If you work in construction you’re familiar with the American Institute of Architects more commonly known as the AIA. They create form contracts used by many construction companies in various types of construction projects. Many smaller contractors pull these contracts offline and present them for execution without much modification at all. Given the frequent use of these agreements, it’s no wonder that their 2017 updates are considered a big deal.
OWNER-CONTRACTOR AIA UPDATES
The parties now have choices with regard to when the project will commence and when the project will be substantially completed. The parties can elect to have the project commence on the date the agreement is executed or a different date. The parties can elect a specific date for substantial completion or a certain number of calendar days.
If a contractor is terminated for convenience under the AIA agreement, the AIA assumes the contractor will be paid a termination fee.
Here’s the big one. The AIA treats the A101 and the A102 differently, and for good reason. The A101 is a standard form agreement for a fixed fee. This is commonly known as a fixed fee agreement. The A102 is a cost-plus agreement with a maximum guaranteed price. This means that the owner will pay for the cost of labor and materials plus some additional percentage of the total cost of labor and materials as the contractor’s fee.
In the A101 because the contract is based on a fixed sum, less significance is given to the percentage of work completed. However, owners are still required to pay for only the contract amount able to be allocated to the work. Unlike A101, because A102 is a cost-plus agreement, emphasis on percentages remains high. The A102 also adds documentation requirements for the contractor on contingency cost items and cost-plus subcontracts.
As always, if you plan to use an AIA form take the extra step to have your counsel customize the form for your specific project. Counsel may also want to attempt to negotiate a better position for your company. If neither is feasible for you, please take the time to read and understand the form before presenting it for execution.
Nothing in this article is to be considered legal advice. If you have questions or need representation due to nonpayment on a construction project, please call 832-930-0529 or email us at firstname.lastname@example.org