Small Project Design

I am a small firm (4 persons) and most of my projects are for clients that are not the corporate type.  Consequently, I find that the AIA agreement is overwhelming to the client.  It's difficult to explain a 20 page agreement for a job that will be a small remodeling.  As a result,  I have a one page proposal / agreement and a (1) page discription of services with all the legal stuff.  It contains a limit of liability which, in essence, limits the amount someone can collect to the amount of the agreement.  One client in particular has a problem with signing this, and I am tempted to just forget the project. (It's for less than $2,000.)   Is there anyone else who has experience with a similar agreement? 


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David Wulff AIA
AIA, LEED-AP
David H. Wulff, Architect, Inc.
Lakeland FL
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Hi David,
I'm in a very similar position to you, and always include a limitation of liability clause.  At the very least, limit liability to available insurance proceeds.  At best, limit to my total fee.  If it's a consultation where I don't have involvement in construction phase, in other words, where they may go off and do something inadvisable, I don't want to be liable for any more than I put in; on the other hand, if I'm performing complete services like we "should" do per the AIA agreements, I'm OK with more liability because I'm more involved and there's more trust all around.

And I often use the AIA B105 1997 for smaller projects--the 3-page contract isn't too daunting and it covers the bases pretty well (I append a letter explaining my services in more detail, as well as exclusions and additional services).

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Thomas Bassett-Dilley AIA
Principal
Tom Bassett-Dilley Architect, Ltd.
Oak Park IL
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Many years ago I stopped using AIA contracts for the same reason David states.  For a while I used nothing and then my lawyer advised that was doing no one a favor,  and he encouraged me to create (he actually created it) a  contract that essentially describes how we work--which is hourly.  In that contract we have a liability clause that reads as follows " 

6.   LIABILITY OF PARTIES: The Owner's liability hereunder shall be limited to amounts due the Architect for services rendered or reimbursable expenses actually incurred.  In case of termination, the Owner shall not be liable for lost profits or other direct or indirect damages.  The Architect shall be liable to the Owner for negligent errors and omissions, and for other breaches by the Architect of the agreement, provided that (a) the Architect has been paid all amounts due under this agreement and (b) the amount of such liability shall in no event exceed the amount so paid. The Owner and Architect waive all rights against each other for damages if and to the extent that they are reimbursed for such damages by property insurance. A similar waiver of subrogation will be included in the construction contract for the Project.

In the 25 years that I have used it, only 1 or 2 people have been troubled by  it, and I have told them that I am unwilling to risk my corporation for their job--and they shrugged and hired me anyway.  For a small office, I think that liability insurance just makes you a more attractive target.   If you want to see (use) the entire contract you could contact Chris Noble of Noble & Wickersham in Cambridge Mass.  <cn@noblewickersham.com> and they could probably custom tailor it for you.

I would definitely walk away (even in these times) from a $2,000 fee where the client was worried about a liability limitation.  Life is too short.
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Robert Knight AIA
Knight Associates Inc.
Blue Hill ME
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Original Message:
Sent: 08-16-2011 02:29
From: Thomas Bassett-Dilley
Subject: Liability limit

Hi David,
I'm in a very similar position to you, and always include a limitation of liability clause.  At the very least, limit liability to available insurance proceeds.  At best, limit to my total fee.  If it's a consultation where I don't have involvement in construction phase, in other words, where they may go off and do something inadvisable, I don't want to be liable for any more than I put in; on the other hand, if I'm performing complete services like we "should" do per the AIA agreements, I'm OK with more liability because I'm more involved and there's more trust all around.

And I often use the AIA B105 1997 for smaller projects--the 3-page contract isn't too daunting and it covers the bases pretty well (I append a letter explaining my services in more detail, as well as exclusions and additional services).

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Thomas Bassett-Dilley AIA
Principal
Tom Bassett-Dilley Architect, Ltd.
Oak Park IL
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I use a very similar agreement. Some clients balk at the limit of liability.  I usually remove the limit if they insist, as I do have liability insurance (first cost).  But for a very small job, I usually insist on keeping it in, as the insurance is less likely to be worthwhile and the client is more likely to be trouble, in my estimation.

Glenn

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Glenn MacCullough AIA
MacCullough Architects, P.C.
Arlington VA
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I use the AIA  B105-2007  (with the 100 unit license that costs about 189 per year) I attach the initial proposal letter which has most of the scope and project description language in it.  I modify the 105 with some language from my attorney re indemnification and the ability for either party to terminate for convenience (a crucial point that just came up for the first time in 12 years where I needed to be able to quit a project when the client became unreasonable) The 105 is 3 pages long and with addendum makes it 4-5 which is ok for my commercial and residential small project clients.

I have not tried the liability limit to cost of contract strategy but am going to. If I put on my owner hat it seems a tough logic to buy into. The licensed professional architect charged with meeting a standard of care that protects the public by ensuring they have designed a safe building says "I am not getting much fee for this project so my liability should not be too much"  hmmmm..... does not seem like a strong argument but I do get the common sense thought behind it.  What do others say on this?



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Saxon Sigerson AIA
Sigerson Architects
Fair Oaks CA
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Dennis Ross AIA
Architect
Pacheco Ross Architects, P.C.
Voorheesville NY
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I always include a limitation of liability clause (limited to fee).  My understanding is that the best way to ensure it is enforceable is to make certain the client understands what they are agreeing to.  Negotiating is the best way to demonstrate that there was a 'meeting off minds' on the subject.  In my initial proposal, I include a statement that the subsequent owner/architect agreement will include a LOL and that the fee we are quoting is based on a LOL that is limited to that fee.  We make it clear that the LOL is negotiable, but that the fee will be impacted.  In other words, our most competitive fee will be the one with the lowest LOL.  Few clients will opt for a higher fee. 

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Scott Rappe LEED AP AIA
Kuklinski + Rappe Architects
Chicago IL
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Original Message:
Sent: 08-16-2011 09:03
From: Dennis Ross
Subject: Liability limit



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Dennis Ross AIA
Architect
Pacheco Ross Architects, P.C.
Voorheesville NY
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Like David Wulff, I have long-since abandoned the entire package of AIA forms for small renovations.  For such renovations I normally provide only the master planning and preliminary design phase services.  If a client objects to the fee as being the limit of liability for such services, I see this as identifying a client who may not be understanding and/or fair-minded about the architect's responsibility and/or control.  More often than not, after all, clients make changes to the architect's design that are most frequently driven by perceived cost savings and suggested by contractors.  If a client cannot accept my agreement with its limitation of liability, I walk away, as the risk does not justify my involvement.

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Lydia Straus-Edwards AIA
San Diego CA
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David:

AIA Document B105 is a short form (3 pages) agreement intended for small projects.
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Robert Matschulat AIA
Architect, Educational Facility Planner
Edutecture, LLC
Lakewood CO
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Lynn Anderson AIA
Anderson Architecture, PLLC
Southern Pines NC
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I once had a small project (though larger than $2000 fee) in which my Architect-Owner Agreement was reviewed by the Owner's attorney who, I suspect was a friend.  The attorney didn't know much about construction or architectural contracts so the process took a long time and a bit of educating on my part.  Eventually, I was able to negotiate to my terms which included a LOL clause.  I do remember drawing the line on some things and was prepared to walk away.  Starting out like this can make you nervous and you have to factor in your stress allowance before you take on the project.

I'm a believer in the LOL clause.  It reduces the risk of losing lots more than you are making on a project.  Most people don't appreciate that we are licensed professionals and, as such, have a standard of care to uphold anyway.  I guess they think we are out to make big bucks at their expense.

Try the short form AIA Document B105-2007. It's only 3 pages. You don't want to work for some one who won't sign a
contract. You are likely to have more trouble later.

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Francis Klein AIA
Francis C. Klein & Associates
Montclair NJ
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I agree that if someone has shown an interest in suing you before you have even started a $2000 project you should run, not walk, away.  Liability limits can be challenging to enforce but it serves as a good test to see the conviviality and cooperation you are likely to get from your potential client and in this case the vibes are not good.

Let's face it: 90% of all problems come from 10% of all the clients--the ones who are unrealistic, dishonest or just unhappy. If we, as a profession, could identify these bad actors and put a premium (or at least a fair warning) on working with them, we would all be better off.

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Ross Cann AIA, LEED AP
Senior Architect
A4 Architecture + Planning
Newport RI
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I face the same issue with my commercial clients for small projects. I have been using the AIA B105 and including project specific information into it. My Terms and Conditions including a LOL statement is attached to it. (BTW isn't it funny that limitation of liability and laughing out loud both have a LOL abbreviation...connection?...to an attorney?)

For really small projects and studies, I just have a one to three page letter with Terms and Conditions included. You are right the B101 is way too long and it puts too much liability on the architect to redesign for free if the project is over budget.

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Lee Calisti AIA
Principal
lee CALISTI architecture+design
Greensburg PA
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Here's the flip side of Mr. Wulff's argument:  A number of my consultants, particularly structural, civil and MEP engineers, send me proposals with that same limitation of liability that Mr. Wulff describes.  We are also a small firm and do not relish being sued.  However, it is a fact of life in this business.  I always strike out the clause limiting liability to the amount of the fee, sign the agreement, and return it to them.  So far, they have never refused to perform the services.

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Michael Steiner AIA
Malesardi Steiner Keyes McCommons Architects
Washington DC
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I use AIA agreements for some projects and a short agreement that I drafted myself years ago (and had reviewed by an attorney) for most of my residential work.  I keep the agreement up to date based on information from my E&O provider and I do include a limitation of liability clause similar to what you describe.  Interestingly, I rarely have a client even mention it and when they do, I have been able to negotiate a mutually agreeable limit.  If someone flat out refused to sign the agreement with a limitation of liability clause, especially for such a small job, I would probably decline the work.  On the other hand, I understand the client's concerns and would try to find a reasonable, based on the type of project, limit first.

Good luck

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Michelle Plotnik AIA
Architect
Michelle Plotnik, AIA, Architect
Murphys CA
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I am a sole practictioner.   Once employed 5 persons.   I use the clause that we are liable for not more than the fee agreed to pursuant to the contract.  If a client questions this clause then we refuse the work right off the bat.   I'm sure there are some slick attorneys who will find a way to get around it, even if it is signed by the client.   Litigation will occur and cost the architect whether or not they have a contract or a clause or insurance or a signed letter of indemnification from God.   I have found that, from a trusted friend who is a construction attorney, that liability insurance is a big red flag that says there are deeper pockets here and thus it is worth pursuing a case.   For the smallest practicationers, like myself,  liability insurance will guarantee you litigation whereas a small practitioner with little assets or collateral will send a message that the client (and mostly the attorney) will  be wasting time and resources pursuing a case.   One more tidbit,   I was once sued on a small project that involved a contractor who went belly up.  The fault was clearly with the contractor but since we, as architects, were part of the team the owner was looking for any potential source to recoup his losses.   Eventually it went to arbitration and we agreed to pay what it would have cost for us to retain our attorney for a potential case.  We never had a chance to win.  We would lose if we went to trial and won.  We would lose more if we went to trial and lost.  The only ones that always win are the attorneys.   Welcome to the good ole U.S.A.   (Untouchable Society of Attorneys)

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Joel Silverwatch AIA
Silverwatch Architects
Salem NH
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Original Message:
Sent: 08-16-2011 12:03
From: Michelle Plotnik
Subject: Liability limit

I use AIA agreements for some projects and a short agreement that I drafted myself years ago (and had reviewed by an attorney) for most of my residential work.  I keep the agreement up to date based on information from my E&O provider and I do include a limitation of liability clause similar to what you describe.  Interestingly, I rarely have a client even mention it and when they do, I have been able to negotiate a mutually agreeable limit.  If someone flat out refused to sign the agreement with a limitation of liability clause, especially for such a small job, I would probably decline the work.  On the other hand, I understand the client's concerns and would try to find a reasonable, based on the type of project, limit first.

Good luck

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Michelle Plotnik AIA
Architect
Michelle Plotnik, AIA, Architect
Murphys CA
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You gut feeling is usually correct. If your potential client does not like your reasonable limit for liability for this size project, you are most likely better off not taking the job and exposing your firm to a greater risk for the sake of a small reward.
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Richard Wilken AIA
Architect-owner
R.B. Wilken-Architect
Pacific Palisades CA
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It seems this limit of liability question has provoked a lot of responses.  I am a one man office and use my own contracts, two pages, based upon previous employers' contracts and issues I learned about through my insurance company's education program.  I have a limit of liability clause in my contract, with the limit set at 3 times my fee or $50k, whichever is less.  In ten years, I have only had one client question that clause, but he signed anyway.  I have never been sued (and don't plan on it, knock on wood), but have always wondered how the clause would stand up in mediation/court.

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Patrick Marr AIA
Patrick Marr, PE, AIA
Santa Barbara CA
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Like Patrick, I would like to hear if anyone has direct experience where a LOL clause has saved them a large settlement, or even prevented a suit. I personally think they are false assurance, and at best might be a tool for screening potential deadbeat clients, but remain open-minded if someone has real facts.

Thanks.


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Andrew Fethes AIA
President
Andrew Fethes Architects PA
Oradell NJ
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Original Message:
Sent: 08-17-2011 09:57
From: Patrick Marr
Subject: Liability limit

It seems this limit of liability question has provoked a lot of responses.  I am a one man office and use my own contracts, two pages, based upon previous employers' contracts and issues I learned about through my insurance company's education program.  I have a limit of liability clause in my contract, with the limit set at 3 times my fee or $50k, whichever is less.  In ten years, I have only had one client question that clause, but he signed anyway.  I have never been sued (and don't plan on it, knock on wood), but have always wondered how the clause would stand up in mediation/court.

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Patrick Marr AIA
Patrick Marr, PE, AIA
Santa Barbara CA
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I use an added clause for small projects that I have not seen discussed here.  Usually like most of the architects here I will use a 2 to 3 page description of the services and fees, etc.  Then I append a "legal" page that requires the client signature also, and which includes a paragraph with complete release of liabilibilty if the client opts out of Construction Administration.  Also a limit of liability to the fee paid is included.
I have had a number of full service agreements over the 40+ years of practice where the client decided he/she did not need architectural services after the permits were issued for construction.  No one has questioned this release of liability, although there have been instances where I never heard back from the prospect either way.
I f anyone is interested in a copy of this "legal" page email me at wleatherbee@leatherbee-architects.com .
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William Leatherbee AIA
Principal/Architect
Leatherbee Associates Architects and Planners
Philadelphia PA
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Original Message:
Sent: 08-18-2011 09:25
From: Andrew Fethes
Subject: Liability limit

Like Patrick, I would like to hear if anyone has direct experience where a LOL clause has saved them a large settlement, or even prevented a suit. I personally think they are false assurance, and at best might be a tool for screening potential deadbeat clients, but remain open-minded if someone has real facts.

Thanks.


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Andrew Fethes AIA
President
Andrew Fethes Architects PA
Oradell NJ
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I started this discussion and am  grateful to all that have contributed. 
To Andrew:
I have used a LOL for many years and, yes it did prevent at least one suit that I can attest to.  I had a small remodeling for a Nursing Home and we unfortunately had the type of contractor that wanted an extra at every turn.  I had done the original Nursing Home and the Owner said she was going to use the same contractor.  He was a great guy and we had a good working relationship, so we both knew what was involved and I did the drawings accordingly.  I often cited "match existing" on the drawings.  The drawings were never intended to be a full bid set.  Unfortunately she did not use this guy.  I did not have Construction Admin in my agreement and many changes were made, both by the Owner and Contractor.  In the end, some of their changes did not work out and they wanted to blame me.  Her attorney said she could bring a suit, but would only collect the amount of the liability limit of our agreement.  She declined to bring the suit.  I ended up giving her a refund in exchange for a release of liability. 
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David Wulff AIA
AIA, LEED-AP
David H. Wulff, Architect, Inc.
Lakeland FL
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Original Message:
Sent: 08-18-2011 09:25
From: Andrew Fethes
Subject: Liability limit

Like Patrick, I would like to hear if anyone has direct experience where a LOL clause has saved them a large settlement, or even prevented a suit. I personally think they are false assurance, and at best might be a tool for screening potential deadbeat clients, but remain open-minded if someone has real facts.

Thanks.


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Andrew Fethes AIA
President
Andrew Fethes Architects PA
Oradell NJ
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I also use a two to three page letter of agreement with a limit of liability clause.  No one has refused to sign it although some repeat customers have received the contract but not returned it.   I still performed the services and got paid per the unsigned contract.  For regular customers, I have even agree to services and fee, start working, and presented the written contract early on but after I commenced services.   

So I have broken all the lawyers' rules.   Nevertheless I have developed repeat, trusting clients, always gotten paid and never sued.  This result what makes small projects so rewarding.   Its about working for the often owner/occupants and not what you call the corporate types whose goal is making money. Small project are about value to the environment.

Here is an example.  Occasionally I work for the corporate client.   So I am trying to use more energy efficient light fixtures.  Then I an told that the client doesn't pay the electric bill and so wants only the cheaper,less efficient fixtures.  That's good business I am told by his staff besides the lamps cost less to replace just in case the client has to maintain them.  I guess that's why we need codes.

If I know the customer, trust the customer, but for some reason she doesn't sign contracts (maybe she only has bad experiences when she signs contract versus the hand shake) then I would agree but get a chunk of the fee as retainer for my comfort.

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Mark Robin AIA
Mark Robin Architecture
Nashville TN
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