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Three clauses in appointments documents often give rise to heated debate

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Legalese: The right to withdraw consent to the use of architect’s drawings is probably a better weapon in theory than in it is practice, writes Mark Klimt

Analysis of appointment documents tends to focus on liability and in particular (understandably) on obligations which would be outside the protection of the architect’s insurance policy.  There are three clauses that often give rise to debate and would benefit from closer analysis. All are within the RIBA Standard Form of Agreement but are negotiated with varying degrees of success.

Attempts by architects to secure a cap on contractual liability to the level of their required insurance are often undermined when the client asks if this is an insurance pre-requisite. Insurers’ liability is capped at the level of the policy and what happens beyond that will not be of their concern. But it will be of concern to the architect, who will want to know that its other assets will be safe from a claimant.  The architect will argue it suffers the expense of maintaining insurance at a level the client has stipulated. In return, the architect should have the comfort of knowing that the client will not look beyond the insurance policy for redress. ‘Uncapped’ or ‘unlimited’ liability sounds alarming and conjures up images of the architect being totally unprotected.  This will not be the case where there is an insurance policy in place, which claimants tend to accept as the principal asset of the practice. Operating as a limited liability company further reduces the impact of failure to achieve a formal contractual cap on liability. Such cap would anyway not protect an architect from third party claims in tort.

A common battle concerns whether the architect’s grant of a licence in its materials should be subject to payment of outstanding fees.  The RIBA terms allow an architect to suspend such licence if fees are not paid, but it is questionable whether a court would order that a client is not entitled to use materials if there has been significant payment. It is irksome for an architect to see its materials used when they have not been paid for. The right to withdraw consent to the use of drawings is a powerful weapon when trying to bring a recalcitrant payer to heel. It is, though, probably a better weapon in theory than in practice, should a client be prepared to tough it out and claim that fees are not due.  The architect would then need to be very sure of its ground before suspending the licence. Should it transpire that fees were not due, the architect would be responsible for any delay to the project. Perhaps a compromise can be achieved between the architect’s concern to protect its fees and the client’s concern not to be held to ransom, by agreeing that the licence is subject to payment of all fees which are not the subject of a genuine dispute.

A highly unpopular clause in RIBA standard terms is the exclusion of any right of set-off (particularly given that at common law such a right would exist). Set-off is a counterclaim (say for damages for breach of contract) in respect of one item against monies otherwise agreed to be owed. An architect, having performed its services, will want to be paid and will not want its cash flow compromised by unproven allegations from a client about monies due elsewhere. Some set-off clauses allow a client to set-off against the fees due on one project monies alleged to be due from the architect on any other project between the parties, which means any ‘local’ disagreement threatens the whole relationship. A compromise might be for the contract of engagement to be silent as to set-off - neither expressly excluding nor including it; though in that instance, if a client considers the architect has cost it money, the likelihood is set-off will be applied anyway, on the principle of possession being nine tenths the law.

The complications are probably best addressed by having robust provisions allowing the architect to terminate if the relationship breaks down, without fear of being held responsible for additional costs.

Mark Klimt is a partner at law firm DWF Fishburns

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