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Imperfect Contract Documents
Who Pays for the Errors?
By Arthur F. O'Leary, FAIA, MRIAI


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Architects Are Only Human.
Architects and engineers are painfully aware that there is actually no such thing as a perfect set of construction documents. Contractors, subcontractors, and suppliers have always known this to be true. But some owners have not as yet been informed of the startling fact that architects are only human and some are not perfect.

The repercussions of our shortcomings vary from project to project. Sometimes our imperfections are, thankfully, only minor glitches that are easily rectified, and our embarrassment is fleeting. Other times our inadequacies are more substantial and if they are not corrected in time, considerable harm could be done, and valuable resources wasted. Even more rarely, the blunder is of catastrophic proportions and the price is high in time, money, loss of confidence and reputation, and possibly resulting in personal injury or death. 

Occasionally, the mistake is sufficiently concealed to remain undiscovered for years before the latent misfortune materializes. Some, undoubtedly, remain forever unnoticed. 

Selling Architectural Services.
In the process of attracting clients and marketing professional services, we usually accent the positive aspects of our abilities and attributes. This is only natural as most of us would not want to risk alienating prospective clients. We painstakingly point out our fine educational and experience backgrounds and we extol the virtues of our professional associates and consultants. We proudly display our past accomplishments and design awards. We thus carefully condition our prospective clients to expect nothing less than excellence, superiority, and perfection - the very best.

Upon mature reflection, a perceptive and intelligent client would probably realize that we might not be as good as we say we are. However, we generally fail to inform the client of the realistic prospect of our making errors of one type or another, regardless of our impressive pedigrees, our unusually high degree of care, and our extraordinary design capabilities.

Unrealistic Expectations.
The client's unrealistically high expectations will accrue to our disadvantage when the inevitable error or omission becomes evident. We might have been better off if we had amiably preconditioned the prospective client with the gentle forewarning that we may not always be perfect. It would appear less threatening to the client to receive such a disclosure at a time when no actual errors are yet under consideration.

When we disclose the possibility of our imperfections, we should explain realistically what will happen if a mistake in the construction documents appears during construction.

If the error or omission does not directly affect construction cost or contract time, the architect will usually voluntarily correct the documents, will properly instruct the contractor, and would not usually charge the client for any additional architectural services made necessary by the mistake.

If the mistake in the documents results in added construction cost or time it would be manifestly unfair to hold the contractor financially responsible for it. The owner, rather than the contractor, will have to pay any added construction cost attributable to an architectural error or omission. Moreover, if additional construction time is required on account of the mistake, the contractor should also be granted an appropriate time extension. Again, the architect should furnish all related architectural services without additional charge to the owner.

When Should the Architect Pay for Errors?
A more significant question remains to be answered. When should the architect be held financially responsible for the added construction costs caused by anomalies in the documents? The generic answer is fairly simple: The architect can be held financially responsible if the mistake has resulted from the negligence or intentional misconduct of the architect, architect's employees, or engineering consultants.

An architect or engineer would be considered negligent when the professional standard of care has not been met. 

An architect is legally required to do all those things that other architects in the same community would do under the same or similar circumstances. The architect must also refrain from doing anything that other architects would not do. 

The architect must exercise ordinary skill, reasonable care, and due diligence. 

It would no doubt be considered negligent practice when an error in the documents has resulted from lack of proper research, absence of checking procedures, assignment of unqualified personnel, improper supervision of junior personnel, disregard of the client's program or instructions, or failure to retain appropriate consultants when needed.

If the architect's mistake does not arise from negligence or intentional misconduct, the extra construction cost and time will have to be absorbed by the owner.

Many architectural firms, as a matter of policy, and to better serve their clients, will voluntarily pay for nominal added construction costs caused by their errors even in the absence of negligence. However, if the added cost is beyond the reasonable financial capacity of the architectural firm, the owner will be primarily responsible to meet the contractor's additional charges. The architect when voluntarily paying for affordable errors will regrettably forestall a complete discussion with the client, which would have revealed the client's obligation to pay for the architect's non-negligent errors.

Sometimes in the spirit of compromise the architect will negotiate an equitably shared assumption of the economic burden by contractor, owner, and architect. This is possible, however, only when there has been a history of cooperation and rapport among the parties. In those situations where the three parties are constantly in a state of mutual distrust, hostility, and lack of respect, there is little likelihood of their ever reaching a cost sharing accord. It will also be unlikely in those situations where the costs are unaffordably high.

Measuring the Architect's Liability.
When the architect has been negligent, the amount for which the architect can be found liable to the owner will be the additional construction cost over and above what it would have cost had there been no error or omission in the documents.

When necessary work is erroneously specified or omitted from the architect's documents it must be paid for by the owner when it is added back into the construction contract. However, the architect could be liable for the extra costs due to the work having to be done out of normal sequence. Often change order work will cost ten to fifteen percent higher due to lack of the competitive pressure that would have been present during the initial bidding process.

The architect could also be responsible for the consequential costs of errors such as rainwater damage, loss of use of the building, or liquidated damages. The costs of related removal and reconstruction, restocking charges, and wasted materials and labor could also be chargeable to the architect.

Architects Do Not Guarantee their Work.
At first glance, it may seem unfair to charge the owner with mistakes made by the architect. However, architects cannot and do not guarantee that their judgment will be unflawed and that their designs and documents will be completely free from error or omission. 

The courts agree that architects and engineers sell service not insurance and they will not be liable in the absence of negligence or intentional misconduct. (Note 1) An architect is required only to act with reasonable diligence and will not be liable for damages even if the results of the work are unsatisfactory.

Considering the enormous volume of information included in a typical set of construction documents, usually hundreds of thousands of bits of data, it would be humanly impossible to avoid error, completely and absolutely. Typically, architectural fees are quoted at a level to account only for the time expended in producing the service plus a modest profit. Architects do not charge and owners do not pay an additional fee increment designated and set aside to amass a pool of funds to cover the construction cost of architectural errors. 

Professional liability insurance commonly carried by architects and engineers will provide funds only for legal defense and liability for negligence. The insurance would not cover any guarantee of error-free work product should an architect ever unwisely include such a guarantee in pre-contract discussions or in the architectural services agreement. 

Disclosure to Owner.
Architects, painfully aware that they are far from perfect, and knowing that their clients will have to pay the costs of non-negligent architectural error, should at the very least, discuss the entire matter with all prospective clients before signing architectural service agreements. This is not legally required but would clear away some of the mystery for the client and lessen the probability of legal attack when there is an unfortunate lapse in professional judgment or service.

Recommendations.
Realistic owners are mindful of the possibility of having to fund unexpected demands for increased construction costs due to errors or omissions in the contract documents. An appropriate contingency reserve should be carried in the owner's overall project budget. Experienced owners employ a factor of from two to seven percent of the construction contract, depending on the scope, complexity, or uniqueness of the project.

When establishing the completion date of the project, the owner should recognize that rectification of some document errors could also affect the time of construction, delaying completion and occupancy accordingly.

Fortunately, most projects proceed smoothly to satisfactory completion with little or no additional construction cost or contract time charged to the owner. However, as a matter of simple business prudence, the owner should think ahead and anticipate how it would live with the extra costs and possible delayed completion resulting from imperfect construction documents.

Notes

1. All of the following legal cases stand for the proposition that architects and engineers are not liable in the absence of negligence.

United States v. Peachy (1888) 36 F 160 (Sd Ohio).
White v. Pallay (1926) 119 Or 97, 247 p 316.
Gagne v. Bertran (1954) 43 Cal 2d 481, 275 P2d 15.
Bonadiman-McCann, Inc. v. Snow (1960) 183 Cal. App. 2d 58, 6 Cal. Rptr. 52.
Allied Properties v. John A. Blume & Associates, Engineers (1972) 25 Cal. App. 3d 848, 102 Cal. Rptr. 259.
Swett v. Gribaldo Jones & Assoc. (1974) 40 Cal. App. 3d 573, 115 Cal. Rptr. 99.
Lukowski v. Vectra Educ Corp. (1980) 401 Ne 2d 781 (Ind. Ct. App.).
Del Mar Beach Club Owners Assn. v. Imperial Contracting Co. (1981) 123 Cal. App. 3d 898, 176 Cal. Reptr. 886. 
Additional reading on this subject and discussion of these and other relevant cases is available in these two books by James Acret of the Los Angeles Bar:
Architects & Engineers, Their Professional Responsibilities, Third Edition, Shepard's/McGraw-Hill, 1993
California Construction Law Manual, Fourth Edition, Shepard's/McGraw-Hill, 1990

2. This article is based on one that was originally written for Shepard's/McGraw-Hill's California Construction Law Reporter and was published in its May, 1991 issue. A similar article appeared in Design Cost Data™, Mar/Apr 1995.  



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