Contract Wish List For Design Professionals – Part 1
It is not news to any design professional insured that their contract for services is linked inseparably with their exposure to risk. The terms and conditions that compromise a design professional contract directly impact an insured’s exposure to risk and potential for a claim against its Professional Liability policy. However, an insured often has little if any, input on the terms and conditions of their services contract or ability to alter the terms to mitigate their risk. This frequent scenario leads some design professionals to disengage from the contract negotiation process and potentially lose opportunities to request risk mitigating language. But what if this were not the case?
Dream up a scenario where you are given total contract drafting freedom. What do you want in (or out of) your contract and why?
Limit On The Amount Of Liability
One valuable protection a contract can contain is a limit on the total amount of money an insured is subject to pay in the event of a design error or omission. It is frequently the case where an insured’s fee for services is dwarfed several times over by the potential cost of remediating a design error or omission, leading to excessive exposure to risk for a modest reward. By inserting limitation of liability language in a contract, an insured can expressly limit the amount of damages that may be recovered due to an error or omission. While this limit of liability does no protect an insured from third-party claims, it limits the amount the contracting party may seek and therefore significantly reduces an insured’s exposure. The AIA has provided the following model language:
“Except for acts amounting to willful or intentional wrongs, neither the Architect, Architect’s consultants, nor their agents or employees shall be jointly, severally or individually liable to the Owner in excess of _____ Dollars ($______),” with the dollar amount being equivalent to the architect’s expected profit. AIA Document B503TM_2017 Guide for Amendments to AIA Owner-Architect Agreements Section C-6. Read the rest of the article here.