ACREL Annual Meeting

Transcription

1 ACREL 1998 Annual Meeting October 16, 1998 AThe New (1997) AIA (The thinking behind the revisions.) Steven F. Weiss, FAIA Chicago, Illinois and Arthur E. Pape Ottosen Trevarthen Britz & Dooley, Ltd. Wheaton, Illinois

2 Observations on the 1997 Version of Document AIA 201 I Version of AIA Document 201 A Version of A Continues trend of providing comfort to architect and contractor. 2. Diminishes rights of Owner. B. Objections to AIA Forms: 1. I represent Owners. 2. Too broad in some areas and doesn=t cover others - for example a standard rider that addresses public bonding requirements, prevailing wage requirements, etc. 3. The document is very difficult to work with because of the need to cross things out and because of need create riders, etc.; however, a. AIA is working to overcome this objection. 4. AIA has an Electronic Document project pursuant to which anyone may purchase a one-year license to use the AIA documents. Licenser gets a CD Rom which permits user to insert marked changes, etc. Call to order. 5. In about 6 months the AIA will have WEB based documents which a user can download to his computer. The user may rent for the AIA the software to complete the document and may archive the document with the AIA. Phyllis Krasnokutsky is the Project Manager for these electronic document projects. She can be reached at (202) C. The AIA has published a AComparison of the 1987 and 1997 editions of A-201 (incidentally also the Owner Architect Contract B141). This comparison is extremely well done and is an essential starting point. a. Copies may be obtained for $15.00 from the AIA. Call (301)

3 D. A lot is being written. See Ballard Spahn Andrews & Ingersoll Real Estate Alert - November It as attached. Lists what the authors believe to be the 10 most critical issues in the A-201. It=s a good tool for studying the new form and I thank Lynn Axelroth for giving permission to attach it. Other items are also worth discussing. II. Dispute Resolution: A. Arbitration Requirements. I resist arbitration for the following reasons: 1. No mechanism for joinder of 3rd parties. In fact the Architect may not be joined. (Section 4.6.4). 2. Claimant must file with respect to all claims then known to it. (Section 4.65). This exacerbates, the difficulties resulting from lack ability to join 3rd parties. Note: Since all claims between Owner and Constructor are subject to Arbitration, what does this mean? 3. My experience is to the effect that the potential savings from arbitration is illusory as we lawyers have become involved to a greater degree. 4. I operate under the (perhaps naive) theory that if the alternative to a business-like settlement of a dispute is bad enough people will tend to settle. I think the Afriendly-persuasion@ image of arbitration does not encourage settlement. B. The new version retains Arbitration and has grafted on enough other stuff that the dispute resolution process will encourage gamesmanship and litigation. 1. Section provides that if any part of the cost of a change order is disputed the Architect will make an interim certification of amount due the Contractor, subject to the Contractor=s right to make a AClaim@ per Article Once claim is made, Architect Ais to@ decide merits, as a condition precedent to mediation or arbitration, unless Architect fails to decide the claim within 30 days (Section 4.4.1). 3. Architect makes a final decision subject to mediation and arbitration, and states that arbitration must be demanded within 30 days. The Architect decision is final and binding if no one demands arbitration within 30 days (Section 4.4.6). Now we=re at 60 days. 3

4 a. Did the Architect=s decision differ from the one he made for his interim certification? 4. The claim becomes subject to mediation after initial decision by Architect or 30 days after submission to the Architect, as a condition to arbitration or other legal proceedings (Section 4.5.1). Arbitration is stayed for 60 days while people try to mediate (Section 4.5.2). We are now at 120 days and ready to start to arbitrate. By this time each side is sufficiently angry at the other that the arbitration process will likely be long and contentious. 5. Incidentally, Section says that a demand for arbitration must be made simultaneously with the demand for mediation Aand in other cases within a reasonable time after the Claim has arisen...@ Article IV seems all inclusive. What are the Aother cases?@ 6. If one fails to timely and properly file for arbitration, is the claim lost? The Does Contractor lose it=s lien rights? (See Section 4.4.8) C. Waiver of consequential damages. 1. Section reads as follows: The Contractor and Owner waive all claims against each other for all consequential damages arising out of or relating to this Contract. This mutual waiver includes: (a) Damages incurred by the owner for rental expenses, for losses of use, income, profit, financing, business and reputation, and for loss of management or employee productivity or of the services of such persons; and (b) Damages incurred by the Contractor for principal office expenses including the compensation of personnel stationed there, for losses of financing, business and reputation, and for loss of profit other than anticipated profits arising directly from the Work. This mutual waiver is applicable, without limitation, to all consequential damages due to either party=s termination in accordance with Article 14. Nothing contained in this subparagraph shall be deemed to preclude an award of liquidated direct damages, when applicable, in accordance with the requirements of the Contract Documents. 4

5 B. The notion that the Contractor negotiates to limit its liability for damages for breach is not new. Constructors and Architects have for some time attempted to negotiate financial limits on damages. Real estate developers negotiate to limit liability to equity in the development. C. This is the first time I=ve seen the damage issue approached as a type of damages rather than an amount Note the differences: The definition of AConsequential Damages@ for Owner and Contractor. D. To some extent what consequential damages depends upon what end of the horse you=re riding. For example: 1. As an Owner I would consider extra rental expenses as direct damages. 2. Lost profit is probably consequential but the Contractor retains the right to recover the anticipated profits from the Work. See also Section re termination for convenience. Cite where if it terms for cause may recover reasonable Aoverhead, profit and damages@ in connection with waiver? I think so. 3. Section says either can recover damages for delay per other provisions of Contract Documents - this is unchanged from 1987 edition but would seem to be inappropriate if you believe the waiver of consequential damages. D. Liquidated Damages. Section permits discovery of Adirect@ liquidated damages. 1. If liquidated damages are those which are difficult or impossible to measure it should be impossible to distinguish Adirect@ and Aconsequential@ liquidated damages. 2. Query: Will liquidated damages provision in the AIA form ever be enforced? III. Shop Drawings - Section A. Are the changes in this Section intended to change what has become common practice in the construction industry? B. Shop drawings prepared by subcontractors are designed to meet a foreman=s criteria specified by the Architect. 5

6 C. Section sets forth ground rules for this practice. 1. Contractor is not required to provide services in violation of law. 2. Owner and Architect must specify the design criteria to be met. (Query: Why Owner?) 3. Design services are to be performed by a properly licensed design professional, who must sign and place his seal on his work, and when submitted to the Architect will bear the designers written approval. 4. Owner and Architect may rely upon the adequacy, accuracy and completeness of services, only if they specified to Contractor all performance and design criteria such services must satisfy. 5. Query: If the Architect errs in the specification of one portion of the HVAC system, is the heating engineer relieved of responsibility for the entire system? 6. Query: Should the Contractor have no responsibility for the adequacy of the specification. Make sense that the Contractor and the subcontractor be obligated to review the specification to the extent a first class fully competent Contractor must, if he is to perform the work. Other sections of A201 at least require a Contractor to report what he sees. IV. Insurance Issues. A. Contractor is required to purchase liability insurance. Section permits coverage to be written on either an occurrence or on a claims made basis: 1. Where are limits specified? 2. Certificates are the evidence of insurance Section Does not say AOwner@ is to be named insured. Protects Contractor only. B. Project Management Protection Liability Insurance? What is this? Those I generally consult with insurance questions don=t know either. C. Owner to provide AAll Risk@ or equivalent Builders Risk (Section ) and AAll Risk@ or equivalent permanent insurance. The terminology is special perils. 6

7 1. Note incorrect reference to fire and extended coverage. 2. Query: Testing and start-up. Query: Compensation for Architect and Contract services. D. Owner=s insurance to cover Items stored off-site and in transit (Section ). E. In addition to (or as part of?) waiver of consequential damages, Athe Owner waives all rights of action again Contractor for loss of use of the Owner=s property, including consequential losses due to fire or other hazards however (Section ) F. Note: Owner to provide Contractor with copies of policy (not certificate). (Section ) V. Termination for Convenience by Owner: A. Section permits Owner to terminate for convenience and without cause. B. This is a very useful tool, usually used when the Contractor=s performance is poor enough to cause the Owner [and the Architect] to lose all confidence in him, but not bad enough to terminate for cause. C. Another good thing about Article XIV is that it does not provide for [x] days= notice. D. Contractor is required to terminate all existing subcontracts. Often the Owner will want certain subcontracts assigned see Section 5.4.1, which provides for assignment of subcontracts effective only when prime contract is terminated for cause. E. Note: Section which provides that in case of termination for the Owner=s convenience, the Contractor shall be entitled to receive payment for Work executed, and costs incurred by reason of such termination, along with reasonable overhead and profit on the Work not executed. VI. Note: A new provision of the 1997 Version of B141, the Owner/Architect Agreement, provides that A... Modifications made to the General Conditions, when adopted as part of the Contract Documents, shall be enforceable under this Agreement only to the extent that they are consistent with this Agreement or approved in writing by the Architect.@ (Section ) 7