Vol. 14 No. 1		December 1995

Architects have always been a little uncomfortable with contracts for professional services. They seem to be instruments of an alien culture. They come across as assertive and legalistic, and they can be administratively burdensome. Some prefer to forego written agreements, relying instead on good intentions and mutual trust to guide their projects to a successful outcome.

This has never been a great idea. Now, it may no longer be legal.

Written contracts are fundamental to the orderly flow of commerce. Get it in writing" is a familiar and common maxim in the business world-and for some very good reasons.

Contracts record the intentions of the parties. In the absence of a written agreement, those intentions can fall prey to fallible and subjective memories of convenience. Worse, should one or more of the parties later be unavailable, terms once clearly understood between them can be subject to the far more fallible and subjective memories of others-those who knew about the contract, but knew nothing of the substance of the original understanding. There is plenty of room for argument here.: Contracts also define the duties and obligations of the parties. But, unless they are clearly set forth in writing, those duties and obligations may mean one thing to one party and something quite different to the other. Such misunderstandings foster unmet expectations and breed costly disputes. The question of what, exactly, an architect has agreed to do is difficult enough to determine from a written contract. It can be the penultimate adventure in speculation with only a verbal agreement in place.

Finally, certain terms to the contract will be equitably imposed by the courts in the absence of a written understanding as to whether such terms were, in fact, included. Thus, you could find yourself having assumed responsibilities with a handshake that, even in your weakest moment, you would not knowingly have agreed to accept.

These have long been good reasons for putting your agreements in writing. But, for architects in California, an even more compelling reason has emerged. Now it's the law! The new law applies only to registered architects, not to engineers. An older but similar law, with somewhat different requirements, applies to landscape architects. The statute was enacted as an amendment to the Architects Practice Act. It requires architects to use written contracts in connection with the performance of almost all professional services in California. It arose out of legislation sponsored by the California Board of Architectural Examiners (CBAE). This may help to explain its restricted scope.

CBAE's purpose was to provide for the more effective evaluation of consumer complaints. In the absence of a written contract, the Board apparently has had a difficult time ascertaining whether an enforcement action would be appropriate in a particular circumstance. In the words of a member of the CBAE enforcement staff: "I confess that a major reason for sponsoring the bill was the fact that we were less than effective in meeting our obligation to protect the consumer when we couldn't determine the facts of the case."

The new statute mandates that a written contract be executed by both the client and the architect prior to the initiation of services, There are exceptions in the law, but there is little comfort to be found there. They are extremely limited.

The statute also requires that the contract contain certain, specific elements of information. They are the following; (1) a description of the services to be performed by the architect, (2) a description of the basis for compensation and the method of payment agreed upon by the parties, (3) the name, address, and license number of the architect and the name and address of the client, (4) a description of how additional services will be handled, and (5) a description of how the contract may be terminated. Exceptions to the law apply only in the following circumstances; (I) where services are rendered for which the client will pay no compensation (pro bono services), (2) where the client and the architect have a history of contracting for the same general kind of services being rendered such that an implied-in-fact contract as to the services and compensation can he found to exist, (3) where the client signs a waiver of the requirement for a written contract, or (4) where the architect is contracting with an engineer or land surveyor.

The American Institute of Architects, California Council (AIACC) has drafted a one page, model agreement which is intended to meet the minimum requirements of the new legislation. The model agreement also includes a written waiver of the requirements should your client choose to proceed without a contract. This agreement is expected to he available from AIACC as soon as it clears the internal approval process. You may want to ask for a copy.

Contracts entered into in violation of a statute are generally held to be void and unenforceable, even though one party may be unjustly enriched as a result. The importance to the public of discouraging prohibited transactions tends to outweigh the importance of equitable considerations between the parties.

Most oral agreements for the performance of architectural services will be in contravention of the new law as of January 1, 1996. You can expect that the courts will generally refuse to enforce such agreements. An exception might be made in the face of compelling evidence of unjust enrichment, depending on the degree of sophistication of the client and the nature and extent of the benefit conferred by the architect, but, if push came to shove, it would be an uphill legal battle, at best.

Equally fertile ground for worrisome rulings by the courts lies in the exception to the law which is allowed where services are provided at no cost to the client, This exception may give rise to a presumption that services rendered under an oral agreement to which none of the other exceptions apply are, in fact, rendered pro bono. This possibility would likely loom larger should your client decide, after the fact, to he less than forthright about his or her understanding of your relationship at the outset.

Consider the following, small firm examples of how these concerns might play themselves out.

Suppose you begin work for new clients and invest twelve hours without a written agreement. Then you meet to outline your concept for the remodeling of their kitchen and family room. Your ideas are brilliant, and you solve what had seemed to them to be an insurmountable problem. They listen attentively and send you on your way. They also refuse to pay for the time you spent on their problem. Instead, they hire a contractor who incorporates your ideas and your solution into a remodeling project which is later published as the lead article in Woodworking magazine. Not surprisingly, you are not mentioned at all.

You sue for your fees in small claims court to keep your costs down. The owners say, "Wait! The law says you can only render services on the basis of a written contract. The law also says that the absence of a written contract is consistent with the tendering of pro bono services. We just thought this guy (that's you) was coming over to shoot the breeze. We never contracted for anything. And, even if we did derive a benefit, he (you again) must have granted it out of the goodness of his heart."

`Who wins? Who knows? But, there is a strong argument in favor of a presumption that the client will prevail. It may be that the client would prevail even if a more obvious benefit were conveyed, a set of schematics, for example. Then again, maybe not. But the ante has been raised, and your hand is weak.

Suppose you receive a phone call. It is unexpected good news. You have been awarded a project you thought was beyond your reach. It is a challenging and exciting opportunity. The only problem, your client explains, is that the project is already behind schedule. You will have to start immediately. A contract, of course, will need to be negotiated, but that can be worked out along the way. The important thing is to get the project going now. You set aside less pressing matters, roll up your sleeves, and eagerly set to work.

In the euphoria surrounding the project at the outset, no one thought it might go sour. But, what if; after protracted negotiations, you and your new client cannot come to terms? What if your client simply refuses to pay and hands the project to another architect?

The law requires written authorization for the services you performed. Without it, you may well he out the costs you incurred. Although there may be some form of equitable estoppel, there is no room to argue here about unjust enrichment or benefits conveyed, You could find yourself without recourse and with a former client who knows that. Unfortunately, some may seek to profit from that knowledge.

Granted, these are small firm nightmares, but the law applies equally to all. For large firms, the stakes are simply higher.

Here are some suggestions for action if you have not already done something about the use of written agreements on every project;

1. Use the AlA standard documents (or your own in-house forms) as a matter of routine, and modify them, as necessary. You will need to include your license number, for example. For very small projects, start with the AIACC model agreement. Seek the assistance of counsel.

2.Develop a waiver for clients to sign where you mutually decide, for one reason or another, to proceed without a written agreement. Once again, the AIACC model might be a good place to start.

3. Work with counsel to draft a standard letter agreement authorizing you to start work pending negotiation of a final contract. It will need to be consistent with the requirements of the new law. Make certain it provides for payment for the services you perform in the interim.

4. Use these documents. Always. On every project. Make certain everyone with the authority to bind your firm to a contract consistently uses them, as well.

The use of written agreements for professional services has long been an important piece in the loss prevention puzzle. But after January 1, 1996, getting it in writing may be even more important. It's akin to the mildly annoying advertising campaign designed to encourage us to wear seat belts: "Now it doesn't just make good sense, it's also the law."