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Contract Language and Manufacturer Representations

By Alexander Chaconas posted 03-31-2020 02:00 PM

  

Contract Language and Manufacturer Representations

By Frank Musica

Frank Musica headshot

Recently, there have been disputes and judicial decisions addressing the responsibility of design firms to understand the composition, performance, and availability of specified products, materials, and systems. In part, this relates to the performance of the specified components, but it is increasingly extending to the actual composition and health effects of the specified components.

Few design professionals have the ability to independently test and analyze substances, to verify the performance of a manufactured product, and to predict the longevity of a specified component. And fewer clients are willing to pay the additional costs and experience the delays in design that such second-guessing of a manufacturer’s data would generate.

A design professional’s reliance on information provided by product suppliers is judged by the standard of care: at the time of specification, would a reasonable design professional have relied on the information provided as to the performance, content, and reliability of a material, product, or system? Some firms are apprehensive that a client will attempt a cost recovery effort by alleging that the design firm had a greater duty in specifying products. In some egregious third-party claims, firms are concerned that the judicial system might place unreasonable, unrealistic, and unanticipated responsibilities on them based on the duties established by licensure laws.

Rely on Communication and Information Consent

There are ways to head off some claims and make the design firm’s responsibility rational. One is a high level of communication with the client so that the client understands the risks and rewards of an inadequately tested component or one that has no substantial reputation in the industry. The client’s informed consent can be used to show that the design firm made a recommendation based on information available and the client approved the recommendation after weighing the risks, benefits, and alternatives. 

Contract Language Can Help Mitigate the Exposure

Contracts should reaffirm the ability of design professionals to rely on client and manufacturer representations as long as they meet the standard of care for applying their professional judgment to the information.

The EJCDC has taken the lead in creating contract language that notifies the client of the engineer’s reliance on information provided by others. The standard owner-engineer agreement (E-500-2014) states in article 6.01.D the following “Standard of Performance” provision:

Reliance on Others: Subject to the standard of care set forth in Paragraph 6.01.A, Engineer and its Consultants may use or rely upon design elements and information ordinarily or customarily furnished by others, including, but not limited to, specialty contractors, manufacturers, suppliers, and the publishers of technical standards.

This is in addition to the contractual agreement that allows the engineer to rely on owner-provided information.

The standard owner-architect agreement published by the AIA does not go as far as the EJCDC contract in protecting the design firm. There is no provision that states that the architect can rely on manufacturer information; the reliance is based on the standard of care and not a contractual limit of responsibility.

AIA B101-2017 states in § 3.1.2 the following:

The Architect shall coordinate its services with those services provided by the Owner and the Owner’s consultants. The Architect shall be entitled to rely on the accuracy and completeness of services and information furnished by the Owner and the Owner’s consultants. The Architect shall provide prompt written notice to the Owner if the Architect becomes aware of any error, omission or inconsistency in such services or information.

The provision protects against the reasonable use of information from the client or others providing services to the client, but is silent on reliance on product data.

If a client wants more design firm involvement in assessing the performance, durability, or content of a project component, a discussion should take place during contract negotiation that includes the client’s role in evaluating available information and determining the risk the client will assume in approving a new product or a new use for an existing product.

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Frank Musica is a senior risk management attorney with Victor. His background includes service as in-house counsel for a west coast A/E firm with a large international practice and staff positions with The American Institute of Architects (AIA), the American Society of Civil Engineers (ASCE), and the National Society of Professional Engineers (NSPE). During his tenure with the AIA and NSPE, Frank supported the activities of the AIA Contract Documents Committee and the Engineers Joint Contract Documents Committee, respectively. Frank received a professional degree in architecture, an MBA, and a law degree from the University of Notre Dame.

 

(Return to the cover of the 2020 PM Digest: Architectural Writing)

 

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