Updates to Construction Contracts
As is its custom every ten years, the American Institute of Architects (AIA) has released updated versions of many of its industry standard construction documents commonly used by owners, architects and contractors. The A101 (Standard Form of Agreement between Owner and Contractor) and A201 (General Conditions of the Contract of Construction) – which constitute the most commonly used owner/contractor construction forms – contain a number of notable changes. Some of the more important substantive changes that owners and contractors will need to consider are as follows:
- Owner Termination for Convenience – The 2007 A101 and 2007 A201 provided that if an owner terminates the contractor for convenience (as opposed to a termination on account of the contractor’s default), than the contractor may recoup projected overhead and profit for anticipated work that had not yet been performed as of the termination date. The 2017 versions contemplates a stipulated termination fee which will need to be negotiated by the parties.
- Owner Financial Information – The 2017 A201 version has provided the contractor the express right to refuse to proceed with the work or stop work in progress if the owner fails to provide reasonable evidence that the owner has made sufficient financial arrangements to fulfill its payment obligations under the contract.
- Warranties – The 2017 A201 version now provides that all warranties issued in connection with the work, such as warranties from material or equipment providers, must be issued in the name of the owner or provide that they are transferable to the owner.
- Owner/Contractor Communications – The 2007 A201 stated that owners and contractors shall “endeavor” to communicate through Architect. The 2017 version now contemplates that owners and contractors will communicate directly and will keep the architect informed of the nature and substance of those communications.
- Minor Changes in the Work – The 2007 A201 provided that the architect may order minor changes in the work that do not adjust the contract sum or contract time. The 2017 revisions now incorporate a mechanism for the contractor to register its objections to the architect’s proposed changes and the right not to proceed with the changed work until the objection is resolved.
- Lien Waivers – Subcontractor and supplier lien waivers now must be included in each draw request.
- Contractor Lien Indemnification – The 2017 A201 now provides that so long as the owner has funded its payment obligations, the contractor must indemnify the owner for lien claims and other claims for non-payment by such contractor’s subcontractors or suppliers.
Many of these changes are intended to approximate the types of modifications that owners and contractors negotiate when entering into construction contracts using the AIA forms. Nevertheless, it is important for the parties to take note of these provisions when using the forms without specific consideration of these issues.
For further information regarding construction contracts and the construction process, please contact Jeffrey M. Galkin at 312-368-0100.
