and shall meet all energy, environmental, and accessibility requirements.
  28. 28. Express Warranties & Guarantees <ul><li>Can relate to service or result </li></ul><ul><li>Excluded from professional liability coverage </li></ul><ul><li>No proof of fault or negligence is required </li></ul><ul><li>Can be created by words such as “assure,” “complete,” “fit for intended purpose,” as well as “warrant,” “represent,” or “guarantee” </li></ul>
  29. 29. Warranties RESPONSE Consultant warrants that it is properly licensed to perform the services under this Agreement and that it shall perform the services in a professional manner meeting the standard of care.
  30. 30. Warranties <ul><li>B101-2007 RESPONSE: </li></ul><ul><li>Not in B101-2007 </li></ul><ul><li>Only warranty relates to ownership of copyrights </li></ul><ul><li>Avoids warranties in design, deliverables, shop drawing review, evaluations of the Work, certification of payment requests, and other professional services </li></ul>
  31. 31. Warranties <ul><li>E-500 RESPONSE (Article 6.01 (A)): </li></ul><ul><li>Engineer makes no warranties, express or implied , under this Agreement or otherwise, in connection with Engineer’s services. </li></ul>