Non-Standard Terms Of Engagement (2).

Use NZIA/AAS or CCCS terms

The short point is:  the NZIA or CCCS terms are “neutral” and built up from many years of experience in projects of all types and sizes, so you should be VERY AFRAID of attempts by others to reinvent the wheel, with the prospect of unexpected and potentially unwelcome outcomes.

The frequency with which clients dream up new terms of engagement is wearying, and often unnecessary.  The NZIA suite of AAS, and the CCCS, are well-accepted engagement terms for architects which apply to all but a few projects.  They are the product of wide and knowledgeable input, written in the mutual interests of architect and client, based on verified legal interpretation and case law, insurable, and flexible enough to deal with most issues. 

Some clients or projects will have special requirements, but these should be accommodated by specific terms, rather than specific contracts.  Wherever possible, you should object to clients attempting to impose their own creations which may later create uncertainty as to meaning and insurability.  Both NZIA and NZACS (with input from Aon) are able to provide general non-legal advice, and an appraisal of insurability;  but non-standard terms of engagement are a commercial and legal matter, and you should take legal advice accordingly. The separate article “Non-Standard Terms of Agreements (1)” provides some guidance on the words and terms which may be problematic.

For several years – and ongoing – government departments and larger local authorities have developed agreed terms with professional bodies including NZIA, NZACS, IPENZ, ACENZ and others.  There is a strong move within government to achieve consensus and coherence, and support for the use of CCCS, even acknowledging some particular (government or local body) needs which are not present in the commercial world.  NZIA is keen that the AAS scope schedules are also adopted.  We expect this effort to prevail, but meanwhile some clients just don’t “get it”.

2020 Government Model contracts

MBIE’s website states (Feb 2021):  These contract templates are not intended for construction, ICT or social services related contracts because they are generally not low risk or lower value.

The GMC is intended for products and supply rather than professional services contracts, which have different needs and requirements. We understand that when MBIE refers to construction, they include architectural and engineering design.

Engagement as a subcontractor, or under NZS3910

DO NOT sign up for a project on the basis of being a party to a construction contract or a supply contract or a purchase order. 

BEWARE of being trapped into the situation of being a subcontractor (or sub-consultant) to a design-build contractor.  They are known for spreading risk across their subbies:  this may come in the form of a grandfather clause which overtakes the usual and acceptable terms of a professional services contract.

NZS3910 (or a variant of it) is NOT an appropriate contract for professional services, and exposes an architect to the risk of PI cover not responding in the event of a claim.

Housing NZ

A recent enquiry to Aon from a member was in relation to a Housing NZ project, where HNZ was seeking a statement that “  …. XXXX Architects:

(1) warrants to HNZ that all work will be carried out in a good, professional and workmanlike manner (and in accordance with the provisions of the Contract) ; 

(2) will be required to repair all defects in their works; make good and indemnify HNZ for all direct losses to the works arising from any defect in their works; 

(3) will carry out any repair work for which they are liable under the warranty.

(4) if they do not do so within 14 days after receiving notice by HNZ, then HNZ may undertake the work and recover all costs;  

(5) indemnifies and holds HNZ harmless for any costs, claims, liabilities etc for which HNZ may become liable arising from failure by the architect.”

This wording was all in relation to a Subcontractor Deed of Warranty sought from the Architect.  It is not appropriate to a professional services contract;  it is likely to impose terms and conditions beyond those covered by the PI policy.