Editor’s note: This article is originally from Ava Abramowitz, Esq., Architect’s Essentials of Contract Negotiation, copyright © 2002 by John Wiley & Sons, Inc. Reprinted with permission of John Wiley & Sons, Inc.
What follows is honest-to-goodness owner-drafted contract language . . . . Each analysis will follow the same path: architect’s view, owner’s view, and a cure . . . . Notice that I said “a” cure, not “the” cure. There are lots of ways to mend bad contract language. After all, where there’s a word, there’s a way. Regardless of which route the owner and you choose, if wordsmithing is the solution, I’d try to use as much of the owner’s own language as I can. In that way, I signal to the client that I want to meet them on their playing field; the client doesn’t have to come over to mine. But there are other solutions besides words, and we will consider them also.
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Certification
The Architect certifies that the construction of the Project to the date of this Certificate is being diligently prosecuted and the quality and construction of the Project are, in all material respects, in accordance with the approved Drawings and Specifications.
Before we analyze this paragraph, let’s talk about certifications and their close kin—guarantees and warranties. Each in some way asks you to promise that something is true and accurate and worthy of the other’s reliance and belief. Can you certify, guarantee, or otherwise warrant that you are an architect? Yes, if in fact you are an architect. Otherwise, you cannot. You may want to. You may wish you could. You may feel guilty that you can’t, but, unless you can swear under oath that something is true without fear of being prosecuted for perjury, you cannot certify that same thing as true.
Is refusing to certify something unfair to the owner? Au contraire. You want your clients to trust you and rely on you . . . . Earning that trust is dependent, in part, on your being candid with your clients. To agree to something that is not true, or to something where you have no basis to know whether it is true or not, actively conveys misinformation to your client. You owe your client more than that. So, let’s not be afraid of the words “certify” or “guarantee” or “warrant.” Let’s instead look at the scope of what you are being asked to certify and check to see if you know it to be presently true and accurate. If it is, sign away.
Given what you just read, can you sign off on the certification above? No, because here the owner is asking you to take responsibility for construction you did not perform, built by someone, the contractor, over whom you had no power. Further, unless you were in every square foot of the site 24/7, you wouldn’t know enough or have seen enough to attest to quality and construction in “all material respects.” Even if you wanted to sign this certificate, under those facts and circumstances you would have no basis to do so. To sign it is to give your client an empty promise.
Why then would owners ask you for this language? They want someone, anyone, you, to guarantee the contractor did the job and did it well. Think about it. You can’t blame them. Construction is that complex. Moreover, 10 to 1 if it’s a private project, and 100 to 1 if it’s a public project, the contractor was hired competitively and primarily, if not only, on price. I, too, would want someone to guarantee that a contractor selected on that basis did right by me. So would you. Now, given this reality and the depth of the owner’s need for construction certainty, how can you cure this paragraph?
Again, you have choices, depending on (1) the facts and circumstances facing you, (2) your capabilities, and (3) the responsibilities and powers you and the owner can agree on. At the macro level, the choices are these:
- You can help the owner mitigate the problem that created the owner’s need in the first place.
- You can expand your services to meet the owner’s need.
- You can limit the scope of your services to meet the interests behind the owner’s request.
- You can wordsmith.
Let’s start from the last option, if only because that’s where most architects are taught to start—and stop.
Wordsmithing. Wordsmithing is a most powerful tool used by us lawyers. To cure certifications, you can invoke legal weasel words, what I affectionately call “blah-blah.” You know the words: “To the best of the architect’s knowledge, information, and belief,” or “In the architect’s professional judgment.” And then you insert whatever the owner wants you to certify. Usually, that works. Sometimes you have to do more to make the certification true. Here you might say, “Based on visual observations made during biweekly visits by the Architect, the Architect concluded that, in his professional judgment, the construction seems to have been diligently . . . .” But wouldn’t you rather help the owner manage the dilemma that caused the owner to draft the language in the first place? It’s that skill that makes an architect valuable and valued. Let’s see how that approach works using this certification language as a guinea pig.
Mitigate the owner’s problem. Owners who want you to ensure contractor compliance with your CDs may be signaling they need someone to monitor their contractor. Perhaps they fear they will not choose their contractor well and, hence, look to you to make up their decision vacuum. Instead of arguing over words, why don’t you help them out so they don’t have the need in the first place? Talk to them about contractor selection and how it can make or break a project. Introduce them to the Qualification Based Selection (QBS)-like templates of both the AIA and the AGC (the AIA’s can be found in the twelfth edition of the Handbook, page 747). Ask if they want a list of three to five contractors capable of doing their job. Encourage owners to refine the template and then sit with them as they interview each of the contractors, asking the questions owners need answered. Encourage them also to build partnering into the project and to actively participate in the partnering effort. Make the need for a 24-hour-a-day monitor disappear. This reframing of the issue away from what you cannot do toward what you can do to meet the owners’ interests may be just the solution the owners really want.
Expand your services. Remember quid pro quo? If your owner wants you to certify contractor compliance, step up to bat and agree if the owner also agrees to hire you as the design-builder and pays you accordingly for the increased risks and responsibilities. Absent that agreement, you can still help out the owner through expanded services, again if the owner agrees to retain you to provide agency construction management services along the lines of CM141. Or, if you’re not prepared to provide those services, ask the owner to retain you to provide B352 Project Representative services. In other words, get yourself on the site and help your owner out. If the owner is serious, these negotiations should be easy. If not, there is no better way to determine the real seriousness of an owner’s demands than to offer to meet them for a fee.
Limit your scope. If the owner doesn’t want to expand your services, yet still wants you to certify something, you can limit the scope of the certification to something you can indeed certify. An example: A Class A New York-based, nationwide law firm once asked the late Robert Calhoun Smith, FAIA, to certify a plethora of matters from zoning law compliance to contractor compliance, and more. Many of these certifications effectively required him to practice law without a license. Some even asked him to foresee the results of others’ conduct that would not occur until far into the future. I suggested he ask the owner’s lawyer, preferably in front of the owner, whom he knew well, whether he would allow his own architect clients to sign the certification he drafted. Everyone smiled, and they worked out a scope that Bob could certify. At the end of the project, the owner gave Bob a plaque that read, “I, Robert Calhoun Smith, FAIA, hereby certify that I am an architect.” Call it what you will—your turn, my turn, or what’s good for the goose is good for the gander—the negotiation tool of mutual reciprocity is yet another way of testing owner need and intention.
Thinking this way may force you into a new and very different mindset. That’s okay. Once you get used to it, I’m betting you find it a most comfortable one. It keeps you focused on your client and on project success, and isn’t that why you decided to become an architect in the first place?
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Indemnification of the Owner
The Architect-Engineer shall indemnify, hold harmless, and defend the Owner, its employees, agents, servants, and representatives from and against any and all losses, damages, expenses, claims, suits, and demands of whatever nature resulting from damages or injuries, including death, to any property or persons caused by or arising from, in whole or in part, errors, omissions or negligent acts of the Architect-Engineer or its employees, agents, servants, or representatives under this contract.
This is an indemnification clause. You know that because the owner has kindly labeled it as such. What the owner is asking you to do is to indemnify him or her—that is, to serve as his or her personal bank and insurance company and absorb some loss, real or imagined, suffered by the owner.
It is critical to read these clauses out loud. They can be very convoluted, and the devil is in the details. Here’s a guide: To know whether you will agree to indemnify the owner, you have to read the scope of the promise and decide whether you personally (or with the help of your insurance company) want to take on the risk. If the exposure is one you are capable of managing, and if the owner gives you all the responsibility and the power you need to manage the exposure, you probably will agree to take the indemnification risk on. For example, would you agree to indemnify the owner against injuries caused by your negligence to the same extent as you were proportionately negligent? Sure you would. Why not? As we learned in Chapter 3, being responsible for your own negligence is American common law. But would you agree to indemnify the owner against the contractor’s negligence? Of course not, because you have no responsibility for the contractor’s conduct and no power to control it. Would you agree to indemnify the owner against the acts of the owner’s employees? No, and for the same reason—no capability, no responsibility, and no power to control.
With that said, let’s look more closely at the scope of this indemnification not to cure it word by word—you can’t—but to understand the clause in all its glory. Putting the issues in subsets (with the most salient concepts in bold), this is what the owner wants you to undertake—three activities:
- to indemnify—to agree to the transfer of the owner’s risk from them to you and, further, to reimburse the owner for their losses after those losses have been determined in negotiation, mediation, arbitration, or litigation;
- to hold harmless—to agree to protect the owner even from suits by third parties, such as contractors and building users; and
- to defend—to agree to pay all the owner’s defense costs should anyone sue them, even if this puts you and the owner into a conflict of interest, and even if you have done nothing to cause the suit.
Moreover, the owner wants you to do these three things to protect five groups of people: (1) the owner, (2) its employees, whoever they are, (3) its agents, whoever and whatever they are, (4) its servants, and I have no idea what in this day and age this group includes, and (5) its representatives, clearly a distinct group of people who are also not employees, agents, or servants. And the owner wants you to protect all of these people regardless of whether or not they are actively involved in the project and regardless of whether you or anyone under your direct control have any dealings with them.
As if this were not broad enough, the owner wants you to shield these groups of people (and here is the scope of the indemnification parsed out in all its glory so that you can assess the gravity of what is being asked of you) from and against: any and all—losses, damages, expenses, claims, suits, and demands—of whatever nature—resulting from damages or injuries, including death—to any property or persons. This language, coupled with that of above, has you shielding the owner and the gang of others from whatever comes the owner’s way (and paying for all of the group’s defense costs in the process so there is no reason for any of them to settle any time quickly), including protecting them against mere allegations which is precisely what undecided (or unsettled) claims and suits, and mere demands are.
Now is this reasonable, given the complexity of design and construction? Let’s look at the triggering language. What must you do, if anything to cause this language to be activated? Again, look at the scope. The loss or mere allegation must have been caused by or arising from—in whole or in part—errors, omissions, or negligent acts—of the Architect- Engineer or its employees, agents, servants, or representatives—under this contract. Translating this into English, you need not have been negligent for your purse to become the owner’s. Why? Because a mere or a major non-negligent error or omission triggers the indemnity. Had negligent been a prerequisite of error, omission, or act, this clause arguably would have been insurable. Transposing the negligence to limit it to acts made it not. Moreover, the seeming badness need not be a result of your negligence. It can merely “arise” from it, so that, if the owner can make any argument that takes you in, you get taken. One percent negligent, non-negligent, or 100 percent negligent, with this language, you bought the store.
Owners are not bad people. Why then, do they ask for this language? Some say it is because of the AlA’s traditional and continuing refusal to include a standard of care in the B 141 contract on the grounds that common law negates the need. The owner is merely filling the vacuum. Others say owners are asking for indemnification clauses in response to architects’ requesting that owners limit their (the architects’) liability to them (the owners). Still others point to social causes: People these days don’t like taking responsibility for their actions. They want a risk-free life, and, if the Good Lord won’t give it to them, they want the next best thing to protect them. On the construction site that means they want you and your insurance policy, assuming you have one, to protect them from all badness. And some architectural thinkers posit that owners pay so much to put the building up that they need someone else’s kitty to cover unanticipatable events. Whatever. These reasons may all be true. The problem with them and the clauses they generate, though, is that wrongly conceived indemnification clauses hurt the project.
Shocked you, didn’t I? You expected me to write that crisscrossed indemnification clauses are uninsurable and, thus, empty promises to boot. Well, that’s true. You are only insured for your negligence and nobody else’s, and, unless you are very rich, you probably don’t have the money to live up to the crisscrossed promise exacted by the owner. But remember, we are assertive practitioners. We don’t think from the perspective of insurance. We think what’s best for our clients’ projects, because if we achieve project success, the owner and we will be taken care of in the process.
In design and construction, to achieve success, all parties must be working on all cylinders all the time. When each person on the construction site puts forth full time and attention to each and everything he or she is doing, the chance of something going wrong plummets. Crisscrossed indemnification clauses, however, induce sloppy thinking and give people permission to hedge. “Oh, why question this? The architect (or the owner or the contractor or whoever) is indemnifying me. If I’m wrong, he or she will be the one to pay. Not me.” Sure, some insurance company may kick in, but life is short; who needs the claim in the first place?
How do you cure the clause? Many insurance companies say with language as broad and as egregious as this, just walk away if the owner won’t agree to less. But why? If you and your client have built a relationship based on common ground and, thus, mutual reciprocity, you probably won’t have to. An example: When one large-city airport client asked its architect to agree to absorb its risk by acquiescing to an indemnification clause much like this, the architect merely said the truth: “The best way to forestall claims is to require everyone to be responsible for their negligence to the extent they are negligent. That way everyone is incentivized to act reasonably and prudently. We don’t ask you to limit our liability for our negligence. We stand behind our conduct. We just are asking you to do the same.” This mutuality of promises prevailed.
There’s the key. Mutuality. So next time you face language like this, instead of walking away from a commission or losing goodwill over a wordsmithing session, explore with your client the insertion of mirrored indemnification clauses where you each protect the other from each other’s negligence to the extent either of you is negligent. If your client won’t buy that, you probably have other, bigger problems than an indemnification clause. Explore them, and then decide for yourself: Is this a client for you?
Author Ava Abramowitz, Esq., Hon. AIA, has a mediation and partnering practice and teaches negotiation to architects and lawyers across the country. She has been serving as a mediator for the United States District Court for the District of Columbia for over ten years. She is a former deputy general counsel of the AIA and has lectured on legal aspects of architecture at Harvard University’s Graduate School of Design.
Originally published 2nd quarter 2005, in arcCA 05.2, “Other Business.”
