What Are Critical Elements of a Design Consultant’s Contract? (Part 2 of 3)

21 June 2018 / By John Manning
contract

In Part 1 of “What are Critical Elements of a Design Consultant’s Contract,” important points were made regarding hiring Legal Counsel as well as notations about the importance of having a strong contract with the Design Professional, regardless of if AIA Documents are used/customized or a custom contract is created.  While the choice of using AIA contracts vs. custom contracts should be carefully reviewed by the Owner and their qualified construction Legal Counsel, it is imperative that key issues be addressed within any form of the contract.

The Schedule is an important item that should meet the expectations of the Owner and is flexible if acceleration is directed by the Owner. Another important issue that must be addressed by the contract, would be a Termination clause that clearly defines the process and ensures the Owner is protected should the Design Consultant not meet the conditions of the contract.  Lastly, confidentiality must also be addressed as the Design Consultant may need to be privy to specific information of the Owner that is highly confidential, including, but not limited to, financial information, trade processes, unique systems, etc.  It is imperative that the Design Consultant be held to a high standard of confidentiality for these issues.

Schedule

  1. The contract must require that the Consultant agrees to perform the Work in the manner, sequence and timing necessary to fully comply with the requirements of the Project. Consultant will perform the Work diligently, expeditiously and with adequate resources to complete all of the Work by the requirements of the Project.  Time is of the essence in the completion of each and every provision or condition of this Agreement.
  2. The Contract must note that if directed by Owner in writing, Consultant will accelerate performance after Owner determines that acceleration is necessary to maintain the Schedule with no further compensation to Consultant.

Representatives

  1. The Contract must note who each parties representative are (Owner and Design Consultant) and detail how a change in designation must be made to ensure both parties clearly understand who the representative is at all time.

Books and Records

  1. The Contract must note that the Consultant will maintain and make available to Owner’s representatives at all times, Consultant’s accounting books and records relating to only the Work performed under this Agreement, which will be retained by Consultant for a period of at least five (5) years from and after the completion of the Work. Owner will have the right to examine these books and records and all other documents and material in the possession or under the control of Consultant with respect to this Agreement for the purpose of making extracts from these documents.  Owner, or its authorized representatives, will have the right to audit these books and records at all reasonable times during Consultant’s regular business hours upon two (2) days prior notice to Consultant.

Termination

  1. The Contract must allow the Owner to be able to terminate the Contract for Convenience (e.g. Owner may for its convenience and at any time, elect to terminate the performance of further Work or any portion of the Work under this Agreement upon written notice to Consultant of its election to terminate.  In this event, Consultant will stop its efforts on the Project in accordance with the time and procedures outlined in the termination notice.  Should Owner elect to act under this Section, it will pay all sums due to Consultant through the effective date of the termination.  If this event were to occur, Consultant’s recovery from Owner will be limited to payment for all Work completed up to the date of termination, but in no event an amount greater than the Compensation.).
  2. The Contract must detail how and why the Contract can be terminated for Cause (e.g. Owner may, without prejudice to any other right or remedy available to Owner, and upon written notice to Consultant, terminate this Agreement, take possession of the Work and of all items necessary to finish the Work by whatever method Owner may consider expedient (and in the event Owner uses any of Consultant’s items in the completion of the Work, Owner will return these items to Consultant when the Work is complete).

Confidentiality and Promotion

  1. The Contract must detail the Confidentiality requirements (e.g. Consultant may have access to information regarding Owner’s systems, concepts and designs, trade secrets, financial data, and general business information which is not generally known by the public and which gives Owner an advantage over its competitors who do not know or use this information (“Confidential Information”).  The Project and all matters relating to it, including any discussions between Owner and Consultant are considered and will be treated as Confidential Information by Consultant and Consultant’s employees and Consultant’s sub-consultants, if any.  Consultant agrees to refrain at all times from disclosing Owner’s Confidential Information to others or from using it except for the benefit of Owner and to refrain from any other acts which would tend to destroy the value of the Confidential Information to Owner.  Consultant will secure appropriate agreements with each of its employees and sub-consultants assigned to the Project so that each will agree to the obligations of this Section).
  2. The Contract should detail requirements for using information for marketing (e.g. Further, without the prior written approval of Owner, Consultant and Consultant’s employees will not discuss the Project or their relationship to it with any branch of the media or with any third party nor will they furnish any written materials, photographs, drawings or sketches relating to the Project to any media entity or third party. Consultant will not use Owner’s name or its association with Owner in any form of advertising or promotions without Owner’s prior written consent.  Further, Consultant will not utilize the name of Owner or any other intellectual properties owned or controlled by Owner or any of its parent or related companies without the prior written consent of Owner, which consent may be withheld by Owner in its sole judgment.).

The next installment (Part 3) of this series on the “Critical Elements of a Design Contract” will cover the topics of:  Ownership of Deliverables, Insurance & Indemnification, Suspension of Work, Notice, Dispute Resolution, Representations, Force Majeure, Final Certification, Design Responsibilities and Conflicts of Interest.

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