Open communication between the architect and the contractor is key for the success of a construction project and helps to resolve claims early on. When a dispute arises, the architect often plays an integral role in the resolution of the project disputes.
As such, construction contracts have long codified the role of the architect as the default Initial Decision Maker in the dispute resolution process. This is recognized in many versions of the standard form contracts published by the American Institute of Architects that are used extensively throughout the U.S., both in commercial and residential construction, along with the added requirement that the contractor provide notice to the architect of critical issues that arise during construction so that the architect can participate in the discussion.
This approach saves the parties from significant legal costs when their issues can be resolved early on. When disputes are not properly addressed this way, delays, additional costs, defective construction, and ultimately litigation may result. The key stakeholders must understand these roles and obligations related to this dispute resolution process, and how they can work with the architect to resolve these disputes. Other involved parties in these communications can include the owner’s representative and construction manager.
The Role of the Architect in
Because contingencies often arise in the course of construction, the architect will often remain involved through project completion to respond to changing conditions. During the construction phase, the architect typically assesses the work’s progress and its compliance with the contract documents. The architect that prepared the plans and specifications is often in the best position to assess the compliance of the work with the design expected by the client. Project contracts will define the project leadership, and should be consulted for understanding the roles of the parties in each project. It is critical to know if there is continued contract administration responsibilities for the architect, and the defined role under the contracts as well as the compensation plan for additional design services.
Whereas the contractor controls the means and methods of the construction, the architect will, in many cases, have the power to approve change orders, payment applications, submittals, and to clarify the contract documents in response to Requests for Information. Therefore, it is beneficial that the contractor and architect maintain open lines of communication and exchange feedback.
In particular, under many standard versions of the AIA contracts, disputes that arise between the client and contractor must be referred to the architect to render a decision before further action is taken. These decisions can help establish certainty for the contractors work. Because of the architect’s extensive familiarity with the project and the plans and specifications that the contractor bid on, the architect is uniquely qualified to render opinions as the Initial Decision Maker who can provide the contractor and owner with critical insights on the key issues and help resolve the claims.
Disputes between the owner and contractor frequently arise in two situations: a dispute over the scope and quality of the work, including defect allegations; or payment disputes in which the contractor has issues regarding timing, cost, and change order disputes. In the first situation, the contractor may submit a change order that is disputed and the architect must examine the contract documents to determine whether the change was already included in the contractor’s scope of work.
In the second situation, there may be a payment dispute issue or a delay issue, and the architect is tasked with resolving it based on its review of payment applications and schedules. As the Initial Decision Maker, the architect would have a contractual duty to review these claims and issue a written decision stating its reasons for its decision or that it is unable to resolve the claim. It is therefore important to an efficient resolution of the claims that the parties openly communicate and work together with the architect to understand the situation and reach a compromise. This allows the project to run smoothly without increasing liability. The added benefit is also that the architect’s decision can apprise the parties of how an informed trier-of-fact would decide their claim, possibly allowing the owner and contractor to use this information to prevent costly litigation and significant legal fees in the future.
The contract communication process often imposes the reciprocal obligations on the contractor to provide ongoing payment information to the architect and refer certain disputes to the Initial Decision Maker. The two contracts of the architect and contractor are intended to work together, and under this version of the AIA construction contracts, the contractor cannot receive payment without submitting to the architect payment applications with sufficient backup data to justify the payment. This informs the architect of not simply the progression and condition of the work, but also it assists the owner in verifying payment requests.
Prior to final payment of retention, the architect also has a role in evaluating the contractor’s punch list, which may be prepared by the architect in conjunction with the contractor. It is through this mechanism that the architect can manage the work’s progress and its compliance with the contract documents. A contractor that does not follow these procedures may have little recourse in payment disputes.
Accordingly, it is advisable that these parties comply with these contractual requirements, which can facilitate the claim resolution process later on. Failure to agree on the architect’s decision as the Initial Decision Maker can be addressed through a mediation of the issues in dispute.
Liability of the
Architect and Contractor
There are notable situations where the contractor will not involve the architect in a dispute and communicate only with the client. Although many standard versions of the AIA contract documents do require that disputes between the client and contractor be referred to the architect, this may not always happen in practice. On one hand, the client may not wish to pay for the architect’s services as the Initial Decision Maker, which may be an additional cost under the contract. On the other hand, the contractor may not perceive a benefit to involving the architect to mediate the dispute.
When the parties proceed in this manner, they may be subject to substantial risks if there are construction defects or incomplete work. This can lead to numerous claims later on that may be asserted in litigation. If there are genuine disputes in a commercial project between design and construction, the parties will then be in a more contentious role and proceed on a different resolution path or head into litigation. The commercial projects have a more complicated contract structure that needs to be examined in the beginning of the project to understand the obligations and communication structure in order to avoid further liability if litigation occurs over the project.
A California Example
Under California’s Right to Repair Act, both the architect and the contractor may be liable when there are construction defects in single-family residential construction. Under California Civil Code section 896, a detailed and comprehensive set of standards are provided for residential construction, addressing water, structural, soil, fire protection, plumbing and sewer, and electrical systems issues, and issues regarding almost every other area of construction. It also provides various time periods within which an action must be brought. Violation of any one of these functionality standards may subject the architect, and the contractors and subcontractors to liability. This may create a conflict in identification and allocation of responsibility for defect issues.
In the related cross-actions, the parties may also seek indemnity pursuant to the terms of their contract as well as contribution. California has several relevant anti-indemnity statutes relating to both architects and contractors to limit the risk-transfer available under these contracts. Civil Code §2782.05 limits the extent a builder or contractor in a construction contract can seek indemnification by providing that an indemnity provision is “unenforceable to the extent the claims arise out of, pertain to, or relate to the active negligence or willful misconduct of that general contractor.” Similarly, Civil Code §2782.8(a) limits the extent that another party which hired the architect can seek indemnification from the architect by providing that such an indemnity provision is “unenforceable, except to the extent that the claims […] arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of the design professional.”
Despite these and other limitations on indemnity, the party seeking indemnity may still pursue defense costs which imposes a separate obligation on the indemnitor that is independent of actual liability. The California Supreme Court has held that the duty to defend arises immediately upon proper tender of defense with respect to all claims embraced by the indemnification clause, including those claims which allege facts that would give rise to a duty to indemnify. Crawford v. Weather Shield Manufacturing Inc., 79 Cal. Rptr. 3d, 721 (2008). Because of the numerous parties involved, and the variety of claims and liability discussed and duty to defend, construction claims can quickly balloon into complex civil actions involving many parties and their insurance carriers, thereby resulting in significant costs for all relevant stakeholders. Adhering to the prescribed procedures in the parties’ contract can therefore serve as an effective risk management tool to assess and avoid substantial lawsuits in the future.
It is essential that the key stakeholders involved in construction work together to maintain open communication throughout the project lifetime. The architect has a vital role on the project and is uniquely situated to handle and mediate disputes between the key stakeholders. The parties should emphasize good communication with the architect to ensure better outcomes later if issues arise. This not only serves as an effective risk management tool for future litigation, but is also mandated by many versions of the standard AIA contracts and other commonly used construction contracts. When the parties fail to communicate with the architect as required, they may increase their liability and be subject to numerous claims in a construction claim action.
Other types of claims that can create a greater friction in the roles between the architect and the contractor can be found in other types of projects, including breach of contract and defects actionable under the applicable Right to Repair Act. Moreover, due to the duty to defend and the ubiquity of indemnification provisions in construction and design contracts, it is unavoidable that such litigation may involve many different parties and result in substantial costs. As such, the key stakeholders should pay close attention to their contractual obligations to pursue dispute resolution through the proper channels in order to avoid these potential risks and liabilities.