Top 3 Design Contract Clauses Every Architect Should Know
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Top 3 Design Contract Clauses Every Architect Should Know

Today I want to share with you the three design contract clauses that cause Architects, Interior Designers, and Design Professionals the most problems. So let’s get started…

Fee Proposal Starter Kit

Top Three Design Contract Clauses: 

While contracts cover many important issues, today I’m only going to discuss (what I consider to be) the three most important contractual terms that can be found in most Owner Architect Agreements.

Please note that I’m discussing these issues from a commercial perspective only, I’m not a lawyer and I don’t provide legal advice, so please consult with your professional legal counsel before entering into any contractual arrangement.

GENERAL NOTES ABOUT DESIGN CONTRACTS & AGREEMENTS:

As a starting point you want to make sure that all your design contractual terms are fair, reasonable, insurable and most importantly legal. 

This is to say that all requirements should be within the control and scope of the Architect regarding the Architect’s expertise and experience. 

So, each clause should be reviewed in the context of the project as a whole and as always, please seek professional legal advice before acting on any contractual agreement.

Top 3 Contract Clauses Every Architect Should Know About
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COPYRIGHT CLAUSE:

The copyright clause is one of the most important clauses that you’ll find in any Client Architect Agreement because it addresses the rights granted to the author, or creator of the work (the Architect), including the right to copy, distribute and adapt the work.

Why is the Copyright Clause important for Design Professionals?

As an Architect your ability to build a brand and successfully practice architecture is heavily influenced by retaining ownership of the copyright in the designs created, which explains why the copyright clause is such a hot topic.

This is not to say that Clients shouldn’t have any rights. A fair copyright clause will grant the Client a non-exclusive license allowing them to use the materials for that which they were prepared and provided. However, such license should be subject to payment of fees and limited to the project at hand.

You’ll also want to include language confirming that the Architect will have no liability for any misuse of the work and that the Architect can revoke the license should the Client fail to pay for the work.

Top 3 Contract Clauses Every Architect Should Know About
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SET-OFF CLAUSE:

The second clause I’d like to discuss is called set-off. The reason I’ve chosen to discuss this clause is that it has the potential to impact the Architects ability to receive payment in a timely manner. 

The set-off clause serves as a vehicle by which the Client may deduct money from an Architects invoice. This is not a clause that’s favored by Architects and is therefore typically limited to Client drafted Agreements and larger projects.

Because the scope of a set-off clause can vary widely it’s important to consult with professional legal counsel when such a clause is discovered.

Why do Architects consider the Set-Off Clause to be Unreasonable?

Many Architects consider the set-off clause to be unreasonable for two reasons:

  • Firstly, because it allows too much opportunity for mismanagement by providing a vehicle for arbitrary deductions, and
  • Secondly, because should the Client believe that there is an oversight in the Architect’s services, then the dispute resolution procedure is available to handle such a situation.

Most Architects will want to try and negotiate any set-off clauses out of the contract, however, if this is not an option, then try and amend the clause so that the Client must “establish right” rather than mere “claims”.

Top 3 Contract Clauses Every Architect Should Know About
Image by Blue Turtle Consulting

CAP ON LIABILITY CLAUSE:

The final clause that I’ll be discussing today is called the Cap on Liability clause which is somewhat self-explanatory. A cap on liability requires setting a limit on the Architects liability and therefore, unlike the set-off clause, you’ll want to make sure this clause is included in all your contractual agreements.

Most Architects will want to limit their liability as much as possible. A typical threshold is the level of required insurance, which should reflect a fair balance between the Architect’s fee and possible exposure on the project.

All changes to your approved agreement will need your insurance providers approval so be sure to consult with your professional indemnity insurance provider when reviewing and negotiating contractual clauses.

That has been a very quick look at three of the most important contractual clauses that all Architects are likely to encounter throughout their career.

Let us know what you think:

Are these the 3 most important design contract clauses for Architects and Designers? Let us know in the comments section below by saying “Yes” if you agree, or “No” if you don’t agree. 

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Want to improve your Design Contract Knowledge?

Would you like to learn more about other design contract clauses including; Standard of Care, Bank Guarantees, Bonds, Liquidated Damages, Professional Indemnity Insurance, Indemnities, Warranties, Net Contribution, Payment Terms, Retention, Variation, Securities of Payment, Termination, Suspension, Dispute Resolution, and Assignment?

The following resources are available right now to help you achieve more success with your Fee Proposals and Owner Architect Agreements:

• The Design Professionals Guide to Fees + Contracts (eGuide):
https://blueturtlemc.com/product/fees-contracts-eguide/

• Fee Proposal and Contract (Template):
https://blueturtlemc.com/product/multiple-fee-proposal-template/

• The Ultimate Fee Proposal Workshop (CE/CPD points available):
https://blueturtlemc.com/feeproposalworkshop/

• How to Avoid Giving Away Free Design Services (Blog): https://blueturtlemc.com/blog/how-to-avoid-giving-away-free-design-services/

This Post Has 2 Comments

  1. Chris Chung

    hi there, always enjoy the information that you are providing.

    on a side note- in regards to the copyright of our intellectual property; why are architects not compensated similarly to other industries when it comes to intellectual property. musicians, actors, writers, et al get royalties for their work, why don’t Architects?

    thanks
    Chris

    1. Ian Motley

      Hi Chris,

      Thank you for your kind words. Architects can be compensated with a royalty fee agreement depending on the project. For example, I’ve worked on two projects that included royalty fee agreements. The first was for a line of kitchenware products designed by an Architect. The second was for a residential building that was partly prefabricated. Royalty fee agreements work well when designing something that can be mass-produced. I hope that helps.

      Best,

      Ian

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