Reviewing contracts as a Design Professional

reviewing contractsReviewing contracts as a Design Professional is an important part of the business.  It allows your firm to assess the risk and negotiate on contracts if needed.  While it is good for your firm to review and understand the contracts it is always advised that you have an attorney provide feedback on the contract.  Below is a list of some of the contract clauses to review:

Standard of care – Is the standard of care in the contract higher than required by law?  Design Professionals are required to acts a competently as reasonable expected of other professionals practicing under similar circumstances.  If the standard of care clause states ‘the highest degree of skill and care’, this is beyond the standard of care.

Indemnification – Does the indemnification clause extend the right of clients to recover for causes other than negligence?  A design firm is responsible for rectifying any harm to its client that is the result of your firm’s negligence, not beyond negligence.

Expressed and implied warranties – Does the contract have a warranty obligation?  Express and implied warranties are excluded coverage on a professional liability policy.  Therefore, it is important that your firm is not agreeing to warranties in a contract.

Ownership of documents – Does the contract require that ownership be transferred to the client? If so, your firm is giving up the capability to have input or control over future use or reuse of the documents.  This could cause additional liability exposure.

Additional insured on insurance – Is your client asking for additional insured on the professional liability policy?  The additional insured cannot be done on the professional liability policy since the policy pays on behalf o the policyholder (design professional).  The additional insured language can be accomplished on the general liability policy, be sure to check with your carrier.

Be sure your firm reviews the whole contract and not just these clauses.  Additionally, most Professional Liability insurance carriers will provide contract review for insurability.  Please call or email your PUI Agent for any questions you may have.

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