Risk Managing Your Services

Paula Hanley reports on a BDAV seminar on Risk Managing Your Services

170 members and associates attended the final BDAV CPD event for 2010, on Monday, 8 November 2010. The evening featured (then) BDAV Executive Officer, Brian Morison, whose topic was Risk Managing Your Services. As (then) BDAV President Tim Adam said in his introduction, Brian holds a Bachelor of Laws and is well placed to speak on legal issues that affect building designers. Many members can attest to how helpful Brian is with advice on such matters.

Brian opened his presentation with an overview of legal contracts, explaining the elements which are essential for a contract to be valid – offer, acceptance, consideration, intention to be bound, mutuality (consensus), capacity and legality. As Brian said, this list comes straight out of legal text books but it is not necessarily understood by members of other professions. It was then explained how these elements translate into the vital contract conditions that should be in all contracts between building designers and their clients:

  • the name of parties and the date of the contract;
  • scope of work;
  • authority to act as agent;
  • payment of fees;
  • license to use the drawings to be conditional upon payment of fees;
  • the nature and scope of the rights granted to the client to use the drawings;
  • engaging consultants;
  • no warranty for the accuracy or quality of consultants’’ work;
  • terminations of agreement.

These items need to be clearly expressed so that all parties to the contract are aware of their responsibilities. For example, the scope of work needs to provide a clear definition of the services to be provided, including the work that is to be completed at each stage of the project. Brian suggested that this could be provided in a ‘tick box’ type list. Interestingly, he explained that while it is essential to spell out the services that are included in the scope of work, it is also important to note the services that are not included. The exclusions must be written rather than implied through omission.

Brian then went on to emphasise the legal requirement under the Building Act for a practitioner to obtain authority to act as the agent of the client and urged members to refer to the BDAV’s Practice Note – Authority to Act as Agent – and to include a clause to this effect in the contract.

The importance of including conditions governing the license to use the drawings was then discussed. This license should be conditional upon payment of fees, and it should be made clear that the license extends to the use of the documents only for the purpose for which they were intended. Such conditions need to be included to prevent the client using the drawings for other projects, or passing them on to other parties, unless agreed to by the building designer responsible for those drawings. Brian went into great detail on this point, and it is suggested that members refer to his extensive notes for an understanding of the matter.

Brian then raised another important point regarding the engagement of consultants. Brian’s advice is that the building designer should only ever engage consultants in the capacity of agent acting on behalf of the client, and never directly in his or her own name. To contract directly with consultants makes the designer accountable for the performance of the consultant. To illustrate this point, Brian suggested that members refer to the exclusion clauses in the BDAV Engagement Agreement.

Another vital inclusion in a contract is a termination clause. This clause needs to clearly state in what event the contract can be terminated, and details of the notice required for such termination. The termination clause is required to protect the building designer from action by the client for illegal termination of the contract.

Brian then enlarged upon two matters which commonly cause termination of contracts – time and construction cost. While he explained the need for building designers to ensure that they complete the work described in the contract within a ‘reasonable time’, he also explained that designers should avoid specifying or estimating a time within which their services will be provided. He urged building designers to take the matter of time very seriously and ensure that they keep the client informed as to the reasons for any delays as they occur.

Regarding construction costs, Brian discussed the need for building designers to keep abreast of current costs, through trade publications and discussions with trusted builders. To illustrate the need to do all that is possible to ensure that construction costs do not exceed the client’s budget, Brian cited a number of cases where actions were brought against architects and designers. Building designers need to disabuse clients of unrealistic expectations of construction in the initial discussions of the project. They also need to be able to demonstrate that they have carried out the design with reference to the projected budget, and to ensure that clients are made aware in writing of likely cost increases when the client instigates variations to the design. Brian maintains that to remain silent on this last point may prejudice the designer’s legal position. Further, Brian advised designers to avoid being held out to be an estimator, and to clearly state this to their clients. In addition, if cost estimates are unavoidable, they should only be provided based on current costs. Above all, Brian urged members to have in place ‘superb communications’ – and to keep written records of such communications.

Brian then revisited a pet topic of his, and one that is of continuing concern for many designers – that of Copyright. Many members will have heard Brian’s presentations on the issues related to copyright, and on this occasion Brian chose to explore a number of what he termed ‘Copyright Misconceptions’. Misconception number one is that if a design is modified by a percentage, unauthorised use of that design will not infringe copyright. As Brian said, although many builders, clients and even some building designers believe this, it is, in fact, a fallacy.

Misconception number two is the belief of some clients that they own the copyright because they had some input into the design. Again, said Brian, this not so. What is protected by copyright is not original thought or information, but the original expression of thought or information in some concrete form. Therefore the protection is given to the actual drawings.

Misconception number three, held by designers, is that if the client does not pay the designer’s fees, he or she cannot use the drawings because that use will infringe copyright. This is not so, said Brian, as the courts have decided that non-payment of fees is a debt collection or contract dispute issue, and has no relationship to infringement of copyright. Brian then reiterated the advisability of including a clause in the contract making the license to use the drawings conditional upon payment of fees.

Brian finished his presentation with a discussion of the incidence of misuse of building partitioner numbers. A number of these cases have come to light of late, with two such matters currently before the Building Practitioners Board. Unfortunately, the Building Act does not at present contain a specific clause that prohibits the unlawful use of a building practitioner’s number. Brian assured the audience that the BDAV will commence a lobbying campaign to have the Act amended. He also encouraged members to make use of the BDAV’s Certificate of Design and the relevant Practice Note to assist in clearly spelling out the extent of documentation carried out by the building designer and the associated supporting documentation by others.

A lively and informative question and answer session followed, rounding off a successful Continuing Professional Development program for the year.

Author’s note:

The author understands that there is no requirement to show a building practitioner’s number on drawings. While not showing such numbers on drawings would not in itself prevent intentional misuse of registration numbers (numbers can be checked on the VBA’s website), it would assist in ensuring that the numbers are actively provided only to those who need them, such as the relevant building surveyor. The author is aware that some members believe that it is mandatory to provide registration numbers on drawings. The BDAV would welcome further discussion of this matter, to info@bdav.org.au.