Members Speak: Performing Work Without a Written Contract

Performing Work Without a Written Contract

By Jonathan C. Shoemaker and John P. Williams
Lee & McShane, PC│Washington, DC

Best practices dictate that architects should refrain from doing any work on a project until there is a signed contract in place. However, sticking to this rule is far easier said than done. Whether because of a demanding client, a lucrative assignment, or simply an oversight by a project manager, architecture firms are commonly put in a position where they have begun work on a project without a written contract to govern the terms of the agreement. This article briefly touches on some of the risks of providing services without a written contract.

If there is no written contract on a project, it is likely that there is an oral contract. Maryland law recognizes oral contracts as well as “quasi-contracts,” which are contracts based on the conduct of the parties. The risk of performing work pursuant to an oral contract is that – when disputes arise – the parties may disagree about the terms of the parties’ contract, including the scope of work and the terms/conditions which may apply to the services. This can impede resolution of problems during the project, and after the project.

When performing work without a signed contract, there is a risk that the terms of the architect’s proposal – which may include provisions that would limit the architect’s liability if counter-signed by the owner – will not be enforced. For example, the architect would likely face an uphill battle to prove that a waiver of subrogation provision, which prohibits an owner’s insurer from seeking restitution from the architect for insurance proceeds paid out on the project, bars a claim by the owner. Likewise, clauses which bar claims for consequential damages, disclaim any third-party beneficiaries, or cap the architect’s liability (whether to the architect’s fee or available insurance proceeds) may not be available to the architect who performs work without a written and executed contract.

Another risk relates to ownership of the work product generated as part of the work performed without a signed written contract. If the owner terminates the architect’s services after schematic design is complete, is the owner entitled to use the architect’s design? If the owner terminates the architect’s services after construction documents have been prepared, precluding the architect from providing construction administration services, is the owner entitled to use the architect’s design? Depending on the jurisdiction in which your services are provided, the owner may have an implied license to use the design.

There can also be significant disagreement when it comes to being paid for Additional Services. When preparing a fee for a project, the prudent architect should attempt to negotiate a limit on the number of site visits included in the fee; however, without a written contract, the owner may take the position that there are no limits on the number of site visits required of the architect. If the project is delayed (perhaps by 6 months to a year), is the architect obligated to continue making site visits even if the owner is unwilling to compensate the architect for site visits during the delay period? If the architect suspends its services over non-payment for additional site visits, it may be in breach of its contractual obligations if the owner prevailed on its view of the agreed-upon scope of work.