Clients, users and delivery of services

Question 1

Set out the different ways that you can charge for your professional services

Answer 1

Charges should be resource-based: lump sum, percentage fee, time charge

Question 2

You have been approached by a client to take over the detailed design of a project: what actions should you take?

Answer 2

Contact previous architect; has contract been completed/ terminated? have fees been paid?
Confirm scope in writing to client

Question 3

What does novation mean and how does this affect the relationship with your client?

Answer 3

Novation means ‘new’ - a new contract on the same terms (normally) as the previous contract; in D&B the contract with the client ceases and a new contract starts with the contractor as the new employer

Question 4

What is collateral warranty and when is it used?

Answer 4

An agreement (or contract) with a third party that runs alongside the core agreement and creates a contractual relationship that otherwise would not exist. Examples include employer - s/c architect - first purchaser

Question 5

Give specialist services an architect may provide and when they would be appropriate

Answer 5

Interior design, product design, landscape design, dimensional survey, specialist planning advice, etc.

Question 6

Your client has asked you whether it is acceptable to demolish a former nursery building and build a 15-storey flatted residential tower in its place. Which guidance documents will you refer to in order to advise your client about planning matters? Give a minimum of two examples?

Answer 6

• The relevant Local Authorities Local Plan
• Local Development Frameworks
• The London Plan (if in London)
• The NPPF
• The Housing Act
• Right to Light
• The Planning Portal

Question 7

Give two significant things that could occur should an architect give advice outside of their scope of knowledge.

Answer 7

• They could be faced with a claim of negligence.
• They could be struck off by ARB for not promoting their services with honesty and integrity and not looking after the best
  interests of their client.

Question 8

Why should an architect have a contract with a client?

Answer 8

An architect should have a contract with a client as this provides a framework in which to carry out the services. It clearly defines what the offer is, what the consideration is, that there was an intention of both parties and that these have all been accepted. It also apportions responsibilities and defines how any disputes will be addressed. In the end, having all these terms expressed in writing in a contract should act to mitigate the risk that problems occur.

Question 9

Why should an architect have PII?

Answer 9

An architect should have PII due to the high-risk nature of construction and the use of buildings more generally. They also often deal with projects where there is potential for large financial losses to one or more parties, which in the worst-case scenario, could be apportioned to the architect.

As well as the responsibilities of the initial contract with the client, there may also be responsibilities through collateral warranties. Through tort, the architect owes a duty of care as a professional to all subsequent users of a building, and could therefore be found negligent in the case that someone suffers injury or loss because of their mistake.

ARB requirement

Question 10

What is the name of the act that protects the work of architects (among others.)

Answer 10

Copyright Designs and Patents Act 1988

Question 11

Define ‘duty of care’

To whom does an architect owe a duty of care?

Answer 11

‘Duty of care’ relates to one party not suffering harm from another party. Law of Tort is judged by breach of duty.

To everyone, even if not party to a contract. See Donoghue v Stevenson, 1932.

Question 12

Bolam v. Friern Hospital Management Committee 1957is an important case law that defines the standard of a professional’s duty of care. Explain why.

Answer 12

In the case the healthcare person acted as any other professional would and thus not found guilty. It set the standard for ‘reasonable skill and care’, which is the level of skill and care expected of another reasonably competent member of the profession. This is as opposed to a ‘fit for purpose’ obligation, which requires that works or services must be good enough to do the job they were intended to do.

Question 13

1) Why would you be asked to sign a Professional Consultant’s certificate?
2) How would you safeguard yourself against future litigation if you had to sign such a certificate?

Answer 13

1) A PCC is a document that ensures a professional consultant has inspected the construction works. Youmight be asked to sign one so as to provide alternative to warranties to the design.
2) You would only sign such a certificate if you have competence and enough experience to carry out the services. You would safeguard yourself with Professional Indemnity Insurance (PII) and maintain it for the period of the liability.

Question 14

Freeborn & Anor v Marcal is an important recent case. Describe why.

Answer 14

In this case, the architect was charged for designing a cinema box that didn’t meet the client’s brief. It provided a precedent case for the Tort of Negligence.

Question 15

1) Your client has asked you whether it is acceptable to demolish a former nursery building and build a 15-storey flatted residential tower in its place. Which guidance documents will you refer to in order to advise your client about planning matters? Give a minimum of two examples?
2) Give two significant things that could occur should an architect give advice outside of their scope of knowledge.

Answer 15

1) Town and Country Planning Act 1990:this will outline whether planning permission is necessary for the development (change of use, permitted developments. Etc.)
National., Regional, Local, Neighbourhood Development Plans: Whether the development plans at national-local level gives guidelines as to requirements to not demolish an existing educational buildings and replace with housing.

2) - The architect can be liable for the advice they give. – can be subject to a claim
- The architect is not following the ARB Code of Conduct Standard 2. Be Competent –This standard ensure that the architect offers competent services i.e within their knowledge capacity. In a serious case this could lead to the architect being struck of the ARB register.The architect is providing a professional service thatmust be competent.

Question 16

Why should an architect have a contract with a client?

Answer 16

An architect should have a contract with a client to avoid disputes and ensure a set of terms are agreed. The contract will allow an allocation of reasonable risks across both parties. Furthermore, the contract will outline the terms for copyright and protect the architect’s ownership of copyright of drawings and documents produced in the client’s service.

Question 17

Why should an architect have PII?

Answer 17

Architects should have PII to protect the client. If the client is to make a claim against the architect the amount can be sought through the architect’s PII.

Question 18

ARB Standard 4 (competent management of your business) Clause 4.4 You are expected to ensure that before you undertake any professional work you have entered into a written agreement with the client which adequately covers?

Answer 18

• the contracting parties
• the scope of the work
• the fee or method of calculating it
• who will be responsible for what
• any constraints or limitations on the responsibilities of the parties
• the provisions for suspension or termination of the agreement, including any legal rights of cancellation
• a statement that you have adequate and appropriate insurance cover as specified by ARB
• the existence of any Alternative Dispute Resolution schemes that the contract is subject to and how they might be accessed
• that you have a complaints-handling procedure available on request
• that you are registered with the Architects Registration Board and that you are subject to this Code.

Question 19

ARB Architects Code - Standard 8. Describe the ‘Insurance arrangements’

Answer 19

8.1 You are expected to have adequate and appropriate professional indemnity
insurance cover for you, your practice and your employees. You should
ensure that your insurance remains adequate to meet a claim. You are
expected to maintain a minimum level of cover, including run-off cover, in
accordance with ARB’s guidance.

8.2 The need for cover extends to professional work undertaken outside your
main practice or employment.

8.3 If you are an employed architect you should, as far as possible, ensure
that insurance cover and/ or other appropriate indemnity arrangements are
provided by your employer.

8.4 When requested, you are expected to provide ARB with evidence that you
have professional indemnity insurance in accordance with this Standard.

Question 20

What is the first thing you do if you believe that a claim or complaint will be made by your client?

Answer 20

Notify - Inform your insurers, most likely via your broker

Question 21

What ARB and RIBA codes require you to have a contract with a client?

Answer 21

ARB Code 4.4
RIBA Code 2.2

both relate to competency and competent management of your business

Question 22

Name generic forms of professional services appointments

Answer 22

• RIBA Standard Contract 2020

• NEC4 Professional Services Contract 2017
- Any professional consultant

• RICS Standard Form of Consultant’s Appointment 2011
- Quantity Surveyors

• ACE Agreement 1: Design + Schedules
- Civil and Structural Engineers but not as Lead Consultant

Question 23

RIBA Standard Contract 2020

Why use a standard form?

Answer 23

• Engage an architect within a framework which has a proven legal basis and incorporates standard industry practices
• clarify the respective undertakings of the parties, providing comfort and protection for both client and architect
• establish a fair and reasonable allocation of risks
• define fees and payment arrangements and retain copyright
• comply with RIBA & ARB code of conduct requirements
• avoid misunderstandings & disputes
• enable a successful client - architect relationship

Question 24

Bespoke contract. What are the areas of concern that should be covered?

Answer 24

• Duty of care, altering terms such as “reasonable”, “expert”, “professional”
• Fitness for Purpose clauses or performance warranties
(imposes absolute obligations to comply with brief, budget, programme)
• Collateral warranties
• Ownership of Copyright
• Sub-consultants (direct/indirect appointment, different contract terms)
• Pollution/asbestos/deleterious materials liability
• PII insurance: no limits to liability, or set above that which is available at “commercially reasonable rates”
• Liability periods (longer than 6 or 12 years)
• Assignment or novation
• Economic and consequential loss
• Joint and several liability
• Net contribution
• Liability caps
• Jurisdiction (not using UK law)
• CDM responsibilities
• Third party rights

Question 25

What are Letter contracts and when are they used?

Answer 25

Letter contracts are sometimes used for very small projects RIBA does not recommend their use.

At the very least letter contracts must cover:
• ARB codes of conduct requirements
• Definition of the services to be offered
• Statutory requirements
• Provisions for fees and payment
• Copyright and assignment
• Liability
• Provisions for termination of the agreement
• Disputes and net contribution

Question 26

RIBA Professional Services Contracts 2020

Name the key components

Answer 26

• Agreement (replaces previous memorandum)
• Contract Details (project data, previously included in the schedules)
• Contract Conditions (similar to previous Conditions of Appointment)
• Definition of Terms
• Main Clauses
• Schedules of Services (role specifications, services and fees;
• based on the RIBA Plan of Work)
• Contract Checklist (useful for Domestic contract with consumer clients, to comply with the Consumer Regulations)

Question 27

RIBA Professional Services Contracts 2020

What is set out in the Contract Conditions?

Answer 27

1. General Interpretation
2. Client Responsibilities
3. Architect/Consultant’s Responsibilities
4. Assignment and sub-contracting
5. Fees and expenses
6. Copyright and Licence
7. Architect/Consultant’s Liability
8. Professional Indemnity Insurance
9. Suspension or termination
10. Dispute resolution
11. Information Formats

Question 28

Give various ways of charging fees

Answer 28

• Time charge: hourly rates and/or day rates
• Lump sum
• %age of construction cost Profit related
• Combination of all of the above for different RIBA Stages

Question 29

When charging a lumpsum fee what factors should you consider?

Answer 29

• Scope of service. Stages and service being offered.
• Brief should be clear. Changes may incur additional fees
• Time spent on each stage – resource. # meetings, trips.
• Deliverables – drawings, models
• Expenses and disbursements
• There should be no / very few variables.

Question 30

Nil fee bids and speculative fees

What are the main points for consideration?

Answer 30

• Resources and overhead costs without fees is questionable
• ARB Code Honesty and Integrity, Competent Management of your Business
• PII may not allow ‘free work’. RIBA Code
• Ethical?
• Value yourself more than nil fee
• Consider a fee to cover costs and a ‘profit’ type arrangement with fees paid later – but higher than if paid earlier-

Question 31

Give your understanding of expenses and disbursements

Answer 31

Expenses
Those costs incurred when carrying out your services in particular relation to project work. Costs that your business incurs itself when supplying goods or services to customers are not disbursements for VAT. It’s you who buys the goods or services for use in your own business.

Examples:
Travel
Models
Printing

Disbursements
A payment made to suppliers on behalf of your customers is called a ‘disbursement’ if you pass the cost on to your customers when you invoice them. You might be able to leave out these payments from your VAT calculations because it’s the customer, not you, who buys and receives the goods or services; you’re just acting as their agent.

Examples:
Local Authority
- Planning fees
- Building regulations 
Legal fees

Question 32

Clause 6. Copyright and Licence

Why is this important?

Answer 32

Value!

Issue of licence to use the drawings becomes valid on payment of fees.

Question 33

An architect appoints sub-consultants – key points to consider?

Answer 33

• Can select their preferred design team
• Liability - ensure ‘back to back’ agreements
• Net contribution clause – see RIBA PSC 2020 clause 7.3
• Cashflow – paid when paid not legal
The HGCRA renders ineffective any clause in a construction contract which makes receiving payment conditional upon the payer receiving payment from a third party.
(Architect’s Legal Handbook 9th Edition , p246)
(Housing Grants Construction and Regeneration Act 1996)

Question 34

Sub consultancy agreement - define ‘back to back’?

Answer 34

A simple back-to-back subcontract for use in commercial situations when the main contractor wishes to subcontract all or part of its obligations under a main contract on a back-to-back basis. The agreement incorporates the terms of the main contract by reference.

Question 35

RIBA Standard Contract 2020
Clause 7. Architect/Consultant’s Liability
7.3 Describe Net Contribution

Answer 35

A net contribution clause may also be known as ‘a proportional liability clause’
A net contribution clause states that where two or more parties involved in a construction project are each jointly liable for the same loss or damage, the liability of each party will be limited to the amount which would be apportioned to that party by a court.

Question 36

7.3 Describe Net Contribution

West v Ian Finlay Associates (2014) TCC and Court of Appeal

Answer 36

Wests bought a £1.7 million house with £500,000 budget for renovation. After completion, serious damp and other defects were discovered. Architect required to visit site twice a week and should have been present for the pouring of slabs. However, it was not necessarily negligent to be absent for one pouring.

2013 Court held that IFA was liable and awarded the Wests over £800k.

2014 Court of Appeal held that architect was entitled to rely on a net contribution clause in the conditions of engagement in limiting liability relative to the contractors.

Question 37

Collateral Warranty – define

Answer 37

On a construction or engineering project, a collateral warranty is a contract under which a professional consultant (such as an architect), a building contractor or a sub-contractor warrants to a third party (such as a funder) that it has complied with its professional appointment, building contract or sub-contract.

creates a contract between two parties that wouldn’t ordinarily exist, funders, future buyers etc.

Question 38

Step in rights – define

Answer 38

A right for the beneficiary of the collateral warranty to step in and take over the developer’s rights as employer of a building contractor or a professional consultant, if the developer commits a serious and unremedied
breach of the building contract or the professional appointment.

If the developer becomes insolvent and breaches the building contract and the professional appointments, the beneficiary (e.g a funder) may step in and effectively become the employer/developer, pay any sums due to the building contractor and the consultants in order to complete the project.

Question 39

Third Party rights – define

Answer 39

A third party right is the right of a person who is not a party to a contract (a third party) to enforce the benefit of a term of that contract.

For example, that could include a right for a funder to enforce a term of:
A professional appointment entered into between the employer and its architect, engineer or quantity surveyor.

A building contract entered into between the employer and its contractor.

Typically, a construction contract states that a third party cannot rely on the contract unless the contract expressly grants third party rights.

Usually, a construction contract that uses third party rights sets them out in a schedule to the building contract or professional appointment.

Question 40

Professional Consultant’s Certificate – define

Answer 40

Lenders will generally only lend on a newly built (or newly converted) property where the property is covered by a warranty scheme (for example, NHBC warranty) or the Professional Consultant’s Certificate (PCC). The PCC is for use by professional consultants when designing and/or monitoring the construction or conversion of residential buildings.

The purpose of the PCC is to confirm to the lender (or its conveyancer) that a professional consultant:
• has visited the property to check its progress of construction, its conformity with
drawings approved under building regulations and its conformity with
drawings/instructions issued under the building contract;
• will remain liable to the first purchasers and their lender and subsequent purchasers and lenders for the period of 6 years from the date of the certificate;
• has appropriate experience in the design and/or monitoring of the construction
and conversion of residential buildings; and
• will keep a certain level of professional indemnity insurance in force to cover his liabilities under the certificate.

Question 41

Define ‘caveat emptor’, when does it not apply?

Answer 41

Let the buyer beware

It is qualified by consumer protection legislation. Consumer Rights Act 2015

It is effectively reversed in the case of certain contracts which impose on the parties a positive duty to disclose everything relevant as opposed to the usual negative duty not to make misrepresentations.

These are contracts where there is a special relationship between the parties, e.g. partnership, and contracts of the utmost good faith, e.g. insurance.

Question 42

Define ‘credat emptor’

Answer 42

Let the buyer trust

• Describes the relationship between a professional person and their client.
• The client can trust the opinions and skills of the professional who has an ethical duty to put the interests of the client ahead of their own.
• Imposes upon professionals an assortment of ethical duties including the duty of veracity (to tell the truth) and the duty of fidelity (to comply with the reasonable expectations of the client as to competence, keeping to promises and the maintenance of up-to-date knowledge).

Question 43

What are the various remedies for breach of contract?

Answer 43

Damages:
The contract can stipulate the damages payable in the event of breach, provided the figure is a genuine pre-estimate of loss and not a penalty. These are called liquidated damages. Unliquidated damages are assessed by the Court and awarded for e.g. financial loss, personal injury, damage to property, disappointment and mental distress. However, the damage must not be too remote and the injured party has a duty to mitigate his loss.

Specific performance:
The Court may order the party in breach to perform their obligations under the contract.

Injunctions:
An injunction may be granted, e.g. to freeze assets or to enforce the contract.

Rescission:
Rescission may be granted unless (i) the contract has been affirmed (ii) restitution is impossible, or (iii) a third party has acquired rights.

Question 44

Define ‘recission’

Answer 44

Rescission is the unwinding of a transaction.

In contract law, rescission has been defined as the unmaking of a contract between parties. This is done to bring the parties, as far as possible, back to the position in which they were before they entered into a contract