{"id":359,"date":"2012-02-28T16:15:39","date_gmt":"2012-02-28T23:15:39","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=359"},"modified":"2012-02-28T16:15:39","modified_gmt":"2012-02-28T23:15:39","slug":"7-critical-mistakes-engineers-architects-make-during-project-negotiation-and-execution-that-sabotage-their-projects-invite-litigation","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/7-critical-mistakes-engineers-architects-make-during-project-negotiation-and-execution-that-sabotage-their-projects-invite-litigation\/","title":{"rendered":"7 CRITICAL MISTAKES ENGINEERS &#038; ARCHITECTS MAKE DURING PROJECT NEGOTIATION AND EXECUTION THAT SABOTAGE THEIR PROJECTS &#038; INVITE LITIGATION"},"content":{"rendered":"<div>\n<p style=\"text-align: left;\">Melissa Brumback \u00a0 \u00a0 &#8211; \u00a0 \u00a0 Ragsdale Liggett, PLLC<\/p>\n<p style=\"text-align: left;\">The typical commercial construction lawsuit can cost an architecture or engineering firm well over $100,000 to resolve.\u00a0\u00a0 It is not unheard of for some construction lawsuits to rise into the multiple hundreds of thousands of dollars, and, in some cases, for damages to reach into the millions. \u00a0You might believe that because you are a small firm, performing routine, limited work, you are safe from such large claims.\u00a0\u00a0 However, no matter how small your role on a construction project, you can still be sued for any amount of damages. \u00a0One geotechnical engineer we defended, who performed only 5 site sample borings, was later sued for over $200,000 on a $1,000 contract.\u00a0\u00a0 No one who works in the construction field is immune from large claims.<\/p>\n<p>\u00a0Even firms that are fully insured with large Errors &amp; Omissions (E&amp;O) policies run the risk of spending hundreds of man-hours in meetings with lawyers, mediation, and court\u2014hours that directly affect your bottom line.\u00a0\u00a0 This white paper is intended to address the common, but critical, mistakes of design professionals, so that you can avoid (or minimize) liability on your construction projects.<sup>1<\/sup>\u00a0\u00a0 While you can never eliminate every possible avenue for claims, this paper will provide guidance on 7 specific mistakes which you can correct to dramatically lower your chances of being sued.<\/p>\n<p>Mistake #1:\u00a0 Not Treating The Contract Seriously<\/p>\n<p>This mistake can be made in several ways\u2014either by not having a written contract at all, not reviewing the contract terms, or allowing inconsistent provisions between the contract and your proposal.<\/p>\n<p>The contract rules the parties. \u00a0It is the blueprint, if you will, that says what you can be sued for, when you can sue the other party, and what your damages will be. \u00a0If you do not have any written contract, the law presumes certain things that you may not want it to presume.<\/p>\n<p>The most frequent way this mistake is made is in not having a written contract at all.\u00a0\u00a0 Every project should have a written contract.<\/p>\n<\/div>\n<div>\n<p>The second way this mistake is made is to sign the contract presented, without reading it or attempting to negotiate any of the terms.\u00a0\u00a0 In this bad economy, you may think that you can not afford to make trouble.\u00a0\u00a0 However, almost all owners are willing to negotiate, at least to some extent.\u00a0\u00a0 If you run into an owner who will not budge even an inch on the contract when the parties are all working well together, it does not bode well for the relationship down the road. Some projects you are simply better off not getting.<\/p>\n<p>Simply stated, you must have a written contract, and you must look at that contract before you sign it.\u00a0\u00a0 Standard contracts (that is, those produced by the Architect Institute of America (AIA), the Engineering Joint Contracts Document Committee\u00a0 (EJCDC), or ConsensusDocs) are the norm for larger projects.\u00a0\u00a0 There is some built in level of projection if you use one of these standard form contracts.\u00a0\u00a0 Even so, however, you need to look at the contract closely, particularly those changes and modifications to the default terms.\u00a0\u00a0 Standard terms can cause problems if they will not work for your project and circumstances.<\/p>\n<p>If your contract is not a standard contract, which is typical and appropriate for smaller projects, you must examine the proposed contract even more closely.\u00a0\u00a0 Contracts drafted by one party can often be extremely one-sided.\u00a0\u00a0 You must carefully read the contract from top to bottom to make sure everything discussed is accounted for in the document.<\/p>\n<p>Another way you can make the mistake of not taking the contract seriously is by not dealing with the inevitable discrepancies between your proposal and the contract.\u00a0\u00a0 Undoubtedly, there are things that differ between the two.\u00a0\u00a0 Most contracts have a provision that is called a \u201cmerger clause,\u201d\u00a0 which\u00a0 means\u00a0 that\u00a0 all\u00a0 former\u00a0 agreements\u00a0 are\u00a0 gone.\u00a0\u00a0\u00a0 The\u00a0 legal\u00a0 fiction\u00a0 is\u00a0 that\u00a0 all agreements have been merged into the contract itself; in actuality it may mean you will lose key terms if they are not stated within the final, executed contract.\u00a0\u00a0 Thus, if your proposal has a limitation of liability clause, but the contract does not, the contract will prevail.\u00a0 You might think that, if the contract does not address an issue, but your proposal does, the proposal term can still apply.\u00a0 Unfortunately, you would be wrong.\u00a0 The merger clause typically makes any side or prior agreement null and void.\u00a0\u00a0 This is another reason to treat the contract seriously, and to make any changes necessary so the contract reflects the important points of your proposal.<\/p>\n<p>Mistake #2:\u00a0 Allowing Unfair Or One-Sided Contract Terms To Persist<\/p>\n<p>Avoiding this mistake is part of reviewing your contract well, but certain contract provisions are so unfair or one-sided that they deserve special attention during negotiations.\u00a0\u00a0 Three of the biggest unfair provisions you may encounter are indemnity, duty to defend, and consequential damages.<\/p>\n<p>a. \u00a0Indemnity<\/p>\n<\/div>\n<div>\n<p>Indemnity is the agreement, in advance, of a party to assume the liability of another party. Project owners sometimes have one-sided indemnity clauses in their contracts stating that your firm will indemnify them from any claims.\u00a0\u00a0 Some of these provisions state that you are even required to indemnify the owner from the owner\u2019s own negligence.\u00a0\u00a0 In North Carolina and other states, such a provision purporting to give someone else liability for your own negligence is void as against public policy.\u00a0\u00a0\u00a0 If an indemnity provision is<br \/>\nproperly worded, however, it can still be valid.\u00a0\u00a0 There are pros and cons to indemnity, and the area is fraught with legal issues.\u00a0 For example, most E&amp;O policies do not provide coverage for assumed contractual liabilities such as indemnity clauses.<\/p>\n<p>If there is to be indemnity in the contract, the least you should do is to push for a mutual indemnity provision, where each side agrees to indemnify the other, and only to the extent the claim is based on that party\u2019s negligence.<\/p>\n<p>b. \u00a0Duty to defend<\/p>\n<p>The duty to defend can exist in a contract even if the indemnity clause is stricken.\u00a0\u00a0 If a duty to defend is stated, that requires you to pay for the owner\u2019s defense of the specified types of claims, whether or not your firm is negligent or even named as a defendant. Usually, the duty to defend is tied to the indemnity provision, but it does not have to be. In addition to insurance coverage issues here, there is the likelihood that the owner will pick a law firm that is top of the line, leaving you no say, yet stuck with the legal bill.\u00a0 At the minimum, if a duty to defend clause cannot be stricken, you should attempt to insert clauses to modify it by including language to allow your firm to hire, direct, or be consulted on the litigation defense.<\/p>\n<p>c. \u00a0Consequential damages<\/p>\n<p>Consequential\u00a0 damages\u00a0 is\u00a0 another\u00a0 area\u00a0 where\u00a0 you\u00a0 need\u00a0 to\u00a0 pay\u00a0 careful\u00a0 attention.<\/p>\n<p>Consequential damages include everything that is not a direct damage.\u00a0 These are indirect sources of loss, such as loss of use, loss of profit, or even loss of bonding capacity.\u00a0\u00a0\u00a0 The standard construction agreements by AIA, EJCDC, and ConsensusDocs all have at least a<br \/>\npartial mutual waiver of consequential damages.\u00a0\u00a0 However, if this provision is modified, it should be done with full knowledge of the increased risk.\u00a0 Non-standard, owner-written contracts sometimes provide for consequential damages for the owner, but not for the<br \/>\ndesign professional.\u00a0 Again, if the provision is included, it must be mutual.<\/p>\n<p>Mistake #3:\u00a0 Not Choosing The Proper Dispute Resolution Method<\/p>\n<\/div>\n<div>\n<p>Generally, there are a few distinct options if you do need to fight about a construction dispute: arbitration or trial.\u00a0\u00a0 The arbitration can be voluntary, or it can be mandatory.\u00a0\u00a0 The trial can be a bench trial or a jury trial.\u00a0\u00a0 Which is best?\u00a0\u00a0 Ask 10 lawyers and you will get 11 opinions.\u00a0\u00a0 This is something you should discuss with your lawyer prior to signing on the dotted line.\u00a0 The default is litigation before a jury.\u00a0\u00a0 However, many standard forms default to arbitration, usually American Arbitration Association (AAA) arbitration.\u00a0 There are pros and cons to both, depending on where the case would be heard, the amount of damages in dispute, and how, whether, or not, the underlying claim is complex.<\/p>\n<p>Many lawyers are reluctant to trust a jury with a construction case, although the vast majority of them settle prior to ever getting to a jury because the stakes are so high.\u00a0\u00a0 However, juries generally take their job very seriously and can often be a good dispute resolution method, depending on the facts and the venue.<\/p>\n<p>If you decide to forego a trial and contract for arbitration, you must decide whether it will be private arbitration or arbitration through one of the major arbitration organizations (e.g., the AAA).\u00a0\u00a0\u00a0\u00a0 If you opt for private arbitration, you also need to decide whether it will be single or three-panel arbitration.\u00a0\u00a0 A single arbitrator is usually faster and definitely cheaper; however, you run a greater risk of unintentionally using a poor arbitrator.\u00a0\u00a0\u00a0 In a three-person panel, even if one is poor, there usually are fail-safes represented by the other two panel members.<\/p>\n<p>These discussions are not easy, and there is no one-size-fits-all solution.\u00a0\u00a0 Still, the main mistake made here is in not thinking about the dispute method up front.\u00a0\u00a0 What may be the preferred method in one type of project may not be best for a different type of project.\u00a0 Do not just assume the default; have the discussion up front.<\/p>\n<p>Mistake #4:\u00a0 Failing To Have Good Change Order And\/Or RFI Management Processes<\/p>\n<p>As a design professional, you are well aware of the often voluminous Requests for Information (RFIs) or proposed Change Orders submitted by contractors.\u00a0 Many of these are simply the result of the contractor not wanting to look at the design documents; many others are the result of unscrupulous contractors or subcontractors attempting to \u201cchange order\u201d the project to death to<br \/>\nmake up for profit they may have conceded earlier to get the project.\u00a0\u00a0 Regardless, all change orders and RFIs need to be appropriately managed to avoid litigation.\u00a0\u00a0 You should review the contract requirements on how quickly you are required to turn around these documents and strive to stick to that schedule.\u00a0\u00a0 If the parties agree to hold off on a change order while additional data<br \/>\nor pricing is obtained, that should be documented in the change order file.\u00a0\u00a0 The thing that you do not want to do is to be casual with such requests since, if litigation ensues, the first thing the contractor or owner\u2019s attorney will consider is how responsive you were to the change orders and\u00a0RFIs.\u00a0\u00a0 If delays in response are appropriately documented at that time, you will have created a very nice business record and trial exhibit to explain to a jury why it appears you sometimes did not follow the contract requirements.<\/p>\n<\/div>\n<div>\n<p>\u00a0You also may believe that, if you receive an RFI for something that should be obvious, you do not need to respond, but you do.\u00a0\u00a0 Do not give anyone a chance to say you were anything but thorough.\u00a0 You may verbally respond to a written RFI while in the field.\u00a0 That is fine, but be sure to document the verbal response once you return to the office.<\/p>\n<p>Mistake #5:\u00a0 Failing To Have A Quality Document Retention System<\/p>\n<p>Related to the change order and RFI process, your firm should have a quality document retention system in place for every project.\u00a0\u00a0 This should include keeping uniform procedures for storing documents, deciding whether or not electronic documents are printed, determining where on the hard drive documents will be saved, and requiring timely filing of all incoming documents.<br \/>\nFirst, such a system will help your entire team be more productive and efficient, and it will help prevent anything from falling through the cracks.\u00a0\u00a0 Second, if you get sued, it will be much easier for your lawyer to find the pertinent key project documents.\u00a0 If you save documents one way and your project superintendant another way, confusion is created.\u00a0\u00a0 If a project employee only saves<br \/>\ndocuments to his personal laptop and he subsequently leaves your employment, that data may be lost forever.\u00a0\u00a0 A good document retention system can save you many hours of headache in the event of a lawsuit.<\/p>\n<p>Mistake #6:\u00a0 Failing To Respond Properly To Claims Of Errors &amp; Omission<\/p>\n<p>Like the contractor who misuses the RFI process to document a claim of design errors, some contractors and owners tend to write letters and emails complaining of issues during the project. Often the issue complained of is minor.\u00a0\u00a0 Sometimes the issue has already been resolved.\u00a0\u00a0 It does not matter; if you get a letter that states that your firm did something wrong, respond and respond in kind.\u00a0\u00a0 Specifically, do not call to dispute allegations made in a letter; respond with your own letter.\u00a0\u00a0 For every letter stating your firm did something wrong, there should be a corresponding letter from you explaining why the facts support your position.\u00a0\u00a0 Sometimes clients complain that letter-writing wars are pointless, and they may very well be, at times.\u00a0\u00a0 However, if you do not respond (even to simply say you disagree with the opposing party\u2019s statements), it will be that much harder to explain yourself to a jury after the fact.\u00a0\u00a0 The jury will wonder why you did not respond, or respond in writing, during the project.<\/p>\n<p>Mistake #7:\u00a0 Failing To Involve Insurance Company &amp; Lawyer At First Time Of Trouble<\/p>\n<\/div>\n<p>No one likes to face the reality of a possible professional negligence claim.\u00a0\u00a0 However, you must report any such claim as soon as you become aware of it.\u00a0\u00a0 This is for two reasons.\u00a0\u00a0 First, if you do not report it right away, you run the risk of the insurance carrier later denying the claim. Second, most E&amp;O carriers have experienced lawyers on staff who can help you minimize potential claims if you contact them immediately.\u00a0\u00a0 At times, the E&amp;O carrier will even hire an attorney on your behalf to assist you behind the scenes, helping to respond to letters claiming design error and the like.\u00a0\u00a0 This is called \u201closs prevention,\u201d and it is usually free for your firm for being a client of the insurance company.\u00a0\u00a0 It is generally not considered a claim (since no lawsuit has yet been filed), you usually do not have to pay your deductible, and you get free, and often critical, assistance to stop a claim before it becomes unstoppable.<\/p>\n<p>If you do not have insurance (although really, you should), you still should consider having a lawyer\u00a0 assist\u00a0 you\u00a0 behind\u00a0 the\u00a0 scenes\u00a0 to\u00a0 clear\u00a0 up\u00a0 potential\u00a0 problems\u00a0 before \u00a0they\u00a0 become exacerbated.<\/p>\n<p>Conclusion<\/p>\n<p>While no single white paper, seminar, or procedure can prevent every lawsuit, of course, if you take these 7 mistakes to heart, you can dramatically lower the risk for your firm. \u201cAn ounce of prevention is worth a pound of cure,\u201d as Ben Franklin so famously wrote.\u00a0\u00a0 Take some time now to implement some good policies and procedures, and it can pay multiple dividends later.<\/p>\n<p>&nbsp;<\/p>\n<p>Want to re-use or distribute this white paper?\u00a0\u00a0 Please do; however, you must include the entire paper and the following byline:\u00a0\u00a0\u00a0 Melissa Dewey Brumback is a construction attorney and partner in the firm Ragsdale\u00a0\u00a0 Liggett,\u00a0\u00a0 PLLC. She\u00a0\u00a0 is\u00a0\u00a0 the\u00a0\u00a0 author\u00a0\u00a0 of \u00a0\u00a0Construction\u00a0\u00a0 Law\u00a0\u00a0 in\u00a0\u00a0 North\u00a0\u00a0 Carolina (www.constructionlawNC.com), a blog dedicated to the A\/E community, which was awarded the 2011 Best Construction Blog Award by Design and Construction Report.\u00a0\u00a0\u00a0 She is rated AV, the best rating of the Martindale Hubbell rating system, and is a certified LEED Green Associate.\u00a0 \u00a0Melissa can be reached at mbrumback@rl-law.com or at 919-881-2214.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Melissa Brumback \u00a0 \u00a0 &#8211; \u00a0 \u00a0 Ragsdale Liggett, PLLC The typical commercial construction lawsuit can cost an architecture or engineering firm well over $100,000 to resolve.\u00a0\u00a0 It is not unheard of for some construction lawsuits to rise into the multiple hundreds of thousands of dollars, and, in some cases, for damages to reach into&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/7-critical-mistakes-engineers-architects-make-during-project-negotiation-and-execution-that-sabotage-their-projects-invite-litigation\/\">Continue reading <span class=\"screen-reader-text\">7 CRITICAL MISTAKES ENGINEERS &#038; ARCHITECTS MAKE DURING PROJECT NEGOTIATION AND EXECUTION THAT SABOTAGE THEIR PROJECTS &#038; INVITE LITIGATION<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[14,4,53],"tags":[118,75],"class_list":["post-359","post","type-post","status-publish","format-standard","hentry","category-construction-2","category-construction-defects","category-professional-liability-insurance-2","tag-architect","tag-engineer","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>7 CRITICAL MISTAKES ENGINEERS &amp; 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