Chapter 7
Design Agreements
Summary:
This Chapter discusses the steps and criteria for selecting architects and engineers (A/Es) in the public sector. These selections are regulated at the State level by the California Government Code Sections §§ 4525-4529.5 (“The Little Brooks Act”). The key regulations that state agencies must adhere and the steps that must be taken in the bid and selection process are also described. The crucial phases of design are described with their risks. The typical elements of A/E Design Agreements are set forth as well as the major points of negotiation raised by A/Es and public entities. A few observations are made about the roles A/Es play in design-build and other innovative delivery systems.
§ 7.1 Selection of Design Professionals
The selection of the architect and engineers (A/E) for a project is an important decision for the public entity. As a result, the California public sector has developed formal qualifications-based selection rules that focus on integrity, capability, experience, financial strength and availability. The process is intended to assure the public obtains quality design services at a reasonable cost.
The provisions of the Public Contract Code promoting competitive bidding do not apply to contracts for architectural, engineering or project management services. Instead, they use a qualifications-based selection process under Government Code §§ 4525-4529.5, the so called “Little Brooks Act”.16 It is based upon the U.S. Government’s Brooks Act which mandates qualifications-based selection of A/E services for federal construction projects.
The selection of design professionals by a state or local agency is on the basis of demonstrated competence and on the professional qualifications necessary for the satisfactory performance of the services required.17 California agencies must therefore adopt by regulation and local agencies may adopt by ordinance, procedures to assure that design professionals are hired on this basis and that their services are provided at fair and reasonable prices to the public agencies. In addition, the agencies must ensure the maximum participation of small business firms and must prohibit unlawful practices such as rebates, kickbacks and conflicts of interest.18
The regulations governing the selection of private architectural and engineering firms for projects for the State of California are provided by the Department of General Services.19 However, in negotiating a fee and executing a contract for design professional services, a state public agency must follow specified procedures outlined in the Public Contract Code.20
After notice has been given to the successful design professional firm that it has been selected, the state agency is required to provide written instructions to the firm that contain information regarding contract negotiations. Negotiations must begin within 14 days after the successful firm has been notified.21
Once the negotiations are complete, a contract must be executed within 45 days.22 If the parties reach an impasse during the negotiations, the state agency may terminate the negotiations and begin negotiating with the next most qualified design professional firm.23
Firms are encouraged to submit statements of qualifications and performance data to the state agency on an annual basis.24 In addition, the state agency must announce a statement of all projects requiring design professional services in publications of the respective professional societies.
The agency must evaluate current statements of qualifications it has on file along with others that may be submitted regarding the proposed project, and must conduct interviews with at least three of the qualified firms. Thereafter, the most highly qualified design professional is selected by the state agency.25 If the selection is conducted by a local agency that agency may follow the procedures required of state agencies, but the local public agency must enumerate the selection criteria and method of selection so as to avoid unnecessary bid protests and project delays.26
The public agency must negotiate a contract with the “best qualified firm ... at compensation which the state agency head determines is fair and reasonable to the State of California or the political subdivision involved.”27 If there are more than three successive negotiations with firms that do not result in a contract, then the state agency must select additional qualified firms and repeat the procedures.28 When the selection conducted is by a local agency, the agency may follow the procedures required of state agencies.29 The provisions discussed above do not apply where the state or local agency determines that the services needed are of a more technical nature and involve little professional judgment and that issuing a request for bids (rather than statements of qualifications) would be in the public interest.30
Following the passage of the Fair Competition and Taxpayer Savings Act, adding Article XXII to the California Constitution and Government Code §§ 4529.10 through 4529.20, public agencies were given broader discretion to hire design services. They must be provided pursuant to a “fair, competitive selection process.” (Statewide Proposition 35, November 8, 2000).
In general, the procedures for selecting construction managers follow the rules for designers. Firms proposing to provide construction project management services must provide evidence that the individual or firm, and its personnel carrying out onsite responsibilities, have expertise and experience in construction project design review and evaluation, construction mobilization and supervision, bid evaluation, project scheduling, cost-benefit analysis, claims review and negotiation and general management and administration of a construction project.31
§ 7.2 Key Clauses in Design Agreements
Typically, an architect/engineer (A/E) Agreement is negotiated well before the owner-contractor agreement. The A/E Agreement will often contemplate, make reference to and integrate into the A/E Agreement a requirement the public owner use of a specific form of a national standard agreement between the Owner and General Contractor. As such, the negotiation of the terms and conditions of the A/E agreement may inadvertently and substantially limit the flexibility of the owner in drafting its bidding documents, particularly the proposed Prime Contract with the successful general contractor.
For example, when entering into an AIA B101 (formerly AIA B-141 or AIA B151) agreement with an architect, the public entity may bind itself to use a specific set and edition of general terms and conditions, such as the AIA A-101 Standard Form Agreement between Owner and Contractor on a Stipulated Sum basis and AIA A-201 General Conditions of the Contract for Construction.
An A/E agreement is complementary to and administered in conjunction with a specific owner-contractor agreement and general conditions. Thus, if there exist substantial differences between the terminology and scope of services used in the architect-owner and the owner-contractor agreement and general conditions, it can result in major conflicts during the course of a project. As a result, a common set or “family” of documents, such as AIA, EJCDC or the ConsensusDocs forms, is typically used in the development of a project. A/Es dealing with public agencies are extremely wary of the substantial risk of claims for errors and omissions (E/O). Customarily, errors and omissions (E/O) insurance carriers believe public entities and low-bid general contractors are more prone to making claims against design professionals. Therefore, architecture and engineering firms spend considerable amounts of time and effort negotiating contracts with public entities that contain a variety of limitations of risk and liability, some proposing clauses that are reasonable and others that are not.
It is also important that essential legal issues, such as ownership and future use of the drawings, field inspections, indemnification, and insurance be covered in these agreements, since design errors leading to structural failure, re-work, patent violations and late completion can result in millions of dollars of ongoing damages to the public entity.
When drafting or negotiating agreements with or on behalf of design professionals, one should understand the fundamental contract issues. The following are key issues in design services agreements and a discussion of some of the legal rules that have been applied in interpreting them.
§ 7.2.1 Project Description and Scope of Work
The project description should provide the main elements and limits of the project, (i.e., purpose of structure, budget, square feet, number of floors, exterior skin). It should specifically exclude any elements (such as landscaping or lighting) that are excluded from the project or services.
Where the scope of work is unclear, it can cause serious deterioration of the client relationship and may leave the A/E uncompensated for extra services performed.32 Furthermore, sweepingly worded A/E disclaimers may not protect the architect from liability where they have assumed broad project responsibilities.33
§ 7.2.2 Basic Services Versus Additional Services
It is important to differentiate between Basic Services and Additional Services. Basic Services are typically included in the fixed-fee structure of an agreement, whereas Additional Services may require additional compensation. The A/E generally has the obligation to perform the Basic Services without obtaining advance approval but will often be required to obtain approval from the owner before performing Additional Services. A comprehensive treatment of this subject is found in AIA B101, Article 3, entitled “Scope of Architect’s Basic Services,” and in Article 4 “Additional Services.”
§ 7.2.3 Standard of Care
The A/E will be subject to the professional negligence standard of care unless the contract provides for a higher standard.34 The owner may want to require a higher standard, such as that provided in the following provision excerpted from a public design contract drafted by a city attorney: “The architect shall perform the professional services in accordance with the highest professional standards of those architects practicing in the [designated locale] area and engaged in providing [designated type of services] design and construction services.” This proposed clause increases the duty of care to the highest standard of practice, rather than the normal or ordinary standard, but defines the standard further by geographical area and subject matter. It is arguably uninsurable, since typical A/E liability insurance only covers professional negligence, rather than adherence to the highest standard of practice in the area. In most cases expert testimony is required to establish the standard of care.35
Often, the defendant-architect may be an ineffectual witness, or that testimony may not even be allowed.36 Also, the specific type of consultant may be needed as a testifying expert.37 So, it is wise to bear in mind where the parties will be able to find an expert testifying about that specific standard of care when they are busy drafting the contract language defining the standard of care.
Some owners desire to obtain an express warranty from the A/E despite the fact that the law of professional liability does not require such; and, in professional practice, it is often not practical to provide such a warranty. Professional services have been consistently treated differently from products that are typically guaranteed.38
For a project with a unique or special use, the parties may specify the standard of care for that project. Otherwise, the professional standard of care does not require the A/E to guarantee the result or outcome of design or impliedly warrant the sufficiency of plans and specifications or their fitness for the project’s intended use.39 A contract that obligates the A/E to design a plant or equipment that will meet specified production parameters expressly set forth therein will be enforced as an express warranty of the design.40 For an experimental or innovative design assignment, the standard might be stated as best efforts or, on the other hand, the design liability can be disclaimed entirely.
§ 7.2.4 Schedule of Performance
Traditionally, A/Es do not have binding schedules in their professional services agreements. Where no time is specified for performance of a contract, a reasonable time is usually implied. Where the owner states that “time is of the essence,” any delay in the performance of the contract may constitute a material breach if it causes prejudice or harm to the owner. Generally, however, the quality of the A/E’s performance is more critical than the timing of the performance.
The A/E’s timeliness becomes critical once the construction portion of the project is awarded. The contractor and its subcontractors are contractually bound to the milestones and times set forth in the construction agreement. The A/E is not contractually obligated to achieve the critical path or bound to those milestones, but the A/E’s acts or omissions can affect whether the parties to the construction contract can meet their obligations. In such cases, the A/E may be sued by the contractor who claims to be a third party beneficiary.41 This rule exists in other states as well.42
§ 7.2.5 Redesign Without Cost
The owner is generally liable to the contractor for increases in the contract price associated with the cost of constructing or remedying work arising from the A/E’s errors and omissions because, although the A/E does not guarantee the plans and specifications to the owner, the owner does impliedly guarantee them to the contractor for contract pricing purposes.43 The foregoing rule is separate from the A/E’s liability for negligence, i.e., injuries to persons or property caused by errors and omissions. It should be recognized that a contract clause stating that the A/E does not warrant or guarantee the plans and specifications, but that any errors or omissions in the drawings will be corrected by the A/E without additional cost to the owner, is a fairly restrictive form of limitation of liabilities, and is likely to be closely scrutinized regarding its enforceability.
§ 7.2.6 Adherence to Codes
The A/E is obligated to keep informed of building restrictions and regulations and to prepare plans and specifications that conform to building codes.44 The A/E may be liable for violations of the Uniform Building Code under the doctrine of negligence per se, which creates a presumption of due care and shifts the burden to the A/E to defend its conduct.45
The case of Huang v. Garner48, turned on the question of whether a jury instruction regarding negligence per se could be presented to the trier of fact independent of expert testimony as to the community standard of care that is ordinarily required.
The Huang court found that such a jury instruction could be presented because the injury suffered by plaintiff was of the type that the Uniform Building Code was designed to prevent, and that it was then up to the defendant engineer to show that there was no proximate relationship to the injury.
The Supreme Court in Aas v. Superior Court (2000) 24 Cal.4th 627, overruled the Huang decision in part on the question of being able to sue for violations of the Uniform Building Code that had never lead to actual property damage. The plaintiff in Aas, supra, wanted to sue for the costs to repair deviations from the Uniform Building Code and the court ruled that absent a showing of actual damage, the suit was improper.
Following Aas, supra, the Legislature enacted the Right to Repair Act, codified in Civil Code §§ 895-945.5.
Mere deviations from customary practice do not constitute negligence.46 Complying with special industry standards or utilizing state-of-the-art technology may not be required to satisfy the standard of professional practice. The following provision excerpted from a public design contract drafted by another city attorney illustrates the code issue: “The architect shall study all applicable laws (all codes, ordinances, rules, orders, regulations, and statutes affecting the project, including, but not limited to, tax codes, lien laws, zoning ordinances, environmental regulations, fire and safety codes and coverage, and density ratios) and comply with them in the performance of all the architect’s professional services.”
§ 7.2.7 Licensure and Payment
All persons preparing plans, specifications, and instruments of service for others must sign those documents and all associated contracts therein and, if licensed, must note their license numbers.50 Generally, an unlicensed A/E cannot recover on a contract or for services rendered. However, a licensed person historically could recover on an implied, oral, or unsigned contract, or a contract that did not bear the A/E’s license number where the A/E is licensed and is not alleged to have performed defective work.47
Section 143 was added to the Business and Professions Code and prevents professionals from recovering where they are not licensed thereunder. The A/E may forfeit its right to payment for services for failure to prepare plans and specifications that conform to building codes.48 The owner may not refuse payment of costs due to alterations made during the course of construction49 or changes made to the plans after a successful bidder has been located to do the work at the estimated price.50 Where the contract makes payment dependent on a condition, the owner may not avoid payment by controlling the occurrence of that condition.51
If the contract expresses the measure of the A/E’s compensation, the fee will be determined in accordance with the contract provisions.52 If no provision is made as to compensation, the A/E is entitled to the reasonable value of the services.53 This value may be determined by reviewing customary charges for similar services by other A/Es.
Where the A/E is terminated for convenience prior to completion of the project, the owner must pay for services rendered and expenses incurred to date of termination, unless the contract provides otherwise.54 Where the fee is based on a percentage of the construction cost, the contract should state explicitly whether that means the percentage of the construction cost anticipated at the time the A/E is terminated or the actual cost of the completed project.55
§ 7.2.8 Construction/Site Services–Shop Drawing & Submittal Review
The A/E is typically required to review and approve the contractor’s submittals of shop drawings, samples, and other data for conformance with the conceptual design of the project and compliance with the information in the contract documents. However, these reviews do not include the means, methods, techniques, sequences, or procedures of construction or safety programs incident thereto.
Conflict often arises over the level of review given and the meaning of the A/E’s approval. Contracts generally state that the A/E will review the submittals only for general conformance with the design concepts and that the A/E is not required to ensure the contractor’s submittals are free from minor errors or deviations from specific requirements of the plans and specifications.
When the contract delineates such responsibility, the A/E may be held liable for the contractor’s deviations from clear and specific requirements of the plans and specifications. Where a rigorous level of review and approval is desired, the contract should provide for adequate compensation and time for the A/E and its consultants to perform an in-depth quality assurance review.
§ 7.2.9 Construction Services–Change Order Evaluation and Approval
A major responsibility for A/Es who review and approve contractor change order requests is to ensure prompt negotiation of time and pricing adjustments. It is common for the A/E to have the authority to bind the public works owner on change orders; therefore, the A/E should act in a manner that does not incur unnecessary delay or expense. For example, notice requirements, such as providing written notice of the nature and extent of a problem and its cost and schedule impact, must be observed and enforced, since by inaction or acquiescence, the A/E can waive the owner’s right to written notice.56
When possible, the A/E should obtain advance agreements on changes, known as “forward-priced change orders,” to minimize the volume of unsettled claims. These may be based on the engineer’s best estimate of costs, overhead, and profit for the work, or can be unit prices based on industry averages. This technique eliminates the buildup of major financial arguments throughout the work and reduces the level of distrust that can exist where change orders are left up in the air.
The A/E is usually not empowered to create a new contract between the owner and the contractor under the guise of interpreting the original contract provisions or issuing change orders. The A/E must translate the contract and ascertain its intended meaning based on the original contract documents.
§ 7.2.10 Construction Services–Substitutions
One function of the A/E under traditional contracts is to evaluate and determine the acceptability of substitutions of materials or equipment proposed by contractors for those originally specified in the contract documents. The A/E must review requests for substitution within a reasonable time period and must be fair and reasonable in approving or denying them.
Where the A/E’s decision has a reasonable basis, it will usually be binding and final. The courts in this area tend to defer to the professional competence of the A/E. However, A/Es may be liable for insistence on an exclusionary specification that cannot be performed by the successful bidder.57
§ 7.2.11 Construction Services–Supervision and Site Safety
The design professional’s degree of responsibility for the safety of site contractors has been vigorously debated for the past three decades. As the contractual limitations of privity gave way to extended liabilities to third parties in the lat 1950s, injured workers argued that the A/E’s power to reject and stop work and provide general supervision gave them a responsibility to ensure site safety.
Design professionals argued that their responsibility at a site was to monitor construction only on behalf of the owner, and only for general observation that the key design elements were being faithfully executed.
As a result, strict contractual delineations of duties and disclaimers of site safety responsibility became fixtures in design professionals’ contracts. Some courts have upheld such delineations of duty.58 However, if an A/E undertakes responsibility for safety in its contract with the owner, the contract becomes the initiating source of duty, and that duty is also extended to third parties.59 Some courts have found that professionals may acquire a duty to third parties for safety — even though their contract does not give them such responsibility — if they assume that responsibility by conducting safety meetings, touring the site and noting safety violations and unsafe practices.60
In the absence of an express assumption of safety responsibilities by contract or conduct, the modern view of the A/E’s limited role, as stated in the California Architect’s Practice Act, will prevail. The Act specifically provides that construction observation “does not mean the superintendence of construction processes, site conditions, operations, equipment, or personnel, or the maintenance of a safe place to work or any safety in, on, or about the site.”61
§ 7.2.12 Construction Services-Site Visits & Observation of Construction
The design professional’s role at a site has also created a vigorous debate over the extent of the inspection of the contractor’s work, the purpose of the inspection, and any resulting liability for defective work. The general rule is that where the A/E’s contract imposes a duty to inspect the work or the A/E undertakes such a responsibility by its actions, the A/Es will be liable to the client and third parties for negligence in performing that work.62
By statute, architects do not have a duty to observe the construction of works for which they provide plans and specifications, but they may, by contract, agree to provide such services. Under the California Architect’s Practice Act, those services are defined as “periodic observation of completed work to determine general compliance with the plans, specifications, reports, or other contract documents.”63
Therefore, if greater responsibility for inspections is desired, the degree to which the services are to extend beyond the normal A/E’s role must be specified.
§ 7.2.13 Construction Services-Certification of Progress Payments
The architect must exercise care in the certification and payment process, where the architect approves the contractor’s payment requests on the owner’s behalf. Depending on the architect’s scope of responsibility, liability may arise from certifying incorrect amounts for payment, not discovering defects in the work during inspections incidental to the certification process, issuing certificates without determining whether the contractor has paid its subcontractors and suppliers, not requiring lien waivers, and causing delays. As with other areas of the A/E’s responsibility, the disputes revolve around the extent to which the A/E has responsibility, by contract or otherwise, for the contractor’s poor performance or failure to perform.
The A/E may not withhold a certificate unreasonably64 and, absent fraud or mistake, the A/E’s approval or certification of payment is generally final. In one fraud case, an owner recovered from the architect because the architect was also working for the contractor on another project at the time the certificate of payment was issued, creating a conflict of interest that justified setting aside the certificate.65
§ 7.2.14 Construction Services-Authority to Reject Work
The contract documents should clearly express the extent to which the owner wants the A/E to have the final decision on rejecting the contractor’s work as defective or nonconforming. Presumably, since the contract documents reflect the A/E’s design intent, the A/E should have the final say as to what was intended. However, giving the A/E the authority to reject or stop work exposes the A/E to jobsite accidents and potentially the contractor’s claims of interference with contract or economic advantage. Since this is an intentional tort, carrying with it the possibility of a greater measure of damages, it is a risk that should be minimized by clear expressions of authority and responsibility in the contract.
Unless the A/E’s conduct is malicious or exceedingly unfair, the A/E will normally be protected by the quasi-judicial immunity that cloaks its decisions when acting in the role of the arbiter of the contract between the contractor and the owner.66 It is doubtful this immunity exists where the architect or engineer has a personal interest in the outcome or where the A/E is evaluating a design error for which the designer may have personal responsibility.
§ 7.2.15 Construction Services-Substantial Completion & Final Payment
An improper declaration that the work is substantially complete, which supports the release of the final payment, raises similar liability issues as improper certification of progress payments, since the contractor receives funds meant to secure its performance. Where the items to be corrected or completed are punch list items instead of major incomplete or defective components of the project, the A/E should advise withholding a reasonable sum to assure performance of outstanding punch list items and release the remainder.
§ 7.2.16 Construction Services-Arbiter of Disputes
The A/E has three different roles in relation to the traditional construction contract: (1) independent contractor in the preparation of plans and specifications; (2) agent of the owner during construction contract administration; and (3) quasi-judicial officer with certain immunity when acting as the arbiter in resolving disputes between the owner and the contractor.67 These roles should be clearly understood by the owner and contractor at the outset of a project. It is therefore advisable to include language in the contract referring to the separate responsibilities and liabilities when the A/E acts in these different roles.
§ 7.2.17 Cost Estimates
The A/E is often asked to provide the owner with opinions of probable project costs, which generally include construction costs and allowances for other related costs. Costs of land acquisition and rights-of-way, interest and financing charges, and other services provided by others are usually not evaluated by the A/E. Claims against the A/E for errors in estimated costs have produced mixed results. Generally, unless cost estimates are expressly warranted or result from fraud, the A/E is not liable for errors if the cost estimates are reasonably made.68
The A/E is not liable if the owner has been notified that the project cannot be built for the estimated price and the owner proceeds, or where the owner’s directives cause an increase in costs.73 The contract should clearly establish that opinions regarding construction or project costs are merely opinions for planning and design development purposes and are not guarantees. Where the owner seeks fixed cost estimates, estimates by the A/E should be verified by a contractor or professional cost estimator.
§ 7.2.18 Ownership, Use and Reuse of Drawings
There is a fundamental difference in the ways design professionals and owners view the written work product generated during the design process. Owners want to protect their unique designs from replication or may desire confidentiality and control over the design process. They may also have other motives, such as the desire to minimize the A/E’s involvement, and hence the fee, once the design has been completed. Design professionals, on the other hand, are interested in the authorship of their creative works and architectural style and seek to minimize liability for the exposure resulting from the future use, misuse, modification, or misapplication of their drawings and other documents.
The public is threatened with untold safety risks when construction drawings bearing an engineer’s or architect’s seal are used for another project without careful professional review or adaptation. A further problem arises to the extent owners view A/Es as providers of products consisting of the designs embodied in the drawings and specifications, while designers see themselves as providers of sophisticated design services.
The owners’ perception may be at odds with the legal treatment of design professionals’ work, as well as with the nature of the work itself. Most standard agreements provide that an A/E’s written documents are instruments of the A/E’s services and that the A/E retains all rights in them. Where an owner desires a different agreement, the contract should balance their competing interests to make sure that the A/E is protected by receiving credit and compensation for the work, but not retaining liability for later use or misuse.
Owners often request protection of proprietary information or trade secrets that design professionals necessarily become familiar with while performing their services. All parties may desire confidential treatment of financial information that is exchanged to demonstrate the parties’ ability to proceed. Such agreements are generally subject to exceptions where they may be required to disclose information, but the confidentiality of the documents is generally upheld. Such exclusions commonly include information already in the public domain, in the possession of the other party prior to disclosure, information obtained from third parties not subject to a confidentiality agreement, or information required to be disclosed by public regulatory agencies.
§ 7.2.19 Copyrights and Patents
Since the enactment of the 1990 Architectural Works Copyright Protection Act, A/Es have enjoyed explicit copyright protection for certain design elements in their work.69 However, for developmental, research, or experimental work involving the design of a novel structure, process, or equipment, owners often request a clause granting the owner the benefit of negotiating patent rights, trademarks and copyrights.
On major power, industrial, and high technology projects, designers should research and disclose any patents or other intellectual property rights that may be licensable or infringeable. They should also recommend their client obtain legal counsel to determine the proper course to secure those rights.
§ 7.2.20 Indemnification
Indemnification is the contractual allocation of risk. It is often shifted by the stronger party who drafts the contract onto the weaker party who seeks retention for the job. Generally, the clause will require one party to defend the stronger party and pay the resulting loss. It is a legal area requiring special expertise and a knowledge of Civil Code § 2782, that places limits on the extent to which construction participants can shift the risk of loss to others, particularly where the indemnified party is solely at fault or supplies defective designs.
§ 7.2.21 Insurance
A typical contract requires the A/E to maintain certain types of insurance coverage with specified limits, deductibles and coverage features. It is important that the requirements can be fulfilled by the A/E in the commercial insurance marketplace. In general, the A/E’s insurance should be at least $2 million, or 20 percent of the project value, whichever is greater.70
§ 7.2.22 Payment Bonds and Retention
Design professionals are rarely asked for payment bonds. Occasionally, they are asked for retention provisions. Retention provisions are usually a matter of negotiation.
§ 7.2.23 Suspension or Termination of A/E
If no contract clause governs the parties’ rights to terminate the contract, the common law requires the examination of many factors to determine whether it is fair to allow termination.71 These factors are the impact of the reason for termination (breach of conduct) on the non-breaching party, the likelihood of further breaches, whether the breach can be compensated by economic damages, the effect on the breaching party and the likelihood of losses or forfeitures on it, the likelihood that the breach can be cured, and the reason for the breach.
Since termination disputes are resolved on a case-by-case basis, different facts lead to different outcomes. In a particular case, for example, the owner breached by failing to make payment, the court held that the contractor could rescind and recover the reasonable value of the work done.72 After Amelco Electric v. City of Thousand Oaks, discussed later at Section 14.2, the theory of contract abandonment is no longer applicable to California public entities.
However, it is a practice for a public entity to include both a termination for default and a termination for convenience clause in the design agreement, so that a “no fault” termination may be made by the public owner. In such latter case, the public owner will generally compensate the A/E for work performed up to the termination as well as a reasonable transition period.
§ 7.3 A/E Statutes of Limitation & Certificates of Merit
Often the A/E attempts to limit the time duration of its legal liability, say to 1, 3, or 5 years. As discussed in Chapter 18, and elsewhere, there already exist significant time limitations on A/E claims. The California statutes generally applicable to actions involving A/Es are contained in the California Code of Civil Procedure § 335, et seq.73 Among the statutes are special provisions that apply to claims against public entities74 and to actions based upon exposure to asbestos.75 Further, an attorney must prepare a Certificate of Merit prior to bringing a legal action against a design professional.76
As stated later, the four (4) year and the (10) year statutes of repose generally begin running as against A/Es from the completion of the Plans and Specifications, not the project itself. Generally, the courts allow the Certificate of Merit requirement to be met, after the case commences, if inadvertent and if promptly corrected. Price v. Dames & Moore (2001) 92 Cal.App.4th 355.