Wednesday, September 23, 2009

Air tight: understanding and writing good contracts could be the key to business success for young designers and design firms.(practice).

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Most young architects and designers have only a vague notion of how to manage client business relationships. Even those who have clear business objectives may feel that injecting a "contract negotiation" into the relationship at the early stages will somehow poison the well and limit the free flow of ideas necessary for good design. Thus, work is often begun on the basis of a simple proposal devoted more to describing the project than to setting the business terms between parties. At most, there may be some delineation of the services that are or are not included in the base fee and, at their insurance broker's insistence, some language that limits the professional's responsibility for actual construction.

Aside from legal liabilities that might arise from not having a detailed contract, lack of clarity on terms of an agreement often leads to disappointment. Clients may resent charges for additional services related to unforeseen conditions at the project site, or, in the interest of maintaining the relationship, a designer may feel pressured to provide free services to accommodate his client's finicky tastes.

The key to keeping clients for life--and to having them enthusiastically recommend your firm for other projects--is to set clear parameters for the business relationship at the outset. Good prospective clients will cooperate with a professional approach to these issues and will appreciate your effort to eliminate surprises. Indeed, a client's resistance to such a discussion may be an omen that the fit is not quite right: If you can't agree on business issues during the honeymoon, imagine trying to resolve them if things start to go wrong.

More than just setting the right tone with the client, you and your firm will benefit from the thoughtful process required to formulate

a comprehensive proposal and agreement. By making conscious decisions up front about the scope of services to be provided, the risks you are willing to bear, and the base fee to he paid, you will lay the right foundation for future growth.

For each project, there are some fundamental issues that should be addressed:

* Basic vs. Additional Services: It may seem self-evident, but your agreement must indicate specifically what services you will provide for the base amount of the fee and for what you will need to charge extra. Any services not specified in the agreement should be treated--and paid for--as Additional Services.

* Scope of Work/Design Phases: Many clients don't understand the design process, and those who do will be interested to learn what you intend to do at each step. Break down your services by design phase (i.e., programming, schematic design, design development, etc.), and be sure to explain the goal for each stage, what you will be doing to achieve that goal, and what documents you will produce at the end of the phase.

* Construction Administration and Post-Construction Activities: Carefully consider whether and to what extent you will provide services during and after the construction phase, and be sure to provide for adequate compensation.

* Revisions and Approvals: Be up-front with clients about how many revisions you will make to the design and documents in each phase (we find one to two customary), and explain to the owner that once an approval is issued, changes may delay the project and will be billed as an Additional Service.

* The Construction Budget: Do not commit to designing to a budget over which you will have no control. Although the owner is entitled to expect you to respect his financial goals, he also should be aware that you can't guarantee construction costs.

* Termination: At some point, either party may want to end the relationship. The best way to avoid a complicated parting is to provide a clear mechanism in the agreement that sets forth notice requirements, cure periods, and final payment terms. While an owner may balk at providing you an opportunity to terminate for convenience, it is entirely appropriate for the design professional to end its services for non-payment, if the owner is not providing required information, or for any other breach of the agreement.

* Ownership of the Documents: If the agreement is silent, you will be deemed to have Rill ownership and copyright of all the designs and documents you produced for the project. Most owners, however, will not realize this fact, and that misunderstanding can lead to intractable disputes. Tell the owner in the agreement that you own the documents and that you are providing a license for the project.

* Dispute Resolution: Mediation, arbitration, litigation, or all three? Speak with an attorney about the options, but make clear in your agreement how you wish to handle disputes that may arise. Most importantly, make sure that all parties (including the contractors) will be available in any proceeding.

* Limitation of Liability: The liability that comes with performing construction design services often can far outweigh the fee for such services. It is appropriate to discuss the relative risks and rewards of the agreement with the owner, and to come to an understanding that recognizes and limits your disproportionate exposure to liability.

Design agreements do not need to be overly complicated. To the contrary, the best agreements spell out the obligations of the parties in straightforward terms. In our experience, the language of the document is easy to arrive at once the business issues described above have been agreed between the parties. Embrace the process as part of your professional life, and success will not be far behind.

Alexander F. Ferrini, Esq.

Alexander Ferrini is a partner at LePatner & Associates, LLP, a New York firm specializing in construction and design,

Source Citation:Ferrini, Alexander F. "Air tight: understanding and writing good contracts could be the key to business success for young designers and design firms.(practice)." Contract 48.7 (July 2006): 78(1). Academic OneFile. Gale. BROWARD COUNTY LIBRARY. 23 Sept. 2009

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