-Partners in Practice -

It arrives in the morning mail--a contract drafted by an attorney for one of your clients--and what follows can be a nettle some experience. Few architects or engineers are enthusiastic about struggling through the arcane language; even fewer relish the prospect of haggling over it.

As a result, there is a natural tendency to make a comforting assumption. It goes like this: Since the newly-formed relationship with the client is one of harmony and goodwill, the client's contract proposal can reasonably be expected to incorporate an appropriate element of fairness. As long as the fee is adequate, so the reasoning goes, it may not be prudent to risk the harmony that exists by raising sticky issues over "boiler plate" the client is unlikely to modify in any case. The rationale may be reassuring. The consequences could be disastrous.

Your contract serves two vital functions. First, it is a communications resource--an opportunity to arrive at (and to record for all concerned) a clear, mutual understanding of the expectations and responsibilities of each of the parties. Where an agreement serves this function well, it can significantly reduce the likelihood that it will be called into play, later on, to resolve an argument between two attorneys over what it was you or your client should have done.

Second, your contract is an opportunity to allocate risk in some reasonable way. It is a reflection of your agreement to take on certain liabilities (but not others) in connection with your work. The problem is, if you are not careful about how these risks are apportioned, you could find yourself with a contract that makes you an insurer of someone else's performance--the general contractor's, for example, or one of the subs'.

Most owners understand only too well that negotiation is a process of give and take. The rules of the game are such that a proposed contract is assumed to contain provisions disproportionately advantageous to the party who drafts it. It is also assumed that a certain balance will be struck through the negotiation process.

Owners generally expect you to exercise the same care and judgment in your business affairs as you apply to the professional aspects of your work. They know contracts can apportion risks and responsibilities in ways that are fair and in ways that are not, and they anticipate that you will raise questions on issues important to you.

The reality is, careful negotiation on your part can strengthen your client's confidence. You are, after all, being entrusted with much of the responsibility for an undertaking of great complexity and substantial cost. Your caution can communicate a great deal about the way you are likely to approach issues affecting the owner's business and financial interests in the project.

Although you might view your negotiations as an opportunity to promote understanding, this is not the traditional view of most attorneys--they see negotiation as one more element of the adversary process, one more opportunity for advocacy. But, in a situation where a successful project depends upon nothing quite so much as an atmosphere of mutual trust, a win-lose approach to contract negotiations can be counterproductive for all concerned.

You can negotiate more equitable agreements, on terms your clients will understand and accept, but only if you are prepared to fully explain your point of view, and to do so without losing sight of the fact that your client's perspective is likely to be very different from your own. Here are some ideas on how you might improve your results:

1. Keep your attorneys at bay.

   You and your client are the ones who will have to fulfill the promises you make, not your lawyers. Your attorneys can be of great value after you reach an understanding, but they cannot make the decisions needed to arrive at that understanding. Their proper role is to advise you on the legal implications and pitfalls of the language you use, not to strike an agreement on your behalf.

2. Know your priorities.

   Some issues are more important than others, and you may not prevail on each and every one. You need to have a clear understanding, going in, of the relative importance of the issues you want to raise. In this sense, you might find it helpful to organize the issues into a hierarchy of values. You could, for example, assign the highest priorities to provisions affecting your compensation. Then, you might rank issues involving inordinate risk (such as most forms of indemnification), followed by leverage issues (such as applicable law) and throw-aways (such as client approval of any change in project managers).

3. Prepare carefully.

   Your client cannot be expected to respond to your concerns unless you articulate them clearly and in a frame of reference he or she can identify with. This requires that you develop a rather detailed knowledge of the implications of important issues, and that you be prepared to express your point of view in such a way as to accommodate your client's interests to the extent equity might dictate. It also requires that you enter your negotiations prepared to enlighten. Your client may not understand the limitations on the role you can play in the design and construction process, and you need to be candid about what those limitations really are.

4. Develop a fall-back position.

   You may not be able to negotiate for all of the protections you might like, but that does not mean you have to throw in the towel. There are many ways to deal with important provisions, and it will make your negotiation efforts far simpler if you are prepared to make concessions that, nevertheless, incorporate most of the safeguards you need.

5. Deflect the blame.

   You do have to protect your relationship with your client, and it makes no sense at all to be the source of bad news. Take a partner to your negotiations, one not involved in the project. That way you can be as accommodating as you like, but unable to move beyond the restrictions set by your partner. You can also blame others not present for the stance you take; your banker, for example, who might not permit you to accept a contract without provision for monthly progress payments, or your insurance advisor, who has made it clear that no coverage will be in place if you accept certain of the risks your client would have you assume.

6. Finally, get expert help when you need it.

   After you have arrived at an understanding with your client, have your attorney and insurance counsel review your agreements to make certain that legal requirements are met and that your insurance protection is not being jeopardized. For our part, we are pleased to be able to lend our specialized expertise to our clients by reviewing their contracts for issues of coverage. Because we do this on a regular basis, we also find we can frequently identify other opportunities to strengthen protections against unwarranted liability exposures.

For inquiries or problems please contact us via e-mail at Earleen Thomas or call us directly at 800-705-7742.
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