Episode 6 - Appointment Contracts

Hi, and welcome to the Part 3 with me podcast. The show that helps part 3 architecture students jumpstart into their careers as qualified architects. I am your host, Maria Skudari. And this week we will be talking about appointment contracts. This will be another two-parter podcast. This episode will cover the purpose and the types of contracts available. And next week we will look into one of the RIBA's standard form of appointment in more depth. So this is quite a legal subject, so please bear with me as we go through the episode. So appointment contracts are the most important document an architect should have when engaging with a client. Apart from it being a core principle within the ARB and RIBA codes of conduct, appointment contracts are basically a form of protection for the architect so they don't get sued. So why do we need a form of agreement or contract for the appointment of an architect? Some of the key reasons include to avoid misunderstandings and disputes. We define fees and provisions for payment within those agreements. We assert and retain the copyright of our work, establish a fair and reasonable allocation of risks between ourselves and the client. We also provide clarity, comfort and protection to the client and the architect respectively. And we incorporate standard industry practices in any agreement that proves legal basis in case law. And we also comply with the RIBA and ARB codes of conduct within those appointments. So apart from why we need an agreement, what is the purpose of it? So usually the purpose of an appointment agreement is to identify the parties to the appointment. So obviously if it's you and your client then you two parties will be the ones identified in that appointment. Then you allocate and define the limitations of responsibilities and liabilities between the parties so that one party doesn't end up with more liability or the responsibilities than the other one or damaging the burden on one and not the other. Then we also within the appointment we define the scope of work so it's clear what we're doing. We confirm the legal framework, so that's the form of law for example. We confirm the fee and the method of how we calculated that fee and when payment is expected to be made. And we also set out methods of dispute resolution because unfortunately sometimes disputes may arise so it's good practice to set out how those disputes can be resolved starting from the least harmful resolution procedure to the court. Then we define the provisions for the termination of the agreement so if either party breaches the contract then the other party can terminate that contract and then is to form the client of the ARB disciplinary sanctions so if we do something wrong how they can complain to the ARB about us and have us sanctioned from the ARB. As architects we typically tend to prefer to use the RIBA forms of appointment contract as they generally provide the most appropriate level of detail when it comes to establishing a fair and reasonable distribution of liability between us and the client. The client may sometimes especially in large scale projects prefer to use a bespoke form of appointment. If that happens or if you're faced with that scenario then you have to have your professional indemnity insurance or your lawyers check that appointment to make sure there are no clauses that may not be to your best interest or they might impose more liability on you. If other consultants or specialists are required to work outside the normal expertise of the architect, for example if you need CDM advice, then the client should make necessary arrangements for the appointment to be made alongside the architects so when our appointment starts to make sure that it coincides with our appointment. So before we enter into any agreement we have to make sure that the other consultants have the required level of professional indemnity insurance in respect of their liabilities to the client. So the amount and period of liability is to be agreed with the client and specified in the agreement so that's both obviously for ourselves as architects or for any other consultant. So as architects we should tend to avoid subcontracting other consultants because our professional indemnity insurance usually doesn't cover us for that and if we do subcontract another consultant then their professional indemnity insurance has to match ours otherwise our insurers won't allow us to do it or if we did appoint them under us and they didn't match our insurance then if something happened all the liability would fall on us and then our insurance wouldn't cover it so we would be out of pocket and we would probably have to pay from our own profit so the company would be in deep trouble if that happens. But we only tend to typically subcontract CDM advisors to help us with our principal designer role so we usually try and make sure that they have an appropriate level of liability insurance when it comes to that subcontracted role. So if we move on to the actual RIBA agreements they have a number of different forms depending on the scale, the client and the scope of the project. The most commonly used forms are usually the standard professional services contract for architectural services, the domestic professional services contract for architectural services, the coincide professional services contract for architectural services and the subconsultant professional services contract. Some alternative forms that can be included in the appointment contracts for additional services is the principal designer professional services contract if we are appointed as principal designer from the client. Another one can be the client advisor professional services contract, a domestic professional services, conservation architectural services or coincide professional services, conservation architectural services and then we have the RIBA bid domestic professional services for interior design services or the RIBA bid coincide professional services for interior design services. So today we will be looking more closely into the first four forms I just mentioned as these will be the ones you will most likely be asked to use or be asked during your exam or interview. So let's start with the standard professional services contract for architectural services. This contract is usually suitable where the architect or the consultant is commissioned for architectural services on a project for a business client or a public authority using a traditional form of procurement and in agreement with a business or commercial client or public authority and it's definitely not suitable for domestic use or with a domestic client. So it's suitable for larger more complex commercial projects and it usually provides a comprehensive set of contract terms which include a clear set of roles and associated services with that contract. So this appointment contract is usually executed either on the hand or either as a deed. Now what means when it's signed on the hand? That means that the architect has a liability period for that project for six years. So if anything happens within those six years to the building or any significant damage or something falls down for example, then the architect is liable for the first six years. If that contract is signed as a deed then the architect is liable for 12 years. So quite a long period but we have to have that unfortunately. So the next form we'll look at is a domestic professional services contract for architectural services. Now this contract is more suitable where the architect or the consultant is commissioned for architectural services on domestic projects for a domestic consumer client and it can be used for work on the clients on home including any renovations, extensions, maintenance or any new buildings in their own name using a traditional form of building contract such as the RIBA domestic building contract. So this specific appointment is prepared in accordance to the Consumer Rights Act. Because your client is a consumer client they are entitled to consumer rights. So if anything for any reason delays or cancels the services they have a right to raise this under their consumer rights. And given under domestic projects either the contractor or the designer take on the client's duties under the CDM regulations this appointment is the only form that gives you the option for the architect or the consultant to be appointed as a principal designer as well. For any other appointments you don't have this option to include the principal designer services unless you use the separate RIBA principal designer professional services contract. So this form the domestic professional services contract form shouldn't be used if the client is a business or commercial client. This can include charities, religious organisations not for profit organisations or if the client is a public authority. So this agreement usually consists of the conditions of the appointment for an architect for domestic projects and it incorporates the small project services schedule and it also incorporates the fees and expenses schedule. The next contract which is for the coincides professional services contract for architectural services this one is suitable where the architect or the consultant is commissioned for architectural services on a simple non-complex commercial project for a business client or public authority and this is for a project of any value and where the building works will be carried out using a traditional form of contract. For example such as the RIBA coincides building contract or the JCT minor works building contract or the JCT intermediate building contract. So the coincides agreement usually consists of the conditions of the appointment which incorporates small project services schedules and the fees and expenses schedule and the final form that I mentioned earlier is the sub consultant professional services contract. This is usually suitable where the architect or the consultant wishes or is required by the client to appoint a sub consultant to carry out part of the architect services for example a CDM or health and safety advisor. This can be used both for commercial and non-commercial work but it's only to be used when the client is a commercial client. Another form we tend to use when it comes to appointments is when we are novated which means the architect switches employers from their normal client to the contractor under the design and build contract so the contractor becomes their client usually at stage four or five. For this the RIBA doesn't offer an equivalent appointment but they recommend to use the CIC Novation Agreement which is compatible with the RIBA agreements. So if you are being novated then the CIC Novation Agreement is the form that's best to be used when that process happens. In very very specific circumstances letters can also be used as contracts for very small projects. This can include projects for business clients but these are non-notifiable projects under the CDM regulations where the construction work is not expected to last longer than 30 working days or to involve more than 500 person days or it can also be used when the project is for a domestic client and the building works will not be higher than roughly 40,000 or if the work is for a survey or it's an inspection for a report. So this form of contract is definitely not recommended but if for any reason you are ever faced with this scenario then make sure that your letter includes the ARB codes of conduct requirements, definition of services to be offered, so what will you be carrying out for the client and what will you be offering him as the end product, any statutory requirements so planning permissions and so on, the fees and the payment provision, your copyright entitlement and what you would like to do with your copyright licence, the liability and the provision for termination of agreement and the disputes and net contribution, so under any appointment it's essential to remember that the architect is expected to exercise a duty of care, duty to inform, collaboration and authority, so under the duty of care the architect will exercise a reasonable skill and care and diligence in accordance with the normal standards of the architect's profession in performing the services agreed and when discharging the architect's obligations, the architect must of course provide adequate professional and technical resources available to meet their duties, under the duty to inform the architect is expected to keep their client informed of the progress of the services agreed, any issues that may affect the brief, the construction cost, the timetable or the quality for any reason and the architect must also always keep the client informed if any other consultants at any stage are required to be appointed and these people need to be named in the project data in the appointment form, under collaboration the architect is expected to collaborate with other consultants that are named in the project data as I mentioned just now, all the consultants are expected to be appointed and have to coordinate and integrate the information that those consultants offer into the architect's work and under their authority duty, the architect is expected to act on behalf of the client when it comes to matters of setting out or implied project procedures within the agreement and the architect has to remember that they have no authority without the client's written approval, this is more important when it comes to entering into a contractual or other commitment on behalf of the client, when terminating the employment of any other people appointed by the client or adding to or remitting any services for the approved design, similarly to the architect the client also has their own obligations and authority under the appointment, so this includes them providing information and timely decisions, instructions and time and cost, under their duty for information and decisions, the client is expected to supply the statement of their requirements and the brief and advising of any relative priorities of their requirements, the brief, the construction cost and the timetable, they also have to provide all information in their possession necessary so the architect can perform their duties and to be able to finalise their services and to complete their services, the architect in that instance as well is entitled to rely on that information that the client has supplied, so if for any reason something is wrong or there's an error with a survey or something is incorrectly demonstrated then it doesn't fall on the architect to take the responsibility but to the client, the client is also expected to provide decisions and approvals for the timely performance of the services and to try and not delay the process for the architect to complete their services or to complete the project in general, under their duty to instruct means whether architect is required to direct and coordinate work or services to other people or consultants, these instructions will only be made through the architect and they will not be responsible for any other instructions issued by the client so if the client makes another instruction to a consultant or asks them to do something and if something happens as a result of that instruction or something gets delayed or postponed then it's not the architect's obligation because the client gave that instruction and it has to be made clear in the appointment that the client holds that liability and that duty, when it comes to time and cost the client has to acknowledge that the architect does not guarantee or warrant that planning permission or other approvals made from third parties will be granted and if they are granted that they will be within the specific time scales so the client has to remember that the architect isn't liable for something that is outside of their control and that the architect does not warrant compliance with the construction cost and/or the timetable when it comes to delays and constraints that are imposed by others or by the client themselves so for any delays outside of the architect's control then the architect shouldn't be made liable for these. Some key rules to remember when it comes to contracts is that the RIBA and the ARB codes of conduct require a comprehensive agreement in writing which is one of the potential forms you may use that I mentioned before so you have to have one of these in writing to fulfil your RIBA and your ARB obligations under the code of conduct. Make sure that you check the name of the client in the agreement and that it's the same as you anticipated. You would be surprised how many times this is incorrectly written. Ensure the client understands the payment provisions. Don't undertake any work which is beyond the resources you can access as a practice so don't over promise so you don't under deliver and don't start any work until the agreement is signed because if for any reason something happens before your agreement is signed then you won't be covered under the terms of the agreement. An interesting scenario I faced one time in practice when the appointment was taking months to be reviewed and approved by the legal teams of our practice and the client is that we sent a letter of intent which is basically a letter stating that you are interested in undertaking the works for the specific project to the client. Within that we outlined our role together with the scope of services, a fee breakdown so it was like a little mini contract letter. Before we started any services we sent this through just to state our position and our intent and to make sure that we reduced the risk that it placed us until the full appointment was agreed and signed. So at the time the practice recommended the standard form of appointment to the client but because this was a design and build contract with the novation the client wanted to use a bespoke appointment to accommodate the novation agreement later on so this was drafted by the client's legal team and they used a design consultant appointment with novation, executed as a deed which meant we would be liable for 12 years. Before we signed the appointment the practice obviously had the documentation examined by their insurance company and their legal team to avoid any discrepancies or misunderstandings between the two parties and to confirm compliance and viability with the practice's professional indemnity insurance cover. The appointment was to be viable between the RIBA Work Stages 0 to 4 and then we would release our contract with the client and we would enter into an agreement with the contractor after stage 4. We would then be novated until RIBA Work Stage 6 under an architects appointment and the scope of services and duties after novation would remain the same as the initial appointment with the initial client. So obviously the practice at the time was undertaking the work without a written appointment agreement signed and available before they started work so obviously the bad thing with that is that there was no formal exchange of contract documentation there was only a few email exchanges between the practice and the client these mainly focused on the fees as well so something like this can cause quite a few complications so obviously the RIBA and the ARB recommend that you have an appointment before you start any work and any services and have them in writing clearly stating the terms for the services, your role, your fees and what each party's obligations are to avoid any future disputes. Although the practice did send the letter of intent through outlining their services and their fees, one thing that had mentioned within it was that the fees were on an estimated percentage for the services and it also highlighted that the fee was based on an indicative programme until the finalised fees were confirmed by the client and it also stated that it was not to be used as a binding contract and it would be replaced once the appointment was made so although this letter was sent everything was outlined the client at the time accepted it there was no there was still no formal appointment confirmed this absence of appointment also obviously placed the company at working at risk and they were undertaking architectural services without entering into a formal appointment and since there was no agreement made it meant that there was no copyright agreement no contribution clause agreement no liabilities no disputes or third party rights and if something happened it could have resulted in very major disputes and legal actions placing both the client and the practice in great risk and also the fact that the client wanted to use a bespoke agreement also placed some risk on the architect in terms of being unfamiliar with a proposed appointment and exposing the practice to unforeseen threats so when the client's legal advisers composed the appointment in favour of the client in many ways it increased the liability on the architect which was the case in this scenario that I'm referring to and at that time the practice approached the matter quite correctly by sending it to their insurance and to their lawyers and it was analysed and reviewed and sent back to the client's legal team outlining our concerns and what clauses we would like changed so that it places the practice in a more appropriate level of risk and have more appropriate levels of liability and contribution so obviously this is something that happens quite often in practices because you don't obviously you don't want to lose your client and you don't want to upset them so you have to wait until those procedures finish with the lawyers with the insurers and everything which might take months until the appointment is finalised so obviously because you don't want to lose your client you continue doing work for them but obviously this work is at risk so the practice itself has to make that decision and estimate whether that's a risk they're willing to take and if that's something that can cover them for a little bit until the appointment is actually confirmed and written and agreed so in many scenarios practices will take that approach to continue doing work without a formal appointment but obviously the RAB and the AIB highly recommend that you do have an appointment before you start any work or any services or you at least have a letter as this practice did confirming your position, your role, your fees and saying this is our letter of intent do you agree with this and just to make sure to say that obviously we will finalise all of these details in the final written appointment but it's obviously best practice to have all of this in writing and to make sure that you show evidence that you chase the client to have this appointment ready and signed so that if for any reason anyone disputes what you did you can clearly demonstrate that you took all reasonable steps and all necessary steps to avoid working at risk. So to summarise the purpose of appointment agreements is to properly engage an architect within a legal framework, clarifying the roles and undertakings of each party, avoiding misunderstandings and disputes, make sure that you're getting paid and retaining copyright and enabling a successful client-architect relationship. Please join me next week for a more in-depth episode on the RIBA standard form of appointment and a couple of more scenarios or questions you may come across when it comes to appointments and client-architect engagement. If you would like to get in contact with me please feel free to email me on the address provided in the show notes. Thank you so much for listening, this is an educational show aimed at supporting the future generation of architects. The information, opinions and recommendations presented in this podcast are for general information only and any reliance on the information provided in this podcast is done at your own risk. 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