AIA Issues Updated Construction and Design Contracts

May 24, 2017 Alerts and Newsletters

The American Institute of Architects (AIA) recently issued its 2017 revisions to many of its widely used standard contracts including A101 (Agreement Between Owner and Contractor – Stipulated Sum), A102 (Agreement Between Owner and Contractor – Cost Plus Fee with Guaranteed Maximum Price), A201 (Standard General Conditions) and B101 (Agreement Between Owner and Architect). The existing 2007 version of these forms will remain available into 2018.

Here is a quick summary of the changes. Verrill Dana's Construction Law Group will be presenting a full discussion of the 2017 AIA changes at a later date. Stay tuned for more information.

A101: Substantively, the updated A101 should strengthen contractors' ability to secure early release of retainage. The A101 also includes a new standard provision requiring the owner to compensate for material delays in final completion not related to any fault of the contractor. The new A101 allows the parties to establish a termination fee to be paid by the owner if the contract is terminated for convenience by the owner.

Many of the other changes to A101-2017 relate to format. The new form is a streamlined version of the 2007 edition. Insurance and bonding requirements were moved from the A101 document to an accompanying exhibit. The revised documents include a wider assortment of "check the box" and "fill in the blank" provisions for project start and completion dates, allowances, unit prices, and liquidated damages. In addition, the A101 also now includes an option for including an early completion bonus.

A201: With a few exceptions, the substantive changes in A201-2017 are not dramatic and seem to incorporate many of the adjustments that owners, contractors and attorneys commonly made to the 2007 form. Nonetheless, the 2017 version will require getting used to by owners and contractors.

Owner Finances: Article 2.2 strengthens the contractor's hand when it comes to making sure that the owner has the financial resources to fund the project. The contractor can refuse to proceed with the work, or even suspend work in certain instances, if the owner does not provide timely information concerning its financial arrangements.

Waiver of Claims Not Filed in Sixty (60) Days: Perhaps the most significant change to A201 is the clarified role of the architect in addressing claims by the owner and contractor. The new Article 15.3.3 attempts to facilitate prompt resolution of disputes where an initial decision has been rendered by the architect (or other "Initial Decision Maker") by imposing harsh deadlines on the filing of claims after mediation has concluded unsuccessfully or prior to mediation taking place. Failure to initiate suit or demand arbitration within 60 days will result in a waiver of claims of both parties.

Either party may, within 30 days from the date that mediation has been concluded without resolution of the dispute or 60 days after mediation has been demanded without resolution of the dispute, demand in writing that the other party file for binding dispute resolution. If such a demand is made and the party receiving the demand fails to file for binding dispute resolution within 60 days after receipt thereof, then both parties waive their rights to arbitration or litigation with respect to the initial decision.

This provision will put a premium on owners and contractors keeping a close eye on the calendar when the other party serves notice under this new provision.

Insurance and Bonds: As noted with A101-2017, provisions for insurance and bonding are now included in a separate exhibit rather than in Article 11. The new AIA insurance and bond exhibit offers flexibility in choosing insurance coverages and makes it easier for parties to specify coverages to the specific project. The A201-2017 also provides for owner liability to the contractor for the owner's failure to procure insurance and requiring waivers of subrogation under insurance.

Lien Waivers: Contractors are now explicitly required to submit releases and waivers of liens along with their applications for progress payment. In addition, AIA added a new Article 9.6.8 to require contractors to indemnify the owner from all damages it suffers as a result of a lien or claim filed by a subcontractor where the owner has fulfilled its payment obligations.

Warranties: Article 3.5 now requires all warranties be issued in the name of the owner or be transferrable to the owner. It also clarifies that the contractor's warranty obligations commence on substantial completion.

Termination for Convenience: A201 previously allowed a contractor terminated for the owner's convenience to recover "reasonable overhead and profit on the Work not executed" in addition to payment for completed work and costs resulting from termination. Although the contractor can still recover for the latter categories of costs, AIA modified Article 14.4 in 2017 to clarify that the contractor is entitled to "costs attributable to termination of subcontracts" and a "termination fee, if any, set forth in the Agreement." This approach mirrors that taken by AIA with respect to use by the owner of the architect's instruments of service in prior versions of the B101 documents.

The Contractor Can Just Say "No": AIA revised Article 7.4 to clarify the contractor's rights when it disagrees upon whether a proposed change is a "minor change" (i.e. one that does not affect the contract sum or contract time). Specifically, if the contractor is asked to perform a "minor change," but the contractor believes that such change will affect the contract sum or contract time, the contractor can now refuse to perform the proposed change until the matter is resolved or the owner issues a change directive.

Notice and Communication Between Owner and Contractor: The revised AIA-A201 form also allows for more direct communication between owner and contractor in Article 4.2.4, as opposed to communicating through the architect. Electronic notice is now permitted as well.

This communication is intended for general information purposes and as a service to clients and friends of Verrill Dana, LLP. This publication, which may be considered advertising under the ethical rules of certain jurisdictions, should not be construed as legal advice or a legal opinion on any specific facts or circumstances, nor does it create attorney-client privilege.

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