5.1 Overview of bespoke forms

5.1.1 Why would a client propose a bespoke form of appointment?

If a client has sufficient resources to do so, they may propose to use a bespoke form of professional appointment. The expense to the client comes not only from the fact that a professional legal advisor will have been required to put the document together initially, but also from the likelihood that an architect will not be willing to accept bespoke terms without proposing amendments, whether these come from the architect’s own experience or from their legal advisors or insurers. The client’s legal team will be required to conduct any negotiations to settle an agreed form.

Because of the potential additional expense, the client will need to have a good reason to use a bespoke form. However, if the client is a regular user of architectural services, or a job is particularly complex or high value, the client may consider that the standard forms on offer, including the RIBA Standard PSC, do not provide sufficient protection.

It almost goes without saying that the use of a bespoke form of appointment is likely to increase costs for the architect, too. Agreeing a non-standard form, without taking legal advice and seeking insurer approval, is not sensible practice. The cost of obtaining legal advice can be significant, although some insurers and insurance brokers provide a ‘contract review’ service as part of the overall PII package, under which they will arrange for solicitors to provide comments on a draft appointment form for free. Discuss this with your broker. Typically, this advice will be limited to issues that may affect cover under the architect’s insurance policy; this is a different focus from the ‘full commercial review’ that an independent solicitor would provide if instructed to review a draft appointment. If an architect does have to seek advice from an independent solicitor, the client may be willing to pay or contribute to these costs; in other cases, the architect might factor their legal costs into the fee in another way.

There may be occasions when architects, particularly large and international practices, have and propose their own bespoke forms However, this chapter concentrates on bespoke forms put forward by clients, where the reasoning behind the terms being proposed, and their effects in practice if accepted, can be obscure.

Client bespoke forms will be drafted to shift the balance of risk in favour of the client in many, often subtle, ways. This chapter sets out areas where bespoke appointments are likely to be more onerous than the industry standard forms. Not all of these points are going to be worth fighting over every time; it is for the architect and their legal advisor to decide what is important on a project-by-project basis, and to assess the relative strength of the bargaining positions of the architect and the client in each case. It is rare that a legal argument is so persuasive on its own that it will convince the other party to agree an amendment. Each negotiation is a mixture of legal argument and commercial pragmatism to achieve an overall compromise.

5.1.2 How does a negotiation progress? How do I express my preferred amendments?

If the bespoke form is proposed by the client, the client’s solicitor will usually get the ball rolling by sending out an initial draft. The draft should have been properly tailored to the nature of the project, but this is not always the case, and you may need to spend some time striking out obviously inappropriate provisions.

How should the architect indicate the areas they cannot accept? There are three main options:

• Manuscript mark-up of the appointment (handwritten amendments). This is not best practice because of the potential confusion that may result from having to decipher an individual’s handwriting squeezed onto a page.
• Electronic mark-up, tracking the changes proposed by the parties at each stage in the negotiations (often shown in different colours depending on the software used). Electronic mark-ups are very useful tools, but can themselves create confusion if, for example, the clause numbering changes when individual provisions are deleted or if, when a dispute arises, only a black and white hardcopy of the mark-up remains.
• Electronic schedule of comments in the format: ‘clause number – comment’. This is arguably the clearest way to record proposed amendments and track the negotiation, although it is also potentially the most time-consuming.

The architect should always insist on seeing a final draft for review, in both ‘clean’ and ‘track changes’ versions, before a document is sent out by the client for signing (execution).

What if the client says there will be no amendments?

Some clients profess to be unwilling to consider any amendments to their proposed form, particularly clients with an effective monopoly in their respective areas, such as major transport or utilities companies. But in a commercial world it is usually possible to achieve a fairer balance in the appointment document, even if ‘no amendments’ is the client’s opening position. The architect may have particular concerns which are potential ‘deal-breakers’, issues that may either make it not commercially viable for them to take the job on, or which may compromise coverage under their PII policy. An architect should always at least raise these points with the client, however strongly the client has stated that they will not accept any amendments. Your insurer may be willing to agree a specific one-off endorsement to your PII policy if the client is unwilling to compromise on a particular provision that may create a coverage issue.

If everything else is favourable – the architect’s proposed design, their approach, the fee, the personalities – then a client will generally be open to a compromise on particular terms of the appointment. But no appointment is risk free.

5.2 Discussion of particular forms of words used in bespoke appointments

5.2.1 Defined terms

A bespoke appointment will usually have a clause setting out the meaning of certain terms which appear elsewhere in the appointment, signified by beginning with capital letters. A client may wish these meanings to be wider (or narrower, as in the example of ‘Additional Services’, below) than the architect had anticipated. For the architect to understand how the definition may work to their disadvantage, they must cross-refer to the other parts of the appointment where the defined terms appear Examples are given below.

‘Additional services’

The intention of this wording is to restrict the architect’s ability to claim additional fees, even though they have a legitimate claim because they have carried out additional work over and above their basic services. There is no reason for an architect to accept such a restricted definition of what is additional; this does not represent the market norm.

The use of the wording ‘not foreseeable’ is harsh, because it is not subject to a standard of reasonableness. The client will argue that the architect should have foreseen that the additional services provided were going to be required and therefore the client should not pay for them. A similar effect is created by wording requiring the architect to provide the basic services and in addition do all things that ‘may be reasonably implied by them or are reasonably incidental to them’. But the architect needs to know with certainty what their basic services are and, from that, what will be additional; it is impossible to provide an accurate fee estimate without this information, something which is not helpful to the client or the architect.

The wording relating to design changes is indicative of a growing trend for clients to seek redesign for free as part of a ‘value engineering’ exercise or series of such exercises on a project. This is a misuse of the term value engineering, which when used correctly is about innovation through design to reduce cost. The risk being considered in this section is where the client seeks to oblige the architect to redesign down to cost.

This could involve significant redesign by the architect, but the likelihood is that the need for designing down will not be, or not exclusively, the fault of the architect. It is usually for the quantity surveyor to keep track of likely expenditure. If the quantity surveyor only realises late on in the design process that a project is over budget, and that cost savings can only be made if the design is changed, the amount of work thrown away and work which must be redone can be huge. It is unreasonable to expect the architect to bear their own costs of the redesign in these circumstances, and such work should be treated as an additional service. Ideally the architect’s right to additional fees for such work should be expressly stated in the appointment. Ideally the architect should also be allowed some input into agreeing cost changes, and should ensure that the quantity surveyor’s appointment requires the quantity surveyor to seek the architect’s input before changes are made.

‘Brief’

If the brief does change significantly, and the architect finds that the building they are designing is substantially different from the one which they originally agreed to design, any additional work required must be paid for as an addition to the basic fee. This is normally not controversial, but it is vital that the architect keeps track of changes from the initial brief. Development of the brief may be inevitable, but a wholesale change in the scope of the design is something that should be notified to the client, an instruction sought, and an increased fee agreed, before the additional work takes place. It is so important to keep on top of these changes; lots of little adjustments can cumulatively amount to a significant deviation from the initial brief.

‘Documents’

This definition will link in with a ‘copyright’ clause in the main body of the appointment. A client will expect to receive a copyright licence in relation to all of the documents, as defined, or in the worst case may even expect copyright in the documents to be assigned to them. The use of the words ‘by or on behalf of’ require the architect to secure the right to grant a copyright licence from any other party whose copyrighted material the architect has incorporated into the work they have produced. This can be extremely difficult to achieve in practice, so at the very least the obligation in relation to third party copyright should be subject to a ‘reasonable endeavours’ obligation – an obligation to do only such things as are commercially reasonable, rather than everything possible, to achieve a copyright licence for the client from such third parties.

In addition there should be an express exclusion in relation to proprietary products, such as computer software, whose originators are unlikely to be willing to grant copyright licences without a formal fee arrangement, if at all.

‘BIM’: building information modelling

The architect may be required by their appointment to collaborate with all of the other designing contractors and consultants on the project through BIM. BIM is described in detail in section 12.3 of the RIBA Handbook of Practice Management (ninth edition, 2013). As the author notes:

The perceived advantages of BIM include the promotion of more efficient team working, enhanced clash detection, easing the integration of architectural design with mechanical and electrical services, structure and programming, and providing a focus for design meetings.

It is vital that, in the context of BIM, the architect’s appointment makes very clear that they shall not be liable for the work, acts or omissions of others. BIM dates back to the 1990s, but the potential advantages and pitfalls are still being discovered; the following questions remain to be resolved:

• Who owns the copyright in the design if all consultants and specialists have collaborated on a single common output?
• Can BIM create liability between designing parties? How does this sit with the legal doctrine that contractual liability is generally only possible between parties to a contract?
• What is the best way to audit design changes and track who has done what and who is meant to do what?

The RIBA Plan of Work 2013 has been developed to embrace the use of BIM, and the design management processes and leadership issues referred to in the 2012 BIM Overlay to the old Outline Plan of Work 2007 are embedded in the 2013 Plan of Work, specifically in the Key Support Tasks bar and the references to the need for a project execution plan and a technology strategy.

‘Losses’

If the main body of the appointment makes the architect liable for the client’s losses as a result of particular breaches of contract, you should check whether ‘losses’ has been defined. The intention may be to create an ‘indemnity’ under which the architect is liable to the client for a far more broadly defined range of losses than would ordinarily be recoverable for breach of contract. This should not be accepted. This is an important issue for architects, because PII policies are generally based on the more restrictive common law definition of the losses that can be recovered.

‘Third party agreements’

A definition such as this will usually be linked to a clause in the main body of the appointment obliging the architect to perform their services so as not to cause or contribute to any breach of such agreements by the client. This should generally not be accepted without qualification. After all, the architect will have had no influence at all over the terms the client may have agreed with third parties.

The architect’s primary duty is to carry out their services for the client, exercising reasonable skill and care. There is no reason why this should necessarily be compatible with the client’s obligations under agreements with third parties. For example, the client may enter into an agreement for lease with a potential tenant that includes a penalty if the building is not completed by a strict deadline. But the architect’s duty is to use reasonable skill and care, not to guarantee completion of the building on a particular date.

If the client is insistent, then additional wording may be proposed providing that the architect’s obligation to carry out their services in compliance with any third party agreement is subject to the terms of the appointment itself taking precedence in the event of any discrepancy or conflict between the terms of the third party agreement and the appointment. Failing that, the architect should insist on an additional fee to cover the potential risk that any services provided under the appointment may cause or contribute to a breach of the third party agreement. Alternatively they should add wording such that only a breach of the appointment or negligence would fall within the scope of the obligation – not the simple fact of performance of the architect’s services.

Finally, the architect must ensure that their obligation in relation to third party agreements is only effective to the extent that the architect has received a copy of any such agreement prior to commencing their services; the architect cannot reasonably be expected to carry out their services in compliance with a document they have not seen. The architect should be entitled to recover the additional costs of re-doing any services that need to be amended to comply with a third party agreement that the architect had not seen at the time they carried out the services in question.

5.2.2 Entire agreement

This ‘entire agreement’ provision is intended to prevent the architect from seeking to rely on any promises or agreements made during the course of negotiations – for example, a promise by the client to pay an additional fee if the architect’s services are not required beyond the planning stage. This is not necessarily a problem for the architect, but it does mean that if there is something that was agreed during the pre-contract negotiations, or some assurance given, on the basis of which the architect was persuaded to enter into the appointment (and on which the architect may later want to rely) then the architect must ensure that the agreement or assurance is included in the written terms of the formal appointment.

5.2.3 Effective date

If significant services have been carried out prior to the date of the appointment, such an ‘effective date’ clause can create problems for the architect. This is particularly true if the appointment imposes additional conditions or standards of performance – such as the requirement to comply with the terms of a third party agreement – that the architect was not aware of at the time they began performing the services. If there is any question of the architect’s prior performance being in breach of the appointment terms subsequently proposed, the architect must insist that the appointment starts on the date it is executed and no earlier. Failing that, the architect could propose that if any work carried out prior to the date of the appointment needs to be revisited to ensure compliance with the terms of the appointment then this additional work will be paid for by the client.

5.2.4 Pre-existing work by others

Assuming responsibility for the work of others is a high-risk venture and should not generally be considered. There is usually no need for the client to have this protection – the client will generally have a contract with, and therefore a contractual right to sue, any previous architect or other designer for defaults – but it is better for the client to have a single point of responsibility for the internal coherence of the design.

If you assume responsibility for previous work, you must use reasonable skill and care to check it, including the design assumptions on which it is based, or you are acting negligently. Consider the nature of the previous work and ask the following questions:

• Is the work extensive and fundamental to the design going forward?
• Are you being given the opportunity to properly assess the quality of the existing work?
• Are you being paid an enhanced fee for accepting the risk of integrating the existing work into your overall design?
• Why is the previous designer no longer involved?
• Do you trust their work?
• What does your insurer say?

5.2.5 Additional services and instructions

In practice an instruction will often be given orally, but the architect should always wait for written instructions, and written agreement of any consequent cost and programme adjustments, and chase if necessary. This is a project management issue; it is within the architect’s control to keep the paperwork ticking over and make sure there is a written record of any changes to the scope of services, the fee or the programme.

There must be scope under the appointment for the architect to notify the client when they reasonably consider that additional services are required. Any such variations to the services should again be recorded in writing and only carried out if agreed in writing by the client. If the architect considers that additional services are required, and the client disagrees, the architect should consider whether further correspondence is necessary. If the failure to instruct additional services is, in the architect’s reasonable opinion, likely to compromise the project in some way, this advice has to be set out in detail in writing to the client.

The architect should expect, under their appointment, to be obliged to comply with the reasonable instructions of the client. But if the architect receives an instruction which, in the architect’s reasonable opinion conflicts with the terms of the appointment, or any statutory or other legal or regulatory requirements, the architect should be able, under the appointment, to reject the instruction.

In addition, if for any other reason the architect considers in the reasonable exercise of their professional judgment that the client should not proceed with such instruction, they should be entitled to advise the client in writing of their opinion and the appointment should clearly say that if the client proceeds with the instruction against the advice of the architect, the client proceeds at their own risk.

5.2.6 Duty of care

As mentioned in section 4.1.3 in the context of the RIBA Standard PSC, knowledgeable commercial clients will usually expect an enhanced duty of care, over and above the standard of the ordinary skilled professional that is implied by law.

It can be hard to argue against this enhanced duty – it is effectively the market norm in a bespoke appointment – and it is easy to see why a client who has selected an architect on the basis of their reputation and past experience expects to be able to rely on the architect achieving a special, subjective level of skill, not merely the ordinary standard of skill that the client could expect to get from any other architect. If the architect in question does actually possess the enhanced degree of skill and care, the practical consequences of accepting the enhanced duty may be limited.

Even so, no architect should feel compelled to agree the enhanced standard without exploring whether the client will accept instead the standard of the ordinary skilled professional. As a compromise, an architect could add wording to the effect that:

Incorporating this wording should be enough to cut across any more onerous standards of care or obligations (such as indemnities) that may otherwise be expressed in or implied by the appointment.

Many PII policies are based on the ordinary standard of care, so agreeing the enhanced standard in an appointment could potentially be a reason for the insurer under such a policy to deny cover. It would be rare for an insurer to take this point in isolation – most would tend to be more pragmatic, because this enhanced standard of care crops up very regularly in bespoke appointments, and it is still not as onerous as an indemnity – but if there are other factors that count against the insured consultant, such as a failure to operate the PII policy notification procedures properly, an insured architect may find their agreement to the enhanced standard of care is held against them.

Reasonable skill and care or all reasonable skill and care?

In the absence of any express terms to the contrary, in any contract entered into by an architect for the provision of services, there will be an implied term that the professional should undertake their duties with reasonable skill and care. Most contracts for professional services contain express wording to this effect, rather than relying on the implication by law of the term.

It is difficult to see any practical difference between ‘reasonable skill and care’ and ‘all reasonable skill and care’. There is no real parallel with the concepts of reasonable and all reasonable endeavours, considered in a number of recent cases and discussed below; ‘endeavours’ means a set of actions that can be taken, whereas ‘skill and care’ is a standard in itself. You can use your reasonable endeavours, and if you need to do more you can use ‘all’ reasonable endeavours; but reasonable skill and care is an objective standard and adding ‘all’ to the beginning cannot impose a requirement for more skilfulness, or more care. It is still reasonable skill and care.

Reasonable endeavours, all reasonable endeavours and best endeavours

The use of the term ‘reasonable endeavours’ in a professional appointment or contract is usually linked to the achievement by a professional of a particular end result.

In the case of Rhodia v Huntsman, the High Court decided that ‘reasonable endeavours’ imposes no obligation on a party to sacrifice its own commercial interests. The Court in that case went on to say that ‘all reasonable endeavours’ was probably equivalent to ‘best endeavours’. However, in another case from 2007, Yewbelle v London Green, the Court of Appeal decided that ‘all reasonable endeavours’ does not require a party to lay out significant funds to do, or achieve, the particular thing in question. The case of CPC Group v Qatari Diar concerned a clause within a contract that required the defendant to use ‘all reasonable but commercially prudent endeavours’ to obtain planning permission. The Court made clear that ‘all reasonable endeavours’ does not always require the party subject to the obligation to put the achievement of the stated objective before its own commercial interests. In the CPC case the Court took into account the impact of the additional words ‘commercially prudent’, which seemed intended to allow the party subject to the obligation to weigh its own commercial interests against its obligation to achieve the stated objective.

‘Best endeavours’ wording creates the most demanding obligation, short of an absolute obligation. To satisfy the obligation to use best endeavours, a party must take all reasonable courses of action to achieve the stated purpose. Best endeavours may require significant expenditure by the professional to achieve the required end and may, where necessary imply an obligation to litigate or appeal against a decision given under a formal dispute resolution process. In April 2012 the Court of Appeal, in the case of Jet2 v Blackpool Airport, confirmed that an obligation on the part of an airport operator to use best endeavours to promote Jet2’s interests extended to keeping the airport open outside normal operating hours to allow for Jet2 arrivals and departures – even though this created significant extra costs for the airport operator.

Both for commercial and PII policy compliance reasons, professionals should be wary of agreeing any obligation beyond ‘reasonable endeavours’. In practice, this will require the professional, using reasonable endeavours to achieve an aim, to take only one reasonable course, not all of them. An architect should also be wary of agreeing to carry out certain specific steps or activities as part of an obligation to use reasonable endeavours. Where the contract does specify that certain steps have to be taken in order to exercise reasonable endeavours, those steps wil actually have to be taken, even if they may involve the sacrificing of that party’s commercial interests.

Skill and care or skill, care and diligence?

The common-sense meaning of diligence seems to imply attentive working – making an effort – and careful attention to the task in hand. These attributes are surely aspects of ‘care’ and so arguably the addition of diligence to reasonable skill and care makes no practical difference However, PI insurers and those who carry out free insurance reviews for architects and other professional consultants regularly raise this as an issue of concern in professional appointments. It is possible that ‘diligence’ brings with it the implication of persistence – a dogged pursuit of the end goal – that may go beyond exercising skill and care. Certainly the court in the case of Sabic UK Petrochemicals Limited v Punj Lloyd Limited [2013] EWHC 2916 (TCC) effectively equated ‘due diligence’ with the contractor’s rate of progress and found the contractor wanting. If your insurer raises the point, resist its inclusion.

Good faith

A bespoke appointment may, in addition to the requirement for the exercise of reasonable skill and care, contain an express obligation on the parties to perform their respective sides of the contract in good faith. In some specialist contexts, such as insurance contracts, a failure to act in utmost good faith can have practical legal consequences. However, in an ordinary commercial contract, such as an architect’s appointment, can you really be liable to a claim for damages for not acting with sufficient good faith? In all but the most extreme cases, the answer is almost certainly not. The High Court has provided guidance in the case of Gold Group Properties v BDW Trading Ltd. A good faith obligation does not require either party to give up a freely negotiated commercial advantage clearly embedded in the contract; such an obligation does not require a party to subordinate its own interests to those of the other party, but merely to have due regard to the reasonable interests of both parties in enjoying the benefit of the contract.

A good faith obligation can be given legal meaning by a court in exceptional circumstances. For example in the March 2012 case of Medirest v Mid Essex Hospital, the court found that an employer, subject to an obligation to act in good faith, had acted in breach of contract by exercising its contractual rights to make deductions from sums due to a catering contractor in an arbitrary and ‘patently absurd’ way, to the severe detriment of the contractor. The NHS Trust’s behaviour led to the breakdown of the relationship between the parties and the termination of the contract.

A mutual obligation to act in good faith can provide a significant benefit to both the architect and the client in terms of an atmosphere of collaborative working, while not imposing onerous legal obligations with which an architect may struggle to comply.

‘Warrants’, ‘guarantees’, ‘undertakes’ or ‘ensures’

A professional appointment may contain wording to the effect that the architect ‘warrants’ that a particular statement is true or a particular event has taken or will take place. This is a warranty, as opposed to a collateral warranty. It is a particular type of contractual obligation. The wording may also provide that the architect ‘warrants and undertakes’ to do or ensure a particular thing. The strict legal effect of the warranty wording taken on its own is that the architect is giving an absolute guarantee in relation to the thing warranted.

Generally, such wording should not be accepted. If the happening of an event is beyond the architect’s control, they cannot absolutely guarantee that it will happen; likewise if the background to a particular statement is outside the scope of the architect’s actual knowledge, they cannot guarantee that it is true.

There are alternatives that an architect may suggest. Instead of:

the architect could suggest:

replacing a word that carries with it a known legal effect with one that is more ambiguous. Some employers will accept this compromise; others will say, not unreasonably, ‘what do you mean when you say you agree with that statement?’ Alternatively, the architect could simply leave out the linking word altogether, so in the example given the warranty becomes a simple statement:

One other option would be to add a specific cross-reference to a standard of reasonable skill and care, to get:

Finally, the architect could add wording relating the warranty to the degree of control the architect has over the warranted outcome, for example:

How strictly a court would read these alternative wordings is open to debate, but they each serve to dilute, to some extent, the absolute nature of the warranty.

If a client is unwilling to compromise on a contract warranty, consider the potential practical effect. Is there a general duty to exercise reasonable skill and care? If so, this obligation may cut across the warranty and the practical effect will be that the architect has to use reasonable skill and care to warrant the particular statement or event. What are the potential losses if the warranted thing does not occur? How much control does the architect have over the matter which is subject to the warranty? If the event is within the architect’s control, and the architect’s duty in any case is to exercise reasonable skill and care, it may not be worth an argument.

PII policies typically exclude claims arising from contractual performance warranties or guarantees (including fitness for purpose provisions, covered in section 5.2.24), penalty clauses or liquidated damages provisions. The RIBA Insurance Agency, with the RIBA Practice Department, has produced a useful short guide to reviewing appointment contract documentation from a liability perspective, which is freely available on its website:

• www.architectspi.com/Pages/RiskManagement.aspx

5.2.7 Compliance with other standards and documents

Generally, these types of clause only require the architect to carry out their services in compliance with the background rules and regulations, such as planning law, Building Regulations and the Construction, Design and Management (CDM) Regulations, which the architect must be aware of in any case if they are to carry out their services competently. The difficulty with such a clause is when it pushes these boundaries, for example requiring compliance with a programme or budget. Any such requirement should not be absolute, but should be subject to the exercise of reasonable skill and care, because any programme or budget will be subject to change and the architect may fail to comply with them through no fault of their own. For example, the architect might be prevented from complying with a programme because they receive information late from the client.

In relation to the usual statutory requirements, the client will expect the architect to carry out their services in compliance with Acts of Parliament and other legislation and regulations that are current at the time the architect is providing the services – not necessarily the same as those that were in place at the time the appointment was agreed. An architect is expected to keep up to date with changes in statutory requirements and other background rules, by reading journals, discussing issues with their peers, taking advice and keeping up their continuing professional development hours. Changes in legislation are often trailed years in advance.

It is, however, arguably unfair to expect an architect to take the risk in extensive redesign resulting from unforeseen changes in the background law and regulations. You should include wording such that any additional work resulting from a change in the statutory requirements that was not reasonably foreseeable at the time the appointment was made should be subject to an additional fee and additional time for performance of the services as necessary.

5.2.8 Redesign to cost

Such ‘additional services’ are also discussed in section 5.2.1 of this chapter. Sometimes mistakenly presented as ‘value engineering’, this is a potentially onerous obligation and should not be accepted. There are a number of ways in which a client may try to impose an obligation on the architect to carry out redesign at no cost in order to maintain an overall project budget; defining ‘additional services’ to exclude such redesign is one way; this express provision is another. The unfairness comes from the absence of any necessary link between the architect’s performance and the fact of the budget being exceeded. It is possible that the loss of cost control may in any particular case be the architect’s fault, but equally possible it is not.

If the client is unwilling to compromise it will be necessary for the architect to build a substantial sum into their fee to cover the risk that any such redesign proves to be extensive. Ideally, an appointment should recognise an obligation on the part of the architect to take such reasonable action if they become aware that the project budget is likely to be exceeded, while at the same time recognising the architect’s right to be paid for any substantial redesign required for budgetary reasons that are not the fault of the architect.

However, the architect cannot design in a vacuum without reference to the client’s budget. As the court made clear in the case of Riva Properties Limited & Ors v Foster + Partners Limited [2017] EWHC 2574, an architect has a duty (in this case a contractual duty) to confirm key requirements and constraints relating to any project. The scope of this duty includes ascertaining the client’s budget and advising on the feasibility of the project in the context of that budget.

5.2.9 Review and comment on designs by others

A clause of this type is fair in principle, if review of others’ designs is a service the architect is being paid to provide. It is sensible to add that, for the avoidance of doubt, the architect shall not be responsible for the designs provided by others. The architect should delete any provision that requires them to ‘approve’ the designs of others, which amounts to an overt assumption of responsibility for the work.

5.2.10 Prohibited materials

In former times such clauses were known as ‘deleterious materials' clauses. This terminology has now fallen out of use, so the apocryphal story goes, because of the threat of lawsuits in the United States from disgruntled manufacturers who objected to the pejorative description of their products as ‘deleterious’. Sometimes a clause will refer to the general state of knowledge in the industry, as here; alternatively, it may refer to a long list of prohibited materials; to materials not in accordance with British Standards; or to materials not in accordance with Good Practice in the Selection of Construction Materials 2011 published by the British Council for Offices (BCO). Sometimes a prohibited materials clause will refer to all three.

In general, lists of prohibited materials should not be accepted. They do no favours to the architect (unnecessarily restricting creative use of materials in designs) or to the client (limiting choice so increasing costs); also, lists are always just out of date so offer inadequate protection and are fundamentally too simplistic. The focus should be on the context in which a material is specified, and a simple list does not address this issue. Asbestos, for example, is prohibited for use across large parts of the ‘developed’ world, but it had a role to play until recently, insulating the solid rocket boosters on the Space Shuttle fleet. Context is important.

There is unlikely to be any material which has the potential to harm the health and safety or durability of a project in particular circumstances that is not covered by the British Standards or the BCO guidelines, or both. A prohibited materials clause should be based on compliance with these as updated from time to time, allied to an overall obligation to exercise reasonable skill and care in the selection of materials.

Any obligation on an architect in relation to materials should be limited to the context of the architect’s specification role. The architect will usually have no opportunity to closely monitor the use of materials. Unless the architect has agreed a general site monitoring role, any reference to ‘knowingly allowing’ the use of such materials should be deleted; how would an architect be expected to police the use of materials in any case? They usually have no contractual relationship with the contractor or subcontractors. In addition, the requirement for compliance with the British Standards and the BCO guidelines must be limited to the time of specification by the architect; the architect usually has no say over the timing of the use of a material on site.

An obligation to pass on information about the use of prohibited materials on site, if the architect becomes aware of such use, is acceptable – provided that the clause goes on to say that no additional site monitoring role is implied as a consequence.

5.2.11 Keeping the client informed

This is too wide a remit. A prudent client will want to know about anything in relation to the project that has the potential to compromise or delay delivery or increase costs. That could include almost anything. The architect’s obligation should be to keep the client informed in respect of all matters reasonably relating to the performance of the architect’s services. This does not mean that the architect should be unhelpful The architect is a pivotal member of the professional team, and so it is inevitable and beneficial that the wider project should be discussed at site meetings and in other meetings with the client. However, an express obligation to keep the client informed about all aspects of the project may imply a degree of knowledge that the architect does not have the contractual ability to acquire if the other parties involved in the project do not want to give it freely.

5.2.12 Key personnel

Clients often want this or similar protection to ensure a degree of continuity in the service they receive. This is usually acceptable, provided there is an exception to the requirement for approval in cases where an individual retires, resigns, is sacked or dies.

A commercial client will usually also want the right to approve any replacement. This is generally acceptable as long as approval cannot be unreasonably delayed or withheld. A client may want the right to require the removal of a particular individual from their project. This should usually not be accepted, unless the client’s right is subject to a reasonableness standard.

5.2.13 Collateral warranties and third party rights

• (i) any funder providing finance in relation to the whole or any part of the Project;
• (ii) any Purchaser or Tenant taking an interest in the whole or any part of the Project;
• (iii) any Group Company or Affiliate of the Client; and (iv) any Freeholder.’

Rights of third parties in general

The nature of the obligation to provide contractual rights to third parties, either through collateral warranties or third party rights (TPRs), is discussed in detail in Chapter 6. The main point for the architect is to consider whether the job is one which warrants an obligation to provide contractual rights to third parties at all. Is the architect’s fee sufficient compensation for the risk? Is the job high value, complex and strategically important to the client and the architect? Even if it is appropriate to give a collateral warranty, is it appropriate that it should be executed as a deed?

The next question to deal with is the nature and extent of the likely beneficiaries. On a large retail development, it may be fair enough to provide collateral warranties or TPRs in favour of key anchor tenants, but not for every news kiosk and shoe repair stand. The enabling clause must adequately set out the limitations of the architect’s obligation to provide contractual protection for third parties.

How realistic is it to propose restrictions?

If there is no limit on the overall number of collateral warranties that may be required (or TPRs; the phrase collateral warranties is used in this section for ease of reference, but the points considered apply generally to both), this obligation can soon become very onerous, not just in terms of the extension of contractual liability to many parties over and above the architect’s immediate client, but also (particularly in relation to collateral warranties) because of the amount of management time required to deal with them. There is also a temptation for clients to propose particular amendments to suit individual beneficiaries if the enabling clause allows for reasonable amendments to be proposed; most architects will be willing to consider changes. The time outlay and potential costs of taking legal advice can mount up over the course of 10 or 20 individual collateral warranties.

It is most sensible to seek certain limitations on the overall obligation to provide collateral warranties. But this is an intensely commercial area where legal arguments carry little weight. A commercial developer client is interested solely in the marketability of their project and will have a fixed idea about the strength and comprehensiveness of the collateral warranty package they want to be able to offer to incoming tenants and purchasers; negotiating a less strict obligation in these circumstances can be unrealistic unless the architect’s insurer has made clear that a particular aspect of the obligation to provide collateral warranties will not be insurable.

‘Reasonable’ requests

If the architect has a strong bargaining position, they may argue for the inclusion of an obligation to provide collateral warranties in response to a ‘reasonable’ request; the implication of this wording is that some requests may be unreasonable. A client will find this hard to accept, but this wording would protect the architect from the possibility of providing a collateral warranty to, for example, a beneficiary with a track record of making nuisance claims. As an alternative to address this issue, the architect may propose a specific exclusion of the obligation to provide collateral warranties if the parties are in dispute over fees, or a right for the architect to reasonably object to providing a collateral warranty in particular circumstances. It would be unusual for a client to accept such limitations, but if it is apparent that the client’s own obligation to procure collateral warranties under a sale agreement or agreement for lease is subject to the use of the client’s reasonable endeavours (rather than being an absolute obligation), there is arguably no reason why the architect’s obligation to provide collateral warranties should not also be subject to certain exceptions.

Limitation to first purchaser or first tenant

It is arguably the market norm for collateral warranties in favour of purchasers, tenants and funders to be limited to the ‘first’ such beneficiary in that category. This would mean in practice that if the project was sold to a purchaser, the architect would provide a collateral warranty in their favour, but if the project was subsequently sold again to a second purchaser, the architect would not have to provide a collateral warranty. Even though clients do not like any such restrictions on their ability to procure collateral warranties, an architect can make a strong argument for the inclusion of ‘first’ wording, because collateral warranties generally allow for the beneficiary to assign the benefit. Rather than requiring the architect to provide a new collateral warranty, it is not unreasonable to expect the first purchaser to assign the benefit of their collateral warranty to the party purchasing their interest.

A client may object to the inclusion of a ‘first’ limitation particularly in respect of funder collateral warranties. In these circumstances an architect can press the issue by querying the need for an unlimited ability to call for funder collateral warranties; realistically, how many funders are likely to be involved? Any limit, or any wording that can provide more certainty about the likely extent of the architect’s collateral warranty obligations, is a benefit worth arguing for.

Limit by extent of interest

An architect with a strong bargaining position may be able to limit the collateral warranties obligation not only to the ‘first’ of any category (tenant or purchaser, for example), but also to a first beneficiary taking that particular interest in the whole of the project. Most clients will have drafted the clause to refer to, for example:

The architect could propose limiting this, as a compromise, to the:

The architect could propose more definite limitations by setting specific parameters based on, for example, a monetary value of the interest taken, or a minimum floor area.

Limit in number

The use of this wording provides a degree of certainty for the architect and the client, but it is a blunt instrument and potentially unhelpful to both. Once the collateral warranties are all used up, the client has no legal right to require any more, no matter how important the incoming third party is; conversely, the architect will still be obliged to provide collateral warranties in response to each of the first ten requests, whether or not there is an ongoing fee.

Amending the form of collateral warranty

An enabling clause will often require the architect to provide collateral warranties:

An architect could argue that this amounts to an agreement to agree a collateral warranty form – an obligation not usually enforceable in law – and that it is too uncertain to create a viable legal obligation to accept amendments; it is in any case best practice to eliminate the scope for amending the form attached to the appointment. This does potentially limit the marketability of the collateral warranty package – the client can largely, but not entirely, predict what an incoming third party will need – but it provides a degree of certainty that the obligation is enforceable. There is nothing to stop the parties agreeing amended terms, subject to a possible additional fee to cover the risk to the architect, if a potential beneficiary is adamant that they require something other than the agreed form.

Limit to either collateral warranties or TPRs

An architect may want to limit their obligation to provide either collateral warranties or TPRs. Depending on their PII position, this may not make much practical difference to the architect – although the case of Hurley Palmer Flatt Ltd v Barclays Bank plc [2014] EWHC 3042 (TCC) suggests that a third party is not granted a right to adjudicate under TPRs, whereas it may be possible (according to the case of Parkwood Leisure Ltd v Laing O’Rourke Wales and West Ltd [2013] EWHC 2665 (TCC)) to make a claim through adjudication under a collateral warranty if the architect’s services are ongoing. That said, there is some commercial advantage in limiting the scope of the obligation to collateral warranties only and excluding the possibility of TPRs, and the obligation may be less complex to manage if the architect only has to consider one type of document.

‘Penalities’ for failure to provide

The architect should delete any proposed withholding of fees for failure to provide on request collateral warranties. The client will argue that the clause will only affect the architect to the extent that they are in breach of contract, and that the provision by the architect of collateral warranties (as opposed to sub-consultant collateral warranties) is within the architect’s control. But many such provisions are likely to be ineffective anyway. How can the parties realistically judge the potential worth of a collateral warranty at the time the appointment is signed? And if the clause requiring compensation is not a genuine pre-estimate of the client’s potential losses as a result of the failure to provide the collateral warranty, then the provision is likely to be struck out by a court as an unenforceable penalty. Any clause to the effect that the provision of collateral warranties shall be a pre-condition to the payment of fees as a whole is similarly very likely to be unenforceable.

Powers of attorney

The collateral warranty enabling clause in a bespoke appointment may require that the architect agrees to the client being its lawful attorney for the purposes of executing collateral warranties in the event of the architect’s failure to do so. The client will argue that there is no reason for the architect to be concerned about this clause, because it will only ever become relevant if the architect is in breach of contract and has not provided a collateral warranty that they are obliged to give. But there is likely to be a good reason why the architect has not provided the collateral warranty in question. An architect should never accept a power of attorney provision; it is extremely important that the architect maintains control over the contracts they enter into. The architect’s PII policy may not cover the architect for obligations under a contract entered into in this way. The imposition of such an obligation at the outset also creates a poor impression – the client only needs to include such a clause if they do not think that the architect will comply with their contractual obligations at the outset.

Execution of collateral warranties in escrow

There is no good reason why an architect should provide collateral warranties executed ‘in escrow’. Without knowing their identity, an architect cannot judge the potential risk of the beneficiary making a claim. Such obligations appear in draft appointments relatively rarely largely because there is no sensible argument in support.

Sub-consultant collateral warranties

The architect may also be obliged under the enabling clause to procure collateral warranties from some or all of their sub-consultants. This should always be subject to the architect’s ‘reasonable endeavours’. The client will argue that procuring such collateral warranties is within the architect’s control – the architect after all will generally have chosen their own sub-consultants – and will say that if the architect had not chosen to engage sub-consultants, the additional collateral warranties would not be required. However, the architect can make the point that, even if there is a strict obligation to provide collateral warranties in a sub-consultant’s appointment, this is still not a guarantee that the collateral warranty will be provided – the sub-consultant may breach their obligation. Also, it is not realistic to expect some sub-consultants to provide collateral warranties, particularly if their services are not extensive or are low value. Finally, the architect can point out that their own collateral warranty covers all of their services, whether or not they were sub-consulted out.

5.2.14 Indemnities

General comments on indemnities

This type of general indemnity, which may feature particularly in a bespoke sub-consultancy appointment, should never be accepted.

Most PII policies are based on negligence. Cover is activated when a party establishes that the insured has breached their professional duty of care by acting negligently. But an indemnity obligation does not work in this way.

There is a real risk that, under a typical PII policy, the architect will not be covered to the extent that a claim is based on an indemnity.

Some PII policies contain express exclusions of cover for obligations in the nature of indemnities.

Any use of the word ‘indemnity’ or ‘indemnify’ should set alarm bells ringing, but a clause can amount to an indemnity even without explicitly using the word; any obligation to ‘hold the client harmless’ in relation to or ‘be liable for’ an extended definition of ‘direct’ losses (potentially covering losses, costs, claims, demands, actions, damages, expenses, compensation and liabilities, including legal expenses) may amount to an indemnity, if a court decides the intention of the parties was that it should.

Specific disadvantages for an architect in agreeing an indemnity

Liability for sums not ordinarily recoverable: If the client is able to rely on an indemnity then, depending on the precise wording of the clause, there may be no obligation for them to ‘mitigate’ their losses; they will be able to recover the full extent of their losses without the need to take any positive action to keep their losses to a minimum. The definition of what constitutes a recoverable loss is also expanded. There is potentially no issue of remoteness of damage; everything may be recovered if the client can establish a causal link between the breach and the loss. There is also potentially no issue of contributory negligence; the client is entitled to give up all responsibility for self-preservation.

Liability without negligence: The possibility that a claim under an indemnity may not be covered by the architect’s PII cover stems from this aspect of the nature of an indemnity. The client does not have to prove that the architect was negligent in order to successfully claim under an indemnity. Negligence is not required at all; only that the client has suffered a loss for which the architect has provided an indemnity. In the example wording given above, the indemnity relates to any and all losses which arise out of or in connection with the architect’s performance under the appointment. The indemnity does not relate only to negligent performance; it is any performance, including performance by the architect of their obligations as required by the appointment.

For example, say the architect, exercising reasonable skill and care properly refuses to grant an extension of time. If the contractor goes to adjudication claiming an extension of time and prolongation costs, and the adjudicator takes a different view from the architect and makes an award in favour of the contractor, the client is entitled to sue the architect under the indemnity to recover all their resulting losses and expenses, even though the architect’s original decision was not negligent.

Extended limitation on actions in time: The limitation period for an action under a contractual indemnity will be 6 or 12 years, depending on whether the appointment is executed under hand or as a deed. However, in contrast to an ordinary action for breach of contract, where the limitation period starts to run from the date of breach, the period for an action under an indemnity starts to run only when the client suffers a loss, which could be years after the contractual limitation period expired.

Arguments against accepting an indemnity

The most potent argument against accepting any indemnity in a professional appointment or collateral warranty is that the obligation is unlikely to be covered by the architect’s PII policy. Unless an obligation is insured, it is generally of limited value to the client. Not all PII policies exclude cover for indemnities, however. The architect should check this point as part of the overall request to the insurer for comments that should follow any proposal to sign a bespoke form of professional appointment.

If the client is not convinced by the PII argument, it is worth requesting that the client should explain why they require an indemnity instead of a potential claim for breach of contract in the usual way. The market does not dictate that an indemnity is required for any particular aspect of the architect’s obligations. The wording does regularly appear in the context of breach of copyright and liability for personal injury, death and damage to property, but there is no convincing argument why an indemnity should be more appropriate in these contexts than others. If the client cannot explain or does not understand why they require the more onerous obligation, this is a good argument against including it.

If an architect finds that their arguments against an indemnity provision in principle are not persuasive, there are ways of limiting its scope. For example, an architect could seek general wording to the effect that they shall owe no greater duty than to exercise reasonable skill, care and diligence. This would ordinarily cut across any indemnity provision.

Alternatively:

• a limitation on actions in time could be expressly included, such that no actions under the appointment (implicitly including an action under an indemnity) could be started 12 years (6 years if the appointment is not a deed) after completion of the architect’s services
• the architect could limit the definition of losses to those which are ‘reasonably foreseeable, legally enforceable and fully mitigated’
• the architect could propose wording to limit the application of the indemnity to their ‘negligent acts or omissions or breach of contract’. Incorporating this wording would mean that the clause is no longer an indemnity at all.

However, a knowledgeable client, anxious to preserve an indemnity, would be unlikely to accept such limitations.

More limited indemnities

More specific indemnities with a limited scope may also be proposed by a client; for example, in the context of breach of copyright claims and claims relating to personal injury or death. Although the nature of the indemnity remains the same and there remains the risk of uninsurability, some architects choose to accept these more limited indemnities as acceptable commercial risks.

5.2.15 Copyright

Copyright is also discussed in section 4.1.6.

Who owns the copyright in a piece of work?

An architect’s intellectual property rights are extremely important to their business. By law the copyright in any designs, through the drawings and the finished building representing the designs, is owned by the architect, and the architect is generally free, unless they make an agreement to the contrary, to recycle their work on other projects. Copyright law is subject to the Copyright, Designs and Patents Act 1988 (CDPA 1988). Copyright subsists in the physical expression of ideas, rather than the ideas themselves – drawings, plans, sketches and specifications will all attract copyright protection as ‘literary works’ – and gives the owner the right to prevent others from using their material in particular ways, primarily from copying it. As well as the documents produced by the architect, works of architecture are protected, coming within the definition of ‘artistic works’ for the purposes of the CDPA 1988 (section 4(1)(b)), and a work of architecture in this context can mean architectural models as well as the building itself. Copyright in an artistic or literary work will usually subsist for a period of 70 years from the end of the calendar year in which the author died.

An architect’s drawings and other documents will typically be issued marked with an assertion of copyright, along the lines of:

This is good practice, as it eliminates any ambiguity about the source of a document, although such an assertion alone cannot conclusively establish authorship or copyright ownership.

Implied copyright licences

Although the architect will generally own the copyright in any material they produce during the course of carrying out the services, it is usual in the market for the client to be granted a licence to use any such copyrighted material for the purposes of the immediate project. This licence may be granted expressly under the terms of the architect’s appointment, or implied by law – if the architect has been engaged to provide drawings for a building project, the client cannot be prevented from using the design in those drawings as the basis for construction, provided that the client has paid the architect for the work they carried out. This is the case whether the original appointment was to obtain planning permission only or to provide a full service, and whether or not the architect is subsequently retained to provide construction phase services. There are conflicting decided cases – the Blair case discussed below (yes to a licence) and the case of Stovin-Bradford v Volpoint (no licence) – but there appears to be a clear principle that the client does receive an implied licence to use the designs through to completion of the project without paying any further fee, even though the original architect has no further involvement in the project.

The principle seems to be strongly linked in the perception of the courts to the receipt by the original architect of a fee adequate to take into account the use of their design through to completion of the project, rather than just for the limited use of obtaining planning permission. In the case of Blair v Osborne, the court found that there had been no breach of the original architect’s copyright because the architect had received reasonable compensation for their work; payment was based on the RIBA fee scales for partial services, which were deliberately front-end weighted to provide an in-built compensation for the use of designs created to achieve planning permission but which are then used, without any further involvement of (or payment to) the original architect, to complete the project.

This reflects the traditional approach to an architect’s payment structure, allowing for significant front-end weighting in the fees up to completion of the scheme design stage, reflecting the importance of the architect’s creative skill in achieving a solution to the client’s brief. The architect’s efforts in creating a design that obtains planning permission have conventionally been seen as justifying a reward beyond that which would be payable on the basis of time costs.

Can subsequent site owners use the architect's design?

What if the original architect is engaged to produce designs with a view to achieving planning approval, and does so, but the client then sells their interest in the site and passes on those designs to the purchaser, who uses them to complete the project? The position seems to be the same; if the architect has received adequate compensation, there is an implied licence which can be transferred by the first owner and relied on by the new owner to build out the project using the original designs.

It is for the architect to make sure in these circumstances that the compensation they receive really is commensurate with the value of the work carried out to achieve planning approval for the first owner. Additional wording can be proposed which would require the payment of an additional fee in the event that the architect is not retained but their design is used to complete the project, whether by the client or by a party to whom the client sells the site; this is the mechanism used in the RIBA Standard PSC, in which payment of a copyright licence fee for subsequent use of a design is required. Alternatively, the architect could simply ensure that their fee for the initial design to the end of RIBA Stage 3 is appropriately weighted. If there is any hint that the client is in financial difficulties, the architect has a far stronger case for insisting on wording in their appointment that expressly denies a copyright licence in the event that their fees are not paid.

Sometimes use of a very similar design does not amount to breach of copyright

There may sometimes be special circumstances which mean that the original architect cannot successfully claim for breach of copyright even if they have not been properly paid and the design used to complete the project is very similar to their original design. One case in particular highlights the risk. Jones v London Borough of Tower Hamlets concerned an architect who had been engaged by a client to design a housing development, shortly before the client went into liquidation. The architect produced a scheme design but was not paid. A subsequent owner of the site went on to obtain planning permission based on a scheme design ostensibly provided by their own team, but the architect, Jones, claimed that his designs had been copied. The new developer’s defence to the claim for breach of copyright was that the similarities between the two designs were not the result of copying, but were unavoidable; the physical constraints of the site would not allow an alternative design solution. The court agreed; the new developer’s scheme design would have been arrived at by any competent designer operating within the constraints of that particular site and project brief.

Express copyright licences

It is standard for a professional appointment to contain wording obliging the architect to grant a copyright licence to the client to use the architect’s copyrighted material generated during the course of the project. The details of the licence will vary from appointment to appointment bespoke appointments often push the boundaries of what the architect should accept and what is considered appropriate in the market, and an example is given above.

The architect should include a provision linking the copyright licence to the payment of their fees. Commercial clients in particular are often unwilling to agree to this, but if there is any question about the strength of the client’s financial covenant, the architect has a stronger position from which to argue this point; if the client is based overseas, or is a new developer with no proven track record, these are good reasons for arguing that there should be a link between the licence and the payment of fees.

The use of the wording ‘grants with full title guarantee’ should generally be removed; the extent of the additional covenants implied is not clear, and not many clients will be able to honestly say what they are hoping to achieve by using such wording. References to an ‘unconditional, royalty-free, irrevocable’ licence should also be removed if the architect has the bargaining strength to insist on linking the licence to payment of their fee, in which case the licence is subject to conditions and may be revoked.

Clients will typically want the right to create sub-licences in favour of third parties, generally other members of the project team, or to assign the benefit of the licence – hence the use of the wording ‘non-exclusive’ (the licence is not just for the client). If the architect’s bargaining position is strong enough, they may insist on the client indemnifying them in relation to any claims relating to use by such third parties. At the very least, the architect should insist that any such right is subject to an exclusion of liability in relation to any use by these third parties of the copyrighted material for any purposes other than those for which the material was originally provided; this exclusion should also apply to the client’s own use and is standard wording.

This limitation can have unanticipated consequences for the client if the scope of the architect’s initial engagement was limited; for example, clause 6.3 of the RIBA Standard PSC allows a licence to use the copyrighted material only for the specific purposes of the immediate project.

If the material was prepared under an instruction to achieve planning permission only, this would not give the client the right to use the designs to build out the project without the architect’s permission and, most likely, payment of an additional fee.

It is usual for the architect to object to the copyright licence allowing reproduction of the design for any extension of the project, or for use on any other project that the client may become involved in. Any such use should be subject to an additional fee.

The architect should not accept an obligation to indemnify the client in relation to third party claims for breach of copyright. There is no logical reason why the client should not rely on their ability to sue for breach of contract in the usual way if there is any question of the architect failing to comply with their obligations under the copyright clause.

The client will usually require that the architect procures similar copyright licences from their sub-consultants and in relation to all other copyrighted material used in the performance of the services but not owned by the architect. As discussed above in the context of the definition of ‘Documents’ (see section 5.2.1), any such obligation should be subject to the use of reasonable endeavours, rather than a strict obligation, and should expressly exclude proprietary products.

Transfer to the client of copyright ownership

An architect should generally not accept an obligation to assign the ownership of their copyright material generated in carrying out their services in relation to the project. There is rarely a good reason for the client to require an assignment, as opposed to the more usual licence, and if pressed a client will often be unable to say why they have asked for it. Occasionally a client does have a genuine need to own the copyright; for example, if the client is developing a statement project that they wish to form the basis of a distinctive brand, they will not want the architect to reproduce the same design for their next client. However, insisting on an assignment of copyright is counterproductive; such an approach stifles design innovation. There is little incentive for the architect to produce unique features or develop groundbreaking techniques if they know that they will never be able to make use of them again.

Any agreement by the architect to transfer copyright ownership should only be made if it is an absolute requirement of the client and subject to adequate compensation for the architect.

Remedies for breach of copyright

In reality, it is going to be rare for a court (because of the disproportionate nature of the remedy in comparison to the wrong) to stop a project proceeding because of an alleged infringement of an architect’s copyright, even supposing the original architect was able to bring their case quickly enough to allow the court to consider this remedy as a possibility.

Seeking an injunction is expensive because of the degree of legal input required in a restricted timescale. It is also a high-risk strategy, because if a court subsequently decides, on hearing the evidence in full, that there was no breach of copyright, the architect could in turn be sued for the costs resulting from the delay to the project.

It may be difficult for an architect to quantify in terms of money the potential damage to their professional reputation or standing which would be caused by a new architect continuing a project with a watered-down version of their design. But practically there is no better way for a practice to protect itself than by ensuring that its work to completion of RIBA Stage 3 is subject to an appropriate front-end loaded fee, which includes a sum for the value of the copyright in design, and/or that if necessary any use of the designs beyond that stage is subject to the payment of an additional copyright licence fee.

Moral rights

Moral rights subsist in original works and are enshrined in the CDPA 1988, covering, for example, the architect’s right to be identified as the author of their work and their right to object to derogatory treatment of their work.

Sometimes a client will include a provision obliging the architect to waive their moral rights. This is legitimate – moral rights may be waived, but cannot be assigned – and in most instances architects do not have particularly strong feelings on the topic and are usually happy to waive their moral rights. There is generally no financial implication one way or another with waiving moral rights. If you do want to be identified as the author of a building design, do not accept a waiver provision.

5.2.16 Payment

The level of fees

It is for the architect and the client to decide the level of the fee and the basis on which it is calculated. The fee may be expressed as a lump sum or as a percentage of the total cost of the work, or the architect may (on smaller jobs only, realistically) quote an hourly rate, although any combination of these methods may be used.

If the fee is based on a percentage of the construction budget, the architect should be alive to the possibility that the budget may be reduced if the contractor’s tender comes in low – and with many contractors desperate for work, this is not as uncommon as it used to be. The architect can protect themselves from an unexpected reduction in their fee by providing for ‘upwards only’ adjustment; a client may query the logic of this, so another way of presenting it would be to have a minimum figure for a fee, making explicit that there is a fee level below which it becomes uneconomic for the architect to take the job.

The fee should not be inclusive of expenses and disbursements – it is difficult for an architect to assess what the value of these might be at the outset of a project. If a client insists that the fee must be inclusive of disbursements and expenses, the architect should point out that a contingency in the fee will need to be allowed which may exceed the actual costs incurred by the architect, so simply paying these amounts in addition to the fee each month may represent better value for the client.

Every client wants value for money, but no two clients assess value in the same way. The best source of practical advice on negotiating fee levels, apart from your peers, is probably the RIBA’s Good Practice Guide: Fee Management (2012).

Payment provisions in ‘construction contracts’

The 1996 Construction Act, as amended by the Local Democracy Economic Development and Construction Act 2009, was introduced in an effort to ensure that fair payment practices which promote cash flow are adopted in the construction industry. As well as providing a statutory right to refer disputes to adjudication, considered in detail in Chapter 10, certain requirements in relation to the timing and withholding of payments were also imposed.

The payment provisions in any bespoke appointment should comply with the requirements of the Construction Acts, This is good practice, although not every appointment an architect signs will automatically be subject to the Construction Acts – for example, an appointment in relation to work on a dwelling with a client who is a residential occupier will not be covered by the Construction Acts, and the architect will want to expressly include contractual provisions which reflect the payment provisions of the Acts. The architect should also be sure to explain fully the implications of these provisions to a consumer client; a court may otherwise be unwilling to enforce them against such a client.

The Construction Acts apply to ‘construction contracts’, defined a agreements for carrying out construction operations, which expressly includes an agreement to do ‘architectural, design or surveying work’ in relation to construction operations. The Construction Acts expressly do not apply in a number of circumstances that might otherwise be considered construction operations; as well as the residential occupier exception mentioned above, work in relation to the drilling of oil and gas, other mining operations and the nuclear industry are all excluded. These industry-specific exclusions are the result of lobbying rather than logic.

The provisions of the Construction Acts apply to purely oral construction contracts

Under the 1996 Construction Act, the payment and adjudication provisions only applied to construction contracts which were in writing or evidenced in writing. Courts took a restrictive approach and the absence of any important written term could leave the contract liable to be declared outside the scope of the 1996 Act. The 2009 Act repealed this provision. Although it remains poor practice to agree an appointment other than in writing, many architects’ appointments are at least partly reliant on provisions agreed orally. For this reason the 2009 Act provides an important benefit, implying the protection afforded by the payment provisions of the Scheme for Construction Contracts into a wholly or partly oral appointment. It will be theoretically possible to agree orally payment provisions that are compliant with the Construction Acts without relying on the Scheme, but this should never be considered in practice.

The 2009 Construction Act was drafted to work in conjunction with the Scheme for Construction Contracts (England and Wales) amended Regulations 2011. The Scheme contains specific obligations fleshing out the statutory principles in relation to payment and adjudication that are set out in the Construction Acts. If an appointment is a construction contract for the purposes of the Construction Acts but does not contain all of the necessary payment provisions to comply with the 2009 Act, the relevant wording from the Scheme is implied into the appointment to plug the gaps. This is different to the way the Scheme works in relation to adjudication provisions in construction contracts – if the appointment is non-compliant in any way, the entirety of the adjudication provisions in the appointment are swept away and replaced by the Scheme wording.

Instalments and withholding sums under the Construction Acts

The following issues should generally be covered in any bespoke appointment.

Instalments: For any appointment where the duration of work is to be in excess of 45 days, the Construction Acts provide a statutory right to payment in instalments. The parties are free to agree the amounts of the payments and the intervals at which (or circumstances in which) they become due. It is good practice to agree for payment in monthly instalments to ensure a regular cash flow. There is no reason for architects to be shy about chasing up fee instalments as soon as they become overdue; this is business, and if a failure to pay is ignored once, the client may form the impression that its cash flow requirements can be prioritised over those of the architect.

Basing payment of instalments on the achievement of particular milestones is attractive to clients and has the force of logic. However, if a milestone is, for example, the completion of a particular RIBA stage, this can lead to lengthy periods when no fees are being paid to the architect, with a consequent impact on cash flow – the long contract administration Stage 5 is a good example. Combining both principles so that there is a set percentage of the fee due at completion of a stage, but monthly instalments are to be made during each stage to build up to that percentage, is a satisfactory compromise.

Architects will typically want the fee instalments to be front-end weighted, so that the biggest portions of the fee are payable in the early months. This provides a degree of protection in the event that, for example, the architect is not retained to build out the project after planning permission is obtained. Clients may adjust the weighting so that fee instalments for the initial stages are light, on the understanding that the architect will be involved through to the end of the project and will receive a satisfactory fee overall. If an architect agrees to this, it is sensible to include wording to oblige the client to make a payment on termination to redress the balance if the architect is not retained beyond planning.

It is good practice to include a schedule of fee instalments in you appointment, if possible, but instalment schedules can go out of date very quickly if the schedule is too prescriptive and does not allow for updating to take account of changing circumstances, such as an expanded scope of services.

Dates for payment: Every appointment must provide an adequate mechanism for determining what payments become due, and when they become due (the ‘due date’) as well as a final date for the payment of any sum that has become due. An adequate mechanism may be, for example, a schedule of fee payments setting out precisely the date on which any particular payment becomes due; or wording allowing the architect to issue monthly accounts covering the services they have provided to that date. An architect should not accept any provision that requires them to rely on certification of payment by the client or their project manager, rather than a straight application for payment by the architect.

The process starts with the architect rendering their invoice. The parties are free in the appointment to agree the relevant period after the invoice is issued within which a sum becomes due, and the final date for payment of sums due. Under the Scheme, payment may be due on the date the invoice is rendered, and the final date for payment is 17 days after that. The Act-compliant provisions in the RIBA Standard PSC say that payment is due on the date the architect issues their account, with the final date for payment 14 days after that.

A typical client-drafted bespoke appointment will push the final date out to 30 days after the due date, which may in turn be several days after the invoice is rendered or ‘on receipt’ of the invoice. If your client is a contractor, you may be faced with an unreasonably long period before a sum becomes due in order to tie in with the contractor’s own payment cycle – 35 days or longer is not unheard of. If the due date is triggered by receipt, the architect will need to check with the client that they have received an invoice, and when, in order to ensure that each of the other payment-related timings can be properly calculated.

An architect should generally not accept any specific requirements as to what must be included with an invoice, especially if wording is used which requires the evidence provided with the invoice to be ‘to the client’s satisfaction’. A requirement to provide reasonable supporting documentation with an invoice is logical and difficult to object to.

Payment notices and pay less notices: The Construction Acts were intended to simplify payment mechanisms in construction contracts, including professional appointments, by introducing a new payment notice regime. It was also intended that the regime under the Acts would be fairer for those professionals, such as architects, seeking payment from clients. The wording in any professional appointment must reflect the new mechanism. The basic premise is that there must be an adequate mechanism for determining what payments become due, and when, and for determining the final date for payment.

Section 110A of the 2009 Act requires an appointment to contain a provision obliging the client or their nominee to serve a payment notice not later than 5 days after the due date (usually the date the architect’s invoice is issued), and the notice must specify the sum that the client or the client’s nominee considers is due, and the basis on which such amount is calculated. This is the ‘payment notice’.

Section 110B of the 2009 Act applies where the client was obliged to give a payment notice but failed to do so. The 2009 Act entitles the architect (or any other party hoping to receive payment) to serve their own payment notice if the client fails to do so; the notice has to set out the same information as a client’s payment notice, and can be given any time after the last date when the client should have served their payment notice.

If the architect serves the payment notice in this way, the final date for payment of the sum specified in the notice is postponed by the same number of days as the number of days after the last date for the client to serve a payment notice that the architect’s payment notice was given. So, if the client has not served their payment notice within the 5-day period after the due date set by the Act, and the architect serves their payment notice on the sixth day, then the final date for payment will be extended by 1 day.

In practice, it is far more likely that if the client does not issue a payment notice, the architect’s invoice will become the payment notice. This is allowed for by section 110B(4) of the 2009 Act, which says that if the contract allows or requires an architect to submit invoices on or before the payment due date, and the architect does this, their invoice will be the payment notice, provided it sets out the sum the architect considers to be due and the basis on which that sum is calculated. The sum set out in the payment notice is described in the 2009 Act as the ‘notified sum’.

A number of questions may arise regarding the issuing of pay less notices:

What if the client does not agree that they should have to pay the notified sum in full?

• Section 111 of the 2009 Construction Act requires payment of the notified sum on or before the final date for payment, unless the client has served a ‘notice of intention to pay less’. It is for the parties to agree in the appointment when the pay less notice must be served. The Scheme requires service 7 days prior to the final date for payment. Most standard form and bespoke appointments provide that the pay less notice must be served not later than 5 days before the final date for payment.
• The pay less notice under the 2009 Act must specify the sum that the client considers to be due on the date the notice is served and the basis on which that sum is calculated. The courts had previously made clear, in the context of the 1996 Act, requirement for ‘grounds’ for withholding to be given, and that a notice would remain valid even if the grounds given for withholding subsequently proved not to be true or accurate. This remains the case if the basis for the pay less notice under the 2009 Act is inaccurate.

What happens if the client fails to serve a pay less notice?

• Failing to serve an effective pay less notice will leave the client liable to pay the full sum claimed without deduction. In the absence of a pay less notice, the architect will be entitled to give 7 days’ notice of their intention to suspend performance of the services and, ultimately, instigate formal proceedings to recover the sum due and, depending on the wording of the appointment, may have the right to give notice to terminate the appointment for the client’s breach of their duty to pay the architect’s fees.

Is a client ever allowed to pay less than the notified sum without giving a pay less notice?

• Under the original 1996 Construction Act mechanism, courts took a robust approach to the statutory withholding notice requirement. Arguments raised by clients to attempt to circumvent the need for serving a withholding notice tended to fail – even otherwise legally sound assertions, such as the argument that, because the 1996 Act referred to a notice as a requirement for withholding sums ‘due’ under a contract, a client should be able to set off sums without serving a withholding notice. When a client exercises their right to set off sums owed against sums claimed by the architect, their actions, legally, mean that the sums claimed by the architect in their invoice were never technically ‘due’ for payment. The courts have upheld the spirit of the 1996 Act by rejecting this and similar arguments, and have continued to robustly defend the 2009 Act.
• There were, though, limited circumstances in which withholding notices were not required. A House of Lords case from 2007, Melville Dundas v George Wimpey, decided that a contractual provision entitling the client to terminate a contract and withhold all future payments in the event of the insolvency of the consultant could cut across the requirements of section 111 of the 1996 Act and allow for legitimate withholding without a withholding notice. The Melville Dundas case was decided on the specific facts of the JCT contract between the parties. The contractor went into receivership after the final date for payment; under the contract, this gave the client a right to terminate, and withhold further payments from the contractor. But these rights had only become available to the client at a time when a withholding notice could no longer be served. This would make a nonsense of the clear wording of the contract.

The 2009 Act included a provision to cater for the circumstance which occurred in the case of Melville Dundas, so that the client’s obligation to pay the notified sum (in the absence of a section 111 notice) will not apply to contracts where the client is allowed to withhold further payment when the consultant/contractor becomes insolvent and the insolvency occurs after the time for serving the section 111 notice.

Pay when paid: This is a ‘pay when paid’ clause; the client is only obliged to pay the architect when the client has itself received payment from a third party. This issue will tend to crop up on projects where an architect is engaged as a sub-consultant, but true pay when paid wording is rarely seen in appointments intended to be governed by English law.

Section 113 of the 1996 Construction Act expressly made such provisions ineffective, and an architect should reject any such wording if proposed in a bespoke appointment. The 1996 Act allowed for pay when paid clauses to be upheld if the exclusion of the obligation on the client’s part to pay was based on the insolvency of a third party, rather than that third party’s simple refusal to pay.

Clients over time found ways around the pay when paid exclusion, for example by using wording that only obliged the client to pay if an equivalent payment to them had been certified by a third party.

The existing provisions on conditional payment conditions were tightened up considerably by the 2009 Construction Act. Section 142 of the 2009 Act extended the scope of the ‘pay when paid’ prohibition to cover ‘pay when certified’ arrangements and other ways of making payment under the appointment conditional on an action or decision made under another contract higher up the chain. Also, the 2009 Act stated that an appointment does not contain an ‘adequate mechanism’ if it allows for the client to unilaterally say when a payment becomes due under the appointment. These are positive changes for architects and other parties dependent on receipt of payment from clients or contractors.

However, it does not seem possible to prohibit all conditional payment practices that are arguably contrary to the spirit of the Construction Acts; for example, even under the new regime, it would be possible for a contractor client, say, to impose an extended period, perhaps months, between the due date and the final date for payment, which would have the effect of leaving the architect out of pocket until the contractor had been paid.

Certain exceptions to the prohibition are retained; for example, insolvency higher up the contractual chain is still a legitimate reason for not paying an architect, if expressly provided for in the appointment.

If a sum is due under an appointment and is not paid in full by the final date for payment, and no effective notice to withhold payment has been given, then the architect may give to the client 7 days’ notice of their intention to suspend performance, stating the ground or grounds on which it is intended performance will be suspended. The right to suspend only ceases when the client makes payment in full of the amount due.

Most bespoke appointments will expressly confer this right to suspend. Not including such a clause is poor practice, but should not affect the architect’s rights. The Construction Acts confer a statutory right and although not expressly stated, it is thought that it would not be possible to contract out of. This right does not exist at common law.

The cost consequences of a suspension will fall to be pursued by the architect under the terms of their appointment. The time consequences are dealt with by the Act – any period during which performance under an appointment is suspended in pursuance of the statutory right to suspend for non-payment shall be disregarded in calculating the programme for completing the work under the appointment. This is more relevant to a contractor operating under an obligation to pay liquidated damages for delay, but could be relevant to an architect who has agreed strict programme obligations under their appointment.

The 2009 Act enhanced the right originally set out in the 1996 Act, expressly allowing an architect to suspend their performance in part or as a whole; the possibility of a more limited suspension was intended to reduce the scope for an irretrievable breakdown in relations between the client and architect in the event that the architect exercises their right to suspend.

The Construction Acts go on to provide that the defaulting client will be liable, if the architect legitimately suspends performance, to pay to the architect a reasonable amount in respect of their costs and expenses reasonably incurred as a result of exercising their right to suspend.

5.2.17 Professional indemnity insurance

PII cover is a requirement of the ARB Architects Code, the RIBA Professional Code of Conduct and the RIBA Chartered Eligibility criteria, and it is standard for a bespoke appointment to contain provisions requiring the architect to maintain such cover. The architect should be sure not to warrant that the policy they maintain will provide cover in relation to all of their liabilities under the appointment. There is no way of guaranteeing this.

Obligations to maintain cover with a ‘reputable insurer’ without ‘unusual or onerous terms or exclusions’ should generally be resisted; who is to say whether a particular insurer is reputable? There is also no recognised way of assessing what constitutes an unusual or onerous term. Assuming you have PII cover in place, you do not want to be forced to seek amendments to your policy or change insurer because of the terms of a particular appointment.

The terms of the obligation to maintain PII cover must properly reflect the nature and level of cover that the architect actually maintains. If your policy says that cover is on an ‘each and every claim’ basis, the wording of the appointment should be the same and not say, for example, that cover is maintained ‘for any one claim or series of claims arising out of the same event’, which may amount to something quite different. The level of cover should be no greater than the level of cover maintained; some jobs are so important that it may be worth exploring with an insurance broker the cost of increasing cover, either generally or on a project-specific basis. If the client insists on increased cover, it is reasonable that the client should contribute to the increased premium costs.

If the architect’s PII cover contains any aggregate limits, reduced aggregate limits or exclusions, these should also be clearly expressed in the appointment in the clause requiring PII to be maintained. Aggregate insurance limits provide a level of cover (for example £1 million) in relation to the totality of claims made in a period of insurance – generally a year, because PII is generally sold on an annual basis. This is in contrast with insurance provided on an ‘each and every claim’ basis, which will provide the same level of cover for each claim made – clients prefer cover to be maintained on an each and every claim basis because, with only an aggregate insurance pot, the level of available cover can quickly reduce to nothing if numerous claims have been made.

It is standard for architects to have cover on an each and every claim basis, but with specific types of claim subject to an aggregate limit. These areas will usually include pollution, contamination and date recognition claims. Cover for asbestos claims is very often available only on a reduced aggregate basis, with a limit of cover of £1 million or less; many policies exclude cover for asbestos claims altogether.

A PII obligation in a bespoke appointment should usually be subject to cover being available to the architect on commercially reasonable terms and at commercially reasonable rates. Many clients prefer to express this limitation as:

or to otherwise use wording which would not allow the architect to rely on the fact that they cannot obtain such insurance because of their own claims record. This is not an unreasonable position for a client to take; one counter-argument would be that if PII is not available to a particular architect then that is a fact – putting in a contractual obligation to maintain PII is not going to change the reality. In practice it will be unusual for an architect being considered for work to have a claims record so bad that they struggle to obtain PII cover. If the point is that the architect is struggling to obtain PII cover at the client’s required level, this is usually an issue that can be dealt with pragmatically by the client and the architect together. If the client considers that the architect is the most suitable for the job on every other basis, they will generally be willing to compromise, either on the level of PII or by contributing to premiums.

Evidence of insurance is usually required by clients. An architect should not accept any obligation to provide a copy of their policy, as that may allow the client to frame any claims in a way that will maximise the chance of them being covered by the policy in question; understandably, insurers take a very dim view of this. It is usual for the architect to be obliged to provide a PII broker’s letter or similar evidence confirming the basic details of the insurance cover maintained (overall level, each and every claim or aggregate basis), and brokers will usually be able to produce such evidence very quickly following a reasonable request.

5.2.18 Confidentiality

Any confidentiality obligation imposed in a bespoke appointment on the architect should be reciprocal and should generally relate only to the business affairs of the other party, rather than the project in general. In practice it is usually quite difficult to establish what has been lost in the event of a breach of confidentiality in the context of a construction project, so clients are ordinarily open to reasonable amendments which limit an otherwise onerous confidentiality provision. If an appointment is being negotiated in the late stages of a project, an architect should be wary of accepting a confidentiality obligation that may capture communications the architect has innocently engaged in prior to signing the appointment, at a time when either the architect had no confidentiality obligations or thought their obligations were more relaxed. Proposing wording to ensure that the confidentiality obligation does not apply retrospectively is not unreasonable if the architect suspects that they would otherwise be entering into an appointment knowing that they are probably already in breach of its terms.

Any confidentiality provisions must allow exceptions for:

• taking professional advice from insurers, solicitors and accountants
• dealing with legal proceedings
• disclosing information already in the public domain
• disclosing information when it is required by law to be disclosed (for example under the Freedom of Information Act 2000), and
• the purposes of the project.

A good rule of thumb is that if a communication is made for the benefit of health and safety or the structural or design integrity of the project then it should not be prohibited by the appointment.

An architect should reject any wording which would oblige them to indemnify the client in relation to any losses incurred as a result of a breach of confidentiality. There is no reason why the client should not simply rely on their ability to sue for breach of contract in the usual way or seek an injunction to prevent breaches of confidentiality before they occur.

5.2.19 Assignment and subcontracting

Assignment of the benefit of the appointment

If a contract does not contain any provisions limiting the assignment of its benefit, then the parties will usually be able to assign the benefit freely. The burden of an agreement is different; the obligations under an agreement cannot generally be transferred effectively without the agreement of both the original parties and the incoming party who is accepting the burden. For example, the architect may engage a sub-consultant to perform their services, but if they are not carried out properly, it is the architect who is still in the frame to be sued by the client.

The client will want to be able to freely assign the benefit of the appointment, and a bespoke appointment will generally confer this ability. This is not unreasonable, but can leave the architect exposed if the benefit is transferred to a party with a history of making nuisance claims. One way for the architect to protect themselves, or at least ensure that they are no more exposed than any other member of the project team, is to insist on wording that would limit the client’s ability to assign to only a party taking a contemporaneous assignment of the benefit of all the client’s other contracts and appointments on the project; this may be expressed by saying that the assignee must be an assignee of the whole of the client’s interest in the project. Some clients will be unwilling to accept such a fetter on their ability to assign, but realistically when would the client want to assign the benefit of one appointment without assigning the benefit of all their other project agreements?

Subcontracting by the architect

In a bespoke appointment, the client will wish to preserve their ability to pursue the architect for any default in any of their services. If there is to be any sub-consultant involvement, the client will want to retain control over such an appointment and will inevitably require the right to approve any sub-consultancy agreement and receive a collateral warranty from such a sub-consultant. This is reasonable.

No engagement of sub-consultants will generally restrict the client’s ability to sue the architect for any default in the provision of their services. If the architect engages a sub-consultant to carry out work which is outside the scope of the architect’s own services, this will be a different matter; the architect will not ordinarily be liable for this work, unless they can be shown to have in some way assumed responsibility for it. Simply signing the sub-consultancy agreement is not usually enough to amount to an assumption of responsibility.

5.2.20 Novation

A novation is a three-way agreement made by the original employer, an incoming employer and the architect (or other service provider), under which the architect’s appointment is transferred from the original employer to the new employer, so that after the novation the architect carries out their duties for the benefit of the new employer and is paid by the new employer. The terms of a typical deed of novation are discussed in more detail in section 6.3.2.

In an ideal world, an architect should simply say no in principle to novation. The risks are significant, particularly if there is an expectation that, in addition to carrying out the services for the new employer as if the new employer had always been the architect’s client, the architect will also be carrying out post-novation services for the original employer.

It is, unfortunately, not realistic for an architect to take this approach. There will be circumstances in which it is commercially important for the client to novate the architect’s appointment, most usually to a design and build contractor.

The important issues for the architect are that they must have confidence that their fees will continue to be paid and that their liability will not be extended by the act of being novated. The risks can be minimised if the architect knows what the terms of their novation will be, and what the terms of any ongoing agreement to provide services to the client will be, and also if they know in advance the identity of the party to whom they are being novated. If there is a significant risk that the party to whom the architect will be novated does not have a sufficiently strong financial covenant to pay the architect’s fees then the architect should not go through with the novation. An architect should request that the novation is subject to the client’s reasonable request; if the incoming employer is unlikely to be able to pay the architect’s fees, the request would arguably not be reasonable. However, many clients would be unwilling to accept this limitation.

If the architect has no option but to accept a strict obligation to enter into a deed of novation on the client’s request, they could still refuse to comply with the request (in breach of contract) when it is made. This is a high-risk option and should not be considered unless the risk of carrying out services that will not be paid for exceeds the risk of being sued for breaching the obligation to enter into the novation. The only certain way to avoid this situation is to resist the inclusion of a novation obligation in the original professional appointment. If either the principle of novation or the form of novation agreement are not agreed at the time of the architect’s appointment, then the architect is not legally obliged to agree to a novation.

The principles of novation are covered in further detail in Chapter 6.

5.2.21 Suspension by the client

It is not unreasonable for the client to be able to suspend performance if required, for example because of funding or planning issues, but the potential period of suspension can be unreasonably long. A 12-month period could in theory be followed by an instruction to resume, and then another suspension notice the next day. The architect should consider specific wording preventing follow-on suspension notices. A 12-month initial period will be excessive for most purposes in any case and a shorter period should usually be proposed.

In the event of an instruction to resume work, the appointment should allow for the architect to recover their additional costs of mobilisation. If no instruction to resume is forthcoming, the architect should be entitled to give their own notice terminating their engagement under the appointment, and they should be entitled to be paid for their services up to the date of such termination, including reimbursement of any direct loss or expense incurred during the period of suspension of services as a result of the suspension. It is generally sensible practice to issue an invoice for all sums incurred to date immediately following the issue of a notice of suspension by the client. Commercial clients will typically be unwilling to accept an obligation to pay for loss of profits in any circumstances.

5.2.22 Termination

Trigger events

The client in a bespoke appointment will want to preserve their right to terminate the architect’s appointment on notice, whether or not the architect is at fault. It is hard to argue against this, as there may be many pressing commercial reasons why a client would want to bring a project, or the architect’s involvement, to an end, other than the standard of the architect’s own performance. An architect should insist on this right being exercised subject to reasonable written notice, ideally a specified period of days.

In addition, it is not unreasonable for the client to have the right to terminate in the event of certain ‘culpable’ trigger events; these are typically set out in the appointment, even though the client may have an absolute right to terminate, because the appointment’s approach to payment on termination may be different if the architect is alleged in some sense to be ‘to blame’. An architect should generally argue that culpable termination is limited to material or persistent breaches of the appointment (not merely ‘defaults’) or the architect’s insolvency.

Ideally, there should in a bespoke appointment be symmetry between the termination rights of the client and the architect, but this is generally not realistic; very few clients would be willing to accept the architect having the right to abandon their services without justification. It is reasonable that the architect should have the right to give notice of termination in the event of their services being suspended for an extended period, for example 6 months. The architect should generally have the right under the appointment to terminate in the event of the client’s insolvency. It may be possible to negotiate a right for the architect to terminate in the event that the client fails to pay (and does not serve an effective pay less notice) a sum due under the appointment within, for example, 28 days of the final date for payment. This right may be subject to the architect giving a further written notice to the client demanding payment. If the architect’s bargaining position is particularly strong, they should try to achieve an equivalent right to terminate in the event of any material or persistent breaches of the appointment by the client, for example a failure by the client to provide information or approvals that may jeopardise the architect’s ability to carry out the services effectively.

What if there is no express right for the architect to terminate?

If the architect is given no express right to terminate under the terms of a bespoke appointment, this does not mean that the architect is locked into the appointment forever, even if the client repeatedly fails to make payment or becomes insolvent. It just means that giving notice of termination comes with additional risks. If the client behaves in a way which fundamentally breaches the terms of the appointment and shows that they no longer intend to accept the obligations of the appointment – for example, by failing to make payment or by becoming insolvent – then the architect may treat this behaviour as ‘repudiation’ of the appointment. If the architect in such circumstances gives notice that they ‘accept’ the client’s repudiation of the appointment, both parties will be released from further performance under the appointment. This will not prevent the architect from pursuing the client in relation to outstanding fees or for other damages resulting from the client’s repudiatory breach of contract. The risk for the architect in giving notice to accept a repudiatory breach is that it could be claimed, by the client, to itself constitute a repudiation of the appointment, leaving the architect open to being sued for damages by the client.

Payment on termination

A bespoke termination clause will often provide that the architect must, within a reasonable time following the notice of termination, deliver to the client any drawings, plans, designs or other documents that the architect has produced during the course of their services. This wording is included to prevent the architect from relying on their common law right to retain such property until they have been paid in full. This right, known as the architect’s lien, can be useful leverage in the event of a posttermination disagreement with the client about the level of outstanding fees. For this reason, an informed client will generally insist on wording in the appointment to circumvent the lien. The architect may suggest a compromise to the effect that the various documents will be delivered up to the client on termination except where there is a genuine dispute over outstanding fees. Clients may still be reluctant to compromise on this principle.

It is not unreasonable for the architect to expect to be paid on termination:

A commercial client will generally accept this wording, subject to excluding such right to payment where termination arises as a result of the architect’s material or persistent breach of the appointment or the architect’s insolvency. The client will often try to include wording that puts off assessing the fees due (if any) to the architect until after completion of the architect’s services by their replacement. The client will ‘not be bound to make any further payment’ until their additional costs resulting from the termination (and the architect’s breaches, if any) have been ascertained. If the architect does not agree with the reason given for termination, they are free to utilise the appointment’s dispute resolution procedures, most usually adjudication.

Finally, the client will usually include wording excluding their liability on termination, for any reason, for the architect’s loss of profit, loss of contracts or other losses or expenses arising out of or in connection with the termination. If the remainder of the payment on termination arrangements are satisfactory and allow for the payment of an additional proportion of the next instalment due, this is usually reasonable. If this wording is proposed in a bespoke appointment, the client can be assumed to be alive to the issue; if it is missing, the architect may have scope to claim for recovery of lost profits in the event of termination.

5.2.23 Set-off

A set-off can be established by a party, if they have a viable cross-claim, as a defence to reduce or eliminate the value of claim made against them. A set-off may relate to a cross-claim under the same contract as the claim being made, or it may even be based on a cross-claim under a separate contract with the claimant, if there is sufficient connection to justify the set-off. For example, in the case of Geldof Metaalconstructie v Simon Carves Limited concerning a claim and set-off under separate supply and installation contracts relating to the same project, the Court of Appeal took the view that it would be ‘manifestly unjust’ to allow the claimant to enforce payment without taking into account the cross-claim, because the two were so closely connected.

The right to set off may be expressly provided for in an appointment, as in the wording above. There is also a common law right of set-off, but this can be excluded expressly or by implication. The client is most likely to be the party making payments under the appointment; they will be the main beneficiary of any retained common law right to set off. The client will be reluctant to give up this advantage, as required for example by the RIBA Standard PSC, which expressly excludes common law and equitable rights of set-off and aims to prevent any use of the set-off defence unless a sum claimed by the client has been agreed by the architect (unlikely) or awarded by a tribunal.

If a client is alive to the issues, and has a sufficiently strong bargaining position, it can be difficult to argue against the inclusion of a right to set-off. Claiming a right to set-off would not allow the client to validly withhold sums due to the architect without issuing a pay less notice; rather, the risk for the architect is that a set-off can be based on an unproven claim, so may be open to abuse by clients seeking to delay recovery of fees, or it may make pursuing a claim economically unviable bearing in mind the architect’s potential legal costs in defeating the client’s cross-claim. An architect may argue that wording should be included in the appointment so that set-offs must be established on the basis of a tribunal decision, but a commercial client may not accept this.

A compromise, albeit unsatisfactory from the architect’s perspective, would be to allow both parties to exercise their common law ability to set off. As discussed above, in practice this will be of less use to the architect.

5.2.24 Fitness for purpose

This principle should never be accepted. Many PII policies will not cover an obligation to ensure that the services provided are fit for the purpose that the client requires. This is because an architect may be in breach of a fitness for purpose obligation even if they have exercised reasonable skill and care in carrying out their services. A building is either fit for its purpose or it is not; the fact that an architect may have performed faultlessly to get there is beside the point. This is usually not a justifiable risk for an architect to take.

The Supreme Court case of MT Højgaard AS v E.ON Climate and Renewables UK Robin Rigg East Ltd [2017] UKSC 59 considered a fitness for purpose obligation. Despite the fact that the contractor had complied with its contractual obligation to exercise reasonable skill and care, it was held by the court to be liable for the claimant’s losses because of its failure to comply with a contradictory service life specification, contained in the ‘employer’s requirements’. Under that provision, buried in the depths of a technical document appended to the main terms and conditions, the contractor was taken to warrant that its work would be fit for purpose, the purpose in question being to have a service life of 20 years. The Supreme Court found that it was possible for a general duty of reasonable skill and care to co-exist in the same contract with a much more onerous obligation to achieve a specific outcome in relation to a discrete element of the works (or services, in the context of an architect).

On the basis of the Højgaard case, it is not unreasonable for an architect, if there is a suggestion of fitness for purpose in the appointment wording, to insist on including the following catch-all clause: ‘Notwithstanding anything to the contrary contained in this appointment, the Consultant shall not be construed as owing any greater duty or obligation than the use of reasonable skill and care in accordance with the normal standards of its profession.’

5.2.25 Liquidated damages

It is unusual for a client to seek such wording even in a bespoke appointment, but it does still happen. This should not be accepted by an architect. Claims based on a penalty or liquidated damages are often not covered by PII policies.

In reality, any delay is likely to be the result of a combination of factors that may have nothing to do with the architect’s own performance. It is generally unrealistic for a client to expect an architect to guarantee that a particular programme will be achieved and to pay damages for delay in the event that the architect does not meet the programme requirements. A reasonable compromise is for the architect to accept an obligation to exercise reasonable skill, care and diligence in accordance with the normal standards of their profession to meet any milestones or programme dates.

5.2.26 Limitations on liability

Depending on the relative strength of the parties’ bargaining positions, the architect should seek limitations on liability in the areas set out below in this section. A limitation in time is reasonably standard even in a bespoke appointment; other limitations are generally not. The client will generally be reluctant to accept limitations on liability, but they may be agreed in exchange for compromise by the architect in other areas.

Limitation in time

Unless otherwise provided, the statutory limitation periods (discussed in detail in Chapter 2) will apply. It is sensible for the architect to include wording to clarify that, subject to any shorter period provided by statute, no actions or proceedings may be brought under ‘or in connection with’ the appointment after the expiry of 12 years (6 years if the appointment is a simple contract rather than a deed) from the date the architect performed their last service under the appointment; or, if earlier, the date of practical completion under the building contract.

The use of the words ‘in connection with’ should apply the same limitation period to actions in tort, including negligence. This can be further clarified by expressly applying the stated limitation period to:

or otherwise, and this is the position implicitly adopted in the RIBA Standard PSC.

The client may not be willing to accept the imposition of a limitation period on actions in negligence which would prevent the use of the ‘latent defects’ limitation period provided by statute. In addition, the client may argue that the limitation period should only start to run after the certification of making good defects under the building contract, generally a year after practical completion. Architects should resist this effective extension to the limitation period. They can reasonably argue that they will have completed their most important design services possibly years before that point.

Net contribution

Net contribution is discussed in detail in section 4.1.7 in the context of the RIBA Standard PSC clause 7.3. Consultants have had particularly good grounds for requesting the incorporation of a net contribution clause since the 2002 House of Lords case Co-operative Retail v Taylor Young, which seemed to suggest that it would be impossible for an architect, following a claim from the client, to recover a contribution under the 1978 Contribution Act against a contractor if the contractor happened to be jointly insured with the client. The principle appeared to be that, if the client’s loss was covered by the joint names policy, the contractor would never be liable to the client for the same loss as was the architect. In fact, the contractor had no liability to pay compensation for a jointly insured loss at all; the client’s remedy against the contractor was to insist that they proceeded with due diligence to carry out the remedial works, and the client would be obliged to authorise the release to the contractor of the insurance money paid out. The architect would have no contribution claim against the contractor in these circumstances.

In fact, the House of Lords in the Tyco v Rolls-Royce case clarified that there is no principle of English law that would prevent one jointly insured party from suing another for damages arising out of a jointly insured risk. However, for consultants, including architects, there is still a distinct risk of being left unable to claim a contribution from the contractor in these circumstances.

Commercial clients remain generally reluctant, but an architect can justify the inclusion of net contribution wording in principle if they have only a limited role in the project, and the prospect of being liable for the whole of the client’s loss where other parties are jointly responsible would be disproportionate and unfair. If the architect has concerns over the financial strength of the contractor, and their potential insolvency risk, this may also be a reason to argue for inclusion of a net contribution clause. In reality it may be difficult to convince a commercial client to accept the inclusion of net contribution wording in an appointment because of the inevitable increased risk of the client being unable to recover 100% of their losses in the event of a default.

An overall cap on liability

An overall cap on liability limits the architect’s liability to the client under the appointment to a specified sum. The arguments for an overall cap are similar to those for net contribution, although more clients seem willing to accept an overall cap on liability in principle, on the pragmatic grounds that they are unlikely in practice to be able to recover more from an architect than the level of the architect’s PII cover.

The potentially misleading sense of security that an architect can derive from obtaining an overall cap on liability is dealt with in section 4.1.7 in relation to the RIBA Standard PSC clause 7.2.1. The only truly safe overall cap would be set at the sum actually recovered by the architect from their insurers, and would apply to claims in relation to the project overall, requiring equivalent wording in the appointment and any collateral warranties:

The architect may sweeten the pill somewhat by providing that the limitation shall not apply to the extent the architect fails to maintain PII cover or fails to report a claim in accordance with the requirements of their policy. Even so, commercial clients will very rarely accept such restrictive limits; they would argue that there are in practice no equivalent artificial limits on the potential level of their losses.

Limitation on the types of loss that may be recovered

Ideally, in the event of a claim, the architect would want to be able to rely on a term in the appointment limiting in a reasonable way the losses that may be recovered by the client. This might be, for example, by excluding liability for ‘indirect or consequential’ losses, limiting recovery to the ‘reasonable costs of repair, renewal or reinstatement’ of the defective building, or even seeking to exclude the architect’s financial liability altogether and instead including an obligation to re-perform the relevant services at no cost. Informed clients will generally be unwilling to accept such limitations in an appointment, and will argue that there are no such limitations on the types of loss that they may actually suffer.

5.2.27 Disputes

A bespoke appointment, even one with a ‘consumer’ client, should generally provide a right to refer disputes to adjudication, to be conducted in accordance with the Scheme. It is good practice to provide for mediation as an option, but this should not (and cannot, in construction contracts to which the Construction Acts apply) be allowed to prevent or hinder the parties’ ability to refer disputes to adjudication at any time. The fallback position should be the agreement of the parties to submit to the jurisdiction of the English courts.

5.2.28 Confirmation letters

It is becoming increasingly common, particularly on major projects, for the client to request that each consultant on the project sends them a letter stating that they are satisfied that the works conform with the specifications and recommending that the practical completion certificate be issued. There is often no obligation to provide such a letter under the consultants’ appointments, and the request is often made just weeks or days before practical completion is planned to take place. The requested confirmation may be presented in a standard form such as the Council of Mortgage Lenders (CML) Professional Consultant’s Certificate (PCC).

The intention behind obtaining such confirmation letters is to impose a layer of additional responsibility on the various consultants; to oblige them to some degree to assume responsibility for checking the completeness and quality of the work of the contractor.

An architect faced with such a last-minute request should generally refuse. There may be strong commercial pressure to sign, but there is nothing to be gained by assuming additional liability which the architect’s appointment does not require. If the commercial pressure to provide some form of confirmation is overwhelming, an architect may consider limiting their confirmation only to aspects of the contractor’s work that are clearly related to the architect’s services, and further limiting the confirmation by reference to the architect’s subjective knowledge and the exercise of reasonable skill and care; for example:

However, even this watered-down wording does not address the fundamental concern with providing an 11th-hour confirmation letter. The imposition right at the end of the project of such an obligation means that the architect has missed the opportunity to monitor and review the work, as the project progressed, in sufficient detail to give the confirmation. The CML PCC explicitly requires the architect/other consultant to certify that they have ‘visited the site at appropriate periods from commencement of construction to the current stage’ to check progress and conformity with drawings and instructions issued under the building contract.

If an architect feels commercially compelled to give such a certificate or confirmation letter, the timing of providing it, and the words used to express the architect’s statements, are clearly important. The Court of Appeal in Hunt and others v Optima (Cambridge) Ltd and others [2014] EWCA Civ 714 decided that the claimant homeowners could not establish that they had relied on the architect’s negligent mis-statements as to the values of the various properties within the development, as set out in the certificates; this was because the architect’s certificates post-dated the point in time at which the claimants had committed themselves to purchase their flats. The purchases may have been based on an understanding that the certificates would be provided – but that was not enough. The claimants also failed to establish a claim for breach of contract, with the Court of Appeal deciding that the architect’s certificates were not warranties or guarantees; they were simply certificates, given without contractual consideration, and did not therefore amount to contractual warranties.

Chapter summary

• On high-value and complex projects in particular an architect may be asked to agree a bespoke – non-industry standard – professional appointment, produced by the client’s solicitors.
• Bespoke professional appointments are often drafted to provide a balance of risk that favours the client at the expense of the architect’s interests.
• Certain forms of wording are used regularly in different bespoke appointment forms, and an architect should be able to recognize the potential risks in these clauses and use effective arguments against them.
• Architects should make use of specialist legal advice and the advice of their insurers if in any doubt as to the effect of a contractual provision.