Construction Law 101: AIA Contracts

When you’re involved in a construction project, having a detailed contract in place can protect it by minimizing risk and avoiding expensive litigation. The American Institute of Architects’ A201 General Conditions for Construction and the AIA B141 Owner/Architect Agreement (otherwise known as AIA contracts) are often used because they are familiar to architects and contractors while protecting the rights of homeowners.

Every ten years the AIA revises its construction and design agreements to reflect changing industry standards and market conditions. In 2017 certain documents underwent key revisions, some of which favor contractors while others benefit the project owner. In general, they accomplished the main goal of implementing commonly negotiated terms into the documents.

Date of Commencement

The commencement date of a project is used to determine how long contractors have to deliver the project or whether damages may be due if the work takes longer. The newest versions of the AIA contracts allow the parties to decide whether the date of commencement refers to:

  • – The date of the agreement
  • – The date the contractor receives a notice to proceed
  • – A date agreed to by all the parties

Contractors can negotiate for the best term to provide them with additional time to complete work on a project.

Delays

The new AIA contracts state that if project completion is delayed through no fault of the contractor, the owner shall still pay them. Before the update, contractors would only be paid if material delays occurred after the building was ready to be used for its intended purpose. This new provision can help contractors get paid for delays sooner.

Mutual Waiver of Consequential Damages

This is one of the biggest – and most controversial changes to the AIA contracts. The architect, contractor, and owner agree to waive “consequential damages” against each other, meaning that if the project is delayed, the owner gives up practically every claim they might potentially have against the architect and contractor. Because the legal definition of “consequential damages” is not exactly clear, project owners usually opt to strike this provision from the contract before signing.

Hazardous Materials

The AIA contracts define hazardous materials as anything that presents a risk of bodily injury or death. They now require the project owner to indemnify the contractor for any claims resulting from these materials. While not unfair, the presence of this clause makes it advisable that owners obtain pollution insurance coverage for potential claims and contract with an environmental laboratory that will handle the materials or any pollution from the site.

Contractor’s Obligation to Repair

The contractor’s obligation to repair is separated from their general obligation to fulfill the terms and conditions of the contract. In other words, even if the period for making corrections is expired, the owner can still take the contractor to court for breach of contract if the latter did not perform the work in accordance with the plans and specifications.

Termination for Convenience

While the owner may terminate the construction contract and owner / architect agreement for convenience, they also allow the contractor to recover certain expenses and lost income on work not performed. Project owners often strike this provision or modify it to state that they will only pay for work completed to date and any reasonable termination expenses.

Some clauses are decidedly in favor of the contractor or architect. For example:

  • – The owner / architect agreement allows the architect to stop working if the owner fails to pay, even if the payment is disputed. The architect should not be able to stop work amid a good faith dispute over services, so this clause can be modified to allow disputed portions to be placed in an escrow account and require the architect to stay on the job.
  • – The contractor has the right to stop working if they don’t think the owner has provided sufficient proof of financial resources to continue the work. This is another frequently-removed clause because it permits the contractor to judge the owner’s financial means.

Despite these one-sided clauses, AIA contracts do a reasonable job of allocating risks among the architect, contractor, and owner. Even if you make substantial changes to the documents later, it can be beneficial to start with a template contract that is familiar to everyone involved. An experienced construction law attorney can assist in modifying any contents that are too biased in favor of one party.

At Rosen Law LLC we have dedicated and experienced construction law attorneys who can assist you in modifying an AIA contract or even drafting an entirely separate document that protects the project and the rights of everyone with a stake in it. For more information or to schedule a case review, please call (516) 437-3400 today.

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