The AIA A201-2017 is one of the most common general conditions forms used in construction contracts. While many contractors fear that requesting edits to the AIA A201-2017 will prompt a lengthy negotiation process with owners, there are some revisions that most owners readily accept without issue. Some of those readily-accepted revisions are also improvements that contractors and construction managers can—and should—make when using the A201. There are five key revisions that help contractors “de-risk” their owner contracts without creating unwanted conflict.
Add an “Order of Precedence” Clause
The first provision in the A201 (§ 1.1.1) lays out the documents that comprise the agreement as a whole. Somewhat surprisingly, however, the provision does not identify which documents take priority in the event of a conflict between them. To avoid any argument over which document provision governs, and to give parties clarity over how to proceed if a document conflict exists, contractors would do well to add an “Order of Precedence” clause.
Typical language might read, “Any conflict between any of the contract documents shall be resolved in the order of precedence listed below (from highest priority to lowest), such that any document shall enjoy priority over any subsequently listed document.” Thereafter, the contractor should sequentially list the documents, such as change orders and change directives, the contract documents, drawings and specifications. Generally speaking, there is no rule of thumb as to which documents (among plans, specifications or drawings) should take precedence; however, the important objective is to set some order up front in so as to avoid conflict over an issue that may later arise.
Remove Risks that the Contractor Cannot Control
While contractors are responsible for performing as specified, they should endeavor to exclude performance criteria that are outside of their control. For example, if a contract requires the contractor to achieve LEED certification (e.g., “contractor agrees that the project will meet the standards required for LEED certification”), the contractor may be at risk due to the fact that LEED certification requires confirmation from a third-party organization—the United States Green Building Council. If such organization delays or refuses to certify the project, the contractor could be in breach of contract, despite having properly performed the work.
To avoid this risk of breach, contractors should make sure that their contractual obligations are based on the quality of their performance, rather than the certification from a third-party. The same idea could be applied to other standards that require third-party involvement, such as local inspectors, permits and utility installations because these are all risks that are entirely out of the hands of the contractor.
To achieve this objective, contractors can create a “Qualifications and Exclusions” exhibit, or a similar document, which lists items that are not the contractor’s responsibility. This approach is often favored over issues that are more legal-focused, especially since they are not otherwise addressed in the contract.
Clarify the Commencement and Substantial Completion Date
The main contract (e.g., the AIA A101-2017 or AIA A102-2017, both of which incorporate the A201) includes a section where the parties can define the commencement date and duration of the construction period. Contractors can define commencement as “seven (7) days following the later of owner’s furnishing of (a) all necessary permits and access necessary to complete the Work or (b) the parties’ execution of all applicable contract documents.” This revision ensures that the time for construction is not lapsing until the contractor has everything needed to start the work.
The date of substantial completion should be measured as a set number of calendar days, rather than a calendar date, from commencement. Indeed, all too often, contractors and owners include a substantial completion date when the contract negotiations begin, but fail to update the date to reflect delays in negotiating and completing the contract. This creates a risk of an inadvertently shortened schedule, which can make the contractor unintentionally lose valuable contract time. By using a set number of calendar days, as opposed to a calendar date, the schedule automatically updates itself, which thereby removes the risk.
Furthermore, these two changes together ensure that both parties are on the same page regarding project commencement. However, if contractors are unable to establish an “order of precedence” provision (detailed above), they should be careful to review all documents to ensure that the commencement and substantial completion dates are consistent throughout the contract documents because the general rule is that the most specific language, i.e., a calendar date, will be the language most adhered to by the courts.
Modify the Notice Requirements
While most project communications take place via email, the language of § 1.6.2 of the A201 requires that all claims notices be made “by certified or registered mail, or by courier providing proof of delivery.” This formality increases the risk that contractors may inadvertently miss notice deadlines—even where the contractor had informally notified the owner—because they failed to follow the strict A201 formalities. In addition, requiring notice by certified mail can also raise tensions can also impede the parties’ ability to casually deal with issues and work collaboratively because the pure formality of a certified letter connotes a severity that is likely to cause the recipient’s, i.e., the owner’s, guard to go up.
To address this issue, contractors should seek either to amend the notice provisions to allow email as the method to serve notices or to allow notice by “any reasonable method consistent with the parties’ prior communication or where receipt can be reasonably confirmed.” The latter standard (reasonable method) is used elsewhere in the A201. Either way, both options allow for less formal notice to be given, while also avoiding any question over whether the notice was actually provided. This suggested language does not benefit or prejudice either party; instead, both options simply ensure that strict procedural methods will not interfere with the resolution of claims on their merits.
Discuss Limiting Liquidated Damages
The main AIA contracts (again, the ones that accompany the A201-2017 General Conditions) generally include placeholders as a way to facilitate discussion about liquidated damages. If owners choose to make use of those placeholders and insist on including liquidated damages in the contract, the contractor should push for reasonable limitations, such as 50% or 100% of the contractor’s fee, to avoid the risk of unlimited liability. While this will certainly be a point of negotiation, most owners understand and accept the fact that many contractors are not willing to assume such unlimited risks.
While contractors are frequently anxious to start and to avoid conflict at the outset of the project, the A201 modifications suggested in this article should allow the contractor to “de-risk” their contracts. Even more, these suggested revisions will help the contractor prevent stressing its relationship with the owner before the project even begins. And since these suggested A201 revisions are ones that the owner will likely be very amendable to, both sides will be well-served to implement these in an effort to have an improved contract.
