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RIBA Contracts CPD Day review

Contracts are not the most exciting of subjects, but they are of vital importance as Professor Sarah Lupton demonstrated at the recent RIBA Contracts CPD event. She also provided an entertaining and engrossing day.

13 March 2019

Contracts are not the most exciting of subjects, but they are of vital importance as Professor Sarah Lupton demonstrated at the recent RIBA Contracts CPD event. She also provided an entertaining and engrossing day.

A large proportion of the complaints made to the Architects Registration Board (ARB) relate to a lack of clarity in terms of appointments, believes Professor Lupton. And at least two decisions of the ARB Professional Conduct Committee in the past year were purely about the architect’s form of appointment. Sarah Lupton is well-placed to understand this, since she is an architect, an expert on contracts and contract law, and a former member of the ARB board. She produced this information at the start of the first of the CPD seminar days that the RIBA is running, to introduce its new professional services contracts and its relatively new building contracts.

The morning looked at the RIBA Professional Services Contracts and the afternoon at the RIBA Building Contracts. Although many delegates attended both, they are independent events and it is possible to benefit from one without the other. Lupton had produced numerous slides, but she was happy to allow the presentation to move to address the concerns of her audience. She also produced some brief case studies that allowed attendees to test their understanding.

Professional Services Contracts

In November 2018, the RIBA launched its new suite of professional services contracts, replacing the earlier contracts from 2012. They were:

These replace the previous documents, launched in 2010-12 and include major changes.

Why were they needed?

Drafting contracts is an onerous business, and this would not have been done, said Lupton, had they not been needed. There were some external factors that had to be considered – codes of conduct and changes in legislation. In addition, there was the need to have the correct balance of risk between architect and client. As Lupton explained: "You have to respond to commercial reality, so that clients will be prepared to use the contracts."

In terms of codes, the RIBA Code of Conduct already requires that architects make their conditions, terms of appointment and fees charged clear to clients. In particular, it says that "Members should take particular care when contracting with consumer clients".

A draft new form of the Code of Conduct has now been written, and the aim is to launch it later this year. This will bring it in line with the more detailed requirements of the ARB Code of Conduct.

The RIBA Professional Service Contracts therefore comply with these codes by:

  • defining fees and provisions for payment
  • providing clarity and protection to both parties
  • asserting and retaining copyright
  • allocating risks
  • avoiding disputes

If architects are appointed under one of the RIBA Professional Services Contracts, they can therefore be confident that they are complying with the RIBA Code to which they are subject. Other contracts may, of course, also comply, but there is no guarantee.

Similarly, the contracts comply with changes in the law (and existing laws). These include:

  • Housing Grants, Construction and Regeneration Act 1996
  • Consumer Right Act 2015
  • Consumer Contracts (information, cancellation and additional information) Regulations 2013
  • Construction (Design and Management) Regulations 2015

What’s different?

Only a handful of those in the room had even considered using the new professional services contracts so far – not surprisingly, since they were introduced so very recently. It was therefore vital to discover how they differ from their predecessors and rivals.

The contracts are clearly written and laid out, with everything contained within the documents themselves. Additional elements such as supplements and model letters that existed alongside the earlier contracts are no longer needed. Instead each document consists of four parts: the agreement, the contract details, contract conditions, and a schedule of services that has been created to suit the specific form of the contract. There is a checklist at the front of each contract to ensure that no important elements are missed.

The fees section has been simplified, and there are more options than before for setting the frequency of payments. There are also now options for adding the frequency of design meetings.

Before considering in detail the changes that apply across all the contracts, it is worth seeing how those contracts differ from each other.

Each contract is aimed at a specific type of work. The one that differs most obviously is the domestic appointment. This is because domestic customers are covered by the Consumer Rights Act 2015, which gives them some specific rights. One is a right to fairness, so that an unfair contract term will automatically be ruled to be invalid.

This will not be an issue for those using the RIBA Domestic Professional Services Contract, since it will not be unfair. More important is the entitlement to a 14 day cooling-off period after a domestic client signs their contract. It is vital to recognise this because, since there is often severe time pressure, architects may start work immediately the contract is signed. If they do this, they must make a formal agreement to ensure that they will be paid for the work that they have done even if the contract is cancelled. Otherwise, they will be working at risk.

If one takes the RIBA Standard Professional Services Contract as the "norm", then it is useful to see how each of the others differ from it, and how they have been changed. The RIBA Concise Professional Services Contract is aimed at smaller, less complex projects, and has elements that would not be needed on this sort of work removed, such as novation clauses and clauses for collateral warranties.

The RIBA Principal Designer Professional Services Contract is intended for the person who takes this role under the CDM Regulations. If the architect is also taking this role, then they will need a second appointment under this contract. Because this is largely a role relating to health and safety, there are obligations in the contract to notify the client about health and safety issues – but a lot of other elements, such as novation clauses, are omitted.

The RIBA Sub-consultant Professional Services Contract may be used by architects in two ways. They may use the contract when appointing a sub-consultant or they may be that sub-consultant themselves. This arrangement, whereby an architect or other consultant appoints another professional to carry out part of the work, is increasingly common and can, explained Lupton, be fraught with danger.

The most important thing, she explained, is to have "back-to-back" terms. This means that the responsibilities laid on the sub-consultant are no greater than those laid on the lead consultant. She also warned that it is no longer legal to have pay-when-paid clauses. That means that if the sub-consultant has completed their work as required, and the lead consultant has not been paid, then the lead consultant is liable to pay them. This is something to consider seriously when considering appointing a sub-consultant.

Sarah Lupton warned at this point, "It is not a good idea to change clauses without legal advice". There can be knock-on consequences, she said, that are not immediately obvious.

So what are the changes that are fundamental and affect most of the contracts?

One is to the schedule of services. These are now all set out under the RIBA Plan of Work. Elements have been moved between different stages. For example, there are now a defined number of site visits in stage five, in addition to the requirement to respond to enquiries.

And if things go wrong?

One of the most important aspects of a contract is to protect all parties when things go wrong.

The new contracts change the way that "duty of care" is defined, reading: "The Architect/Consultant will exercise the reasonable skill, care and diligence to be expected of an Architect/Consultant experienced in the provision of such services for projects of a similar size, nature and complexity to the Project."

This does not mean, Lupton stressed, that the architect must actually have experience of such projects, but simply (or perhaps not simply at all) that they must act as if they had that experience. It is more onerous than the requirement in the previous contracts from 2010, which read "shall exercise reasonable skill, care and diligence in accordance with the normal standards of the Architect’s profession".

This, said Lupton, is "what the market wants", the abolition of any possible loophole for an architect to say that, although they were skilled, they made a mistake because they had never done anything like this before. Too often clients will impose their own onerous terms because they are worried about loopholes. Architects may at first glance not be keen on this, but, she said, "You want your own terms to be acceptable and on a par with those of other consultants."

Sub-consultants have their own duty of care, which means that they must act in such a way that they "shall not cause the Architect to be in breach of its obligations under the Head Agreement or under any Collateral Warranty". It is vital, Lupton said, that if you are working as a sub-consultant, you see the head agreement, otherwise you will not know what you have signed up for.

One of the strengths of the RIBA Professional Services Contracts is that they lay down as requirements actions that any sensible person would consider good practice – at least when they were not blinded by panic or overwork. One of these is the duty to inform. All the contracts (apart from the Principal Designer version) say, "The Architect shall… inform the Client of a need to make any Other Client Appointments to perform work or services in connection with the Project; and/or any information, decision or action required from the Client or Other Client Appointments in connection with performance of the Services."

Not doing this, said Lupton, is a major cause of resentment, and can be very expensive. "Architects must keep clients informed. Often they don’t, and clients become very aggrieved if they are kept in the dark."

One very important clause in the contracts is the net contribution clause. This, said Lupton, is "really crucial" since it limits architects’ liability by saying that it "shall be limited to such sum as shall be agreed… or adjudged by the Court to be the proportion of the loss to the Client caused by the Architect's failure." This removes the possibility of joint and several liability, of which architects have previously fallen foul – the condition where all parties to the project are jointly liable. While this may seem equitable, it can, in cases where the contractor has subsequently gone out of business, leave the architect as the "last man standing", liable for all the losses.

The terms for termination are now more precise and more favourable towards clients. They now set out the reasons for which an architect can terminate a contract, saying "Such grounds are limited to..." whereas the previous wording was "Such grounds include but are not limited to..." The reasons for termination do however now include "any other reasonable grounds for suspension or termination of the contract". As so often with contracts, what constitutes "reasonable grounds" will not be clear until or if it is tested in a court of law.

The overall effect, Lupton said, is that "previously you could terminate at will. Now you may have to justify your decision." This should make clients feel more comfortable as the contracts are now more fair and balanced.

Building Contracts

The RIBA Building Contracts were first published in 2014 but new editions were published in February 2018. There are two forms of building contracts - a RIBA Concise Building Contract for small, non-complex projects with a commercial client; and a RIBA Domestic Building Contract for domestic/homeowner projects for consumer clients.

Why use these contracts?

Sarah Lupton sees the RIBA Building Contracts as a Goldilocks option. "The JCT contracts are very detailed and in-depth, but can be indigestible. The NEC contract on the other hand is so concise that it can be difficult to know what is meant. The RIBA contracts are comfortably in the middle. The language is simple but they are not so reduced that there is a struggle to understand them".

Other reasons for adopting the RIBA Building Contracts, Lupton said, is that they are easy to use, "even though they place more risk on the contractor" than some other contracts.

In addition, they are flexible. They allow contractor design in a way that makes it very simple for the client to use them, since the contractor takes full responsibility for the design. As a result, there is no need for any warranties.

Are these the right contracts for the job?

Sarah Lupton produced charts showing the range of contracts available (JCT alone has 18) and where they are applicable. The two RIBA Building Contracts fall in the category "Two-party design – bid – build with contractor design". This makes them pretty flexible, since they are contracts for a traditional route, but with the ability to accommodate contractor design.

The RIBA Concise Building Contract can be used for public-sector work as it contains an appropriate clause. Both contracts can be used on a lump sum or measurement basis, and with payments by monthly valuation, or on achievement of agreed milestones. They can be used on contracts with phased starts, with sectional completion and with partial possession.

What’s different?

Lupton outlined the changes that were made when the 2018 contracts were written, relative to their predecessors in 2014.

Some of these are just to make things clearer. For instance, there are now checklists for completion and several defined terms have been added.

The specific requirements for progress meetings have been removed, as have provisions regarding the confirmation of verbal instructions.

Interim and final certification, and payment provision, are now the same in both contracts. This, Lupton said, "makes them more consistent for architects to administer but does mean that they are slightly more onerous for inexperienced homeowners".

Time bar provisions for contractors have also been removed. "Overall," Lupton said, "the contracts are more balanced. The first version was an architect’s dream contract, but that meant that they struggled to persuade contractors to tender to use them. The contracts are still more stringent than some other contracts, but they are now more equitable."

Getting it right

The contracts set out clear guidelines on collaborative working. They specify that there should be a pre-start meeting to set out expectations and communication procedures, and to identify risks and procedures for dealing with them.

It also says that there should be advance warning and joint resolution of delay.

In the case of improvements and cost savings, the contractor can suggest changes to improve quality, progress and price. Any savings that result will be shared equally. This is not, Lupton admitted, a clause that she favours, because, like many architects, she is suspicious of "improvements" that drive down quality.

The RIBA Building Contracts define the architect or contract administrator’s duty to provide information. They also describe the responsibility of the architect or contract administrator for inspection and tests. Architects inspect on behalf of the client, and where they find something that is not satisfactory, they can ask for it to be done again. This can be a contentious issue. Contractors can become angry if an architect finds a defect at a late stage and demands that it is rectified, saying that the architect should have spotted it earlier.

Lupton made it clear that the fact that an architect inspects does not mean that they can be expected to spot everything. For example, a small error in dimensions may not become apparent until the contractor discovers that a certain element will not fit. It is not the architect’s duty to measure everything at every stage. The case of McGlinn v Waltham Contractors Ltd in 2007 specifically stated that "reasonable examination of the works does not require the inspector to go into every matter in detail. Indeed, it is almost inevitable that some defects will escape his notice." So, taking inspection seriously does not mean being expected to spot everything.

Where the contractor is designing part of the job, the contracts lay out protocols for this, including the condition that the contractor must notify the architect or contract administrator of any discrepancies, and that it must submit details of its design for comment at least 21 days before carrying out any work. Lupton warned, "You have to be clear which elements of the design are to be designed by the contractor." In too many cases litigation results when this is not clear.

When it comes to practical completion the RIBA Building Contracts are, Lupton said, much clearer than JCT on what constitutes practical completion. Describing them as "wonderfully crisp and clear" she said that "it is worth using these contracts for that element by itself".

That term, "wonderfully crisp and clear" could also be used to describe Lupton’s presentation. At the end, she advised that anybody planning to use the RIBA Building Contracts for the first time should do so on a relatively small and simple job. One might well add that they should only do so after attending one of her seminars.

Professor Sarah Lupton is a partner in Lupton Stellakis and directs the Master in Design Administration and the Diploma in Professional Practice at Cardiff University.

Text by Ruth Slavid.

Further details on the new RIBA Professional Services Contracts or RIBA Building Contracts.

Further details on Sarah Lupton’s RIBA Contracts CPD Day, events and dates.

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