May 2014
Updated Feb 2017You should insist on a proper written agreement with your client which outlines at least the scope of work, responsibilities, and fees, and preferably all the standard provisions of the NZIA (or a similar) standard contract for professional services. It is critical to the defence of a claim against you, and your policy imposes a penalty excess if you are faced with a claim in the absence of proper terms of engagement.A report of disciplinary proceedings by NZRAB, in dealing with terms of engagement, makes the following statement:“Lessons to be learned:When accepting a commission, clear terms of appointment are required, of sufficient detail to give clarity to both parties given the nature of the work. The NZRAB recommends that agreed terms of appointment should be in writing and prepared with care. An architect is taking a great risk working in any other way. Not having clear expectations in writing is commercial and professional folly.”The Code of Minimum Standards of Ethical Conduct for Registered Architects Section 50 states:A Registered Architect must not undertake professional work unless the Registered Architect and the client have agreed on the terms of the appointment, which may include but need not be limited to:(a) scope of work(b) allocation of responsibilities(c) any limitation of responsibilities(d) fee, or method of calculating it, and terms of trade(e) any provision for termination(f) provision for professional indemnity insurance. Beware of signing up for conditions of engagement crafted by the client or their lawyers. There seems to be an endless supply of lawyers, project managers and clients who think they know better than the industry standard terms and conditions. The NZIA terms of engagement are built upon years of experience and professional service, and are “neutral” as between the architect and the client. Inevitably, client-generated terms are primarily for their benefit: perhaps at your expense. Unless you have given client-generated contract terms a thorough once-over with sound and experienced legal advice and architectural peer review, then you should avoid the risk.NZACS has had several claims where, because of the ambiguity or inadequacy of the terms of engagement, the exposure to liability has been widened beyond what was anticipated. Recently a lawyer sought to avoid the liability limitations on the basis that a “regular” client had not signed a specific agreement, despite being well aware of the usual terms from several past projects with the same architects.In another case, it was alleged that a mere reference to the incorporation of the NZIA standard terms was insufficient to draw the client’s specific attention to the limitations therein, and accordingly they were inapplicable.One very large claim resulted from a mismatch of terms of engagement: the engineers and contractors had ceased business, the project manager had specifically excluded certain risks, but the architect had not, and thus was left “holding the baby”. Moral: if you can, seek “parity” in the terms and risks between consultants.Often, when describing the scope of work, the “exclusions” are more important than the “inclusions”: a recent claim snared a member on the basis that they attended the site during construction and therefore undertook “supervision”, despite their agreed (but poorly recorded) role being only for the selection of finishes. If work which would ordinarily be undertaken does not form part of the engagement, then that should be carefully and specifically noted.The Building Amendment Act 2013 Part 4A “Consumer rights and remedies in relation to residential work” provides that contracts for building work over $30,000 will need to be in writing, and will be subject to minimum mandatory contract terms. This does not apply to designers: design work is specifically excluded from the Building Amendment Act 2013 Part 4A.