Construction projects frequently require expertise from professional consultants. When they are engaged on a project, professional consultants often wish to use industry standard forms of appointment (such as those issued by the Royal Institute of British Architects or the Association for Consultancy and Engineering), or even their own terms and conditions.
However, clients must take care before agreeing to any terms which have not been reviewed for amendments. This is because these forms in their original state are frequently biased towards consultants. This can cause problems further down the line when issues arise and a client needs to rely on the terms of the appointment. Anyone seeking to engage an external consultant for a construction project should be mindful of the following six main clauses used in consultant T&Cs.
- 1: Assignment – Third parties such as funders and purchasers will want to want to rely on the terms of a consultant’s appointment after it has been entered into. One way to achieve this is for the client to assign the appointment to the third party and this is often required on the sale of a property or as a condition to financing the works. Usually, assignments require the consultant’s prior written consent before the benefit of an appointment can be assigned by the client. The industry standard documents require a consultant to not unreasonably withhold its consent, but this does not guarantee consent being forthcoming and obtaining consent can be time consuming. Other terms and conditions can make consent completely at the consultant’s discretion which means they can refuse to allow an assignment.
- 2: Copyright licences – the granting of any copyright licence to a client for material produced by the consultant is typically made conditional on the payment of the consultant’s fees. This can result in a copyright licence being terminated and a client being unable to use copyrighted material for a project where there is a dispute on fees or a delay in payment.
- 3: Warranties/Third-party rights – purchasers, tenants and funders of a property/project will often require construction remedies directly against the consultants by way of warranties or third-party rights. The particulars of such appointments need to be considered as these will state whether the consultant is required to provide warranties/third-party rights and if so, to whom and in what form. Consultants often try to limit the number of warranties to be provided which needs to be considered on a project-by-project basis. Such documents will often make the payment of the consultant’s fees a condition of the consultant providing the warranties. Again, this can be an issue where there is a dispute on fees or a delay in payment.
- 4: Liability – any agreement will be either be:
- Signed under hand (a signature on behalf of the company) or executed by;
- Deed (usually signed by two directors of the company or one director in the presence of a witness).
- If signed under hand, a client can bring a claim for breach of contract for a period of six years from the breach, however, this period is extended to 12 years if the appointment has been executed as a deed. Consultants often try to limit liability to six years, but funders, tenants and future purchasers will usually expect the underlying appointment to be executed as a deed.
- 5: Caps – an overall cap on the consultant’s liability, often in line with the consultant’s professional indemnity insurance cover or a multiple of the consultant’s fee, is typically referred to. Some industry standard documents also try to exclude liability for loss of profit, loss of business or consequential loss. Any caps included in an appointment need to be considered on a project-by-project basis to determine if they are appropriate in the circumstances.
- 6: Net-contribution clauses – agreements will include net contribution clauses which limit a consultant’s liability to the amount by which it is responsible. In construction, it is not unusual for more than one party to be responsible for a breach, and apportioning liability between parties can be complex and such clauses can result in the client being unable to recover all its losses.
The Hamlins Construction team has extensive expertise in negotiating construction appointments for clients. We seek to obtain the best outcome possible for every client. If you would like to find out more about how we can help you, please get in touch.