A Word to the Wise: The AIA Revised Contract Documents Could Lead to New and Unanticipated Risks – Part II

Part I addressed general conditions, revised insurance terms, revisions that affect owner’s required insurance and revisions that affect contractor’s required insurance.

REVISIONS THAT AFFECT DISPUTE RESOLUTION

A seemingly minor but noteworthy change is to the definition of “Claim.” Under Section 15.1 a “Claim” is defined to:

• include a request for a modification of contract time; and
• exclude any requirement that an owner must file a claim to impose liquidated damages.

Notably, any request relating to contract time must be brought within the specified time period for Notice of Claim¹ and in the prescribed manner². There are at least two traps for the unwary. First, even though email is regularly used for communications among the parties, the revised contract documents do not recognize email as an acceptable form of delivery of a Notice of Claim. Second, an unwary contractor may wrongly assume that an owner’s failure to assert a claim for LDs means that LDs will not be imposed. This may lull the contractor into failing to timely assert its own claim for a time extension and thereby waiving its ability to do so.

There have not been any major revisions to the arbitration provisions of Section 15.4. Other changes, however, will influence dispute resolution. As before, a condition precedent to commencing Mediation and thereafter a possible arbitration or litigation, Claims must first be submitted to the Initial Decision Maker³. The IDM is normally the architect as the architect is designated as the default IDM⁴. The 2017 revisions, however, now include strong exculpatory language protecting the IDM from liability “for results of interpretations or decisions rendered in good faith⁵.” This broad protection from liability could place the architect (acting as IDM) in an uncomfortable and possible conflicted position if, for example, the Claim infers liability on the part of the architect (such as improper or defective design). Moreover, it raises possible struggles to ascertain the meaning of ‘good faith’ in the context of the architect’s actions⁶.

REVISIONS THAT AFFECT SUPERVISION AND CONSTRUCTION PROCEDURE

In circumstances where the specifications do not prescribe construction means and methods, these remain the responsibility of the contractor. It appears, however, that the contractor is now being burdened with some of the architect’s design responsibilities, in circumstances where the specifications and/or drawings “give specific instructions concerning construction means, methods, techniques, sequences or procedures⁷.” Previously, if the contractor determined that the specified means, methods, techniques, sequences or procedures were unsafe, the contractor was required to provide the architect with timely notice and then stop the work it deemed to be unsafe, while awaiting further written instructions⁸. Now the contractor does not have the right to stop work and it is incumbent upon the contractor and not the architect to propose alternate means, methods, techniques, sequences or procedures⁹. The architect’s role has been diminished and is only required to review the contractor’s proposal, solely for “conformance with the design intent for the completed construction¹⁰.”

REVISIONS THAT AFFECT SHOP DRAWINGS

Another change which could shift some design responsibility from the architect to the contractor is contained in the section on Shop Drawings. On one hand this section adds an assurance that in preparing Shop Drawings the contractor is “entitled to rely upon the adequacy” of the architect’s design criteria, yet on the other hand it removes the language stating that “[t]he contractor shall not be responsible for the adequacy of the” design criteria contained in the Contract Documents¹¹. This modification could be interpreted to mean that through submittal of Shop Drawings, the contractor is taking on responsibility for design criteria.

REVISIONS THAT AFFECT CONTRACT TERMINATION

Another deletion that could prove troubling for the contractor involves contract termination by the contractor. Both the prior and current versions are consistent in that each allows the contractor to terminate the contract if work is stopped for 30 consecutive days, for certain specified reasons, i.e. court order. The difference is that the prior version limited this option only to circumstance where the delay was not caused by the contractor, a subcontractor or “entities performing portions of the Work under direct or indirect contract with the contractor¹².”The latest version deletes the underlined words and therefore implies that the contractor has no right to terminate if the delay is caused by any party performing work on the project regardless of whether or not the contractor has any control over that party.

In instances where the owner terminates ‘for convenience’ the contractor will no longer be permitted to receive payment for overhead and profit on work that the contractor performed as a result of the termination unless the contract otherwise provides. Since the contractor is entitled to a termination fee included the contract¹³, it is important that a contractor negotiate for inclusion of overhead and profit in its calculation for a termination fee.

While many of the 2017 revisions to A201 appear to be stylistic in nature, there are some changes which could affect the liability of the architect, owner and the contractor (including its subcontractors). In order to prevent unpleasant surprises, the parties need to recognize those revisions that:

• effect the claims process;
• increase and/or limit costs;
• shift liability; and
• change deadlines.

This will allow them to negotiate around the revisions, i.e. included overhead and profit in termination fee) and/or perform the contract in a manner that anticipates the impact of the revisions, i.e. filing a claim for contract time extension without awaiting the owners claim for LDs.