The American Institute of Architects (AIA) publishes a variety of standard form construction contracts used throughout the industry. Earlier this year, the AIA released its first update to the form contracts in 10 years.
The new versions contain a number of changes that are of particular significance to commercial contractors. This article discusses changes to a few of the most widely used contractor forms: A101 (Standard Form Agreement Between Owner and Contractor for a stipulated sum), A102 (the cost-of-work version of the same agreement) and A201 (General Conditions of the Contract for Construction). Understanding these changes now can help contractors as they negotiate future construction contracts under the new forms.
Standard Form Agreements Between Owner and Contractor (A101 and A102)
The date of commencement in a construction project can be critical for determining how long contractors have to complete work or to determine if damages might be due if construction takes longer than the allotted time. Under prior versions of A101 and A102, the date of commencement was, by default, the date of the agreement. The new versions provide for different options the parties can choose to constitute the date of commencement, including the date of execution of the agreement or the date that the contractor receives a notice to proceed. Negotiating for the best term could provide additional time for the contractor to finish work on a project.
The new versions of A101 and A102 provide that if final completion of the work is delayed through no fault of the contractor, the owner shall pay the contractor in accordance with the payment terms of the contract. Under prior versions of these form agreements, this provision concerned material delays in final completion of the work only after substantial completion – the point at which the building can be occupied or used for its intended purpose. The new language in the 2017 versions strongly suggests that an owner is obliged to make payment where material delays occur through no fault of the contractor at any time during the project, not just after substantial completion. This new provision could help contractors get paid for delays sooner in the construction timeline.
General Conditions of the Contract for Construction (A201)
In the new version of A201, a contractor is solely responsible for the means and methods of a contract’s completion. The prior version contained an exception to this rule where the contract documents contained other specific instructions regarding the means and methods of construction. That exception is not contained in the 2017 version. Under the new version, a contractor must give timely notice and propose alternatives if it considers the means and methods specified in the contract documents to be unsafe, without exception. That change places a significant responsibility on a contractor to determine the safety of the means and methods contained in the contract, regardless of which party to the contract proposed those means and methods.
If a contractor believes a minor change to the work that is ordered by the architect will affect the contract sum or time, the contractor must now notify the architect, and the contractor cannot proceed with the minor change until the issue is resolved. Failure to provide this notification waives the contractor’s right to request an adjustment to the contract sum or time.
The new version of A201 allows for direct communications between the owner and the contractor. Although the architect still needs to be kept in the loop on any matter affecting the architect, this change should help prevent misunderstandings between an owner and a contractor about their respective expectations for a project.
Delays in the work that are not a contractor’s fault must nonetheless be documented by the contractor. Only the architect can extend the contract time for delays outside of the contractor’s control. The default language in the new version of A201 suggests that a contractor cannot contest the architect’s determination regarding an extension of the contract time, even for delays not caused by a contractor’s conduct.
As was the case with the prior version of A201, an owner may terminate a contract at any time without cause. The prior version, however, required five days’ written notice to the contractor of such termination and a specification of the date of termination and work to be terminated. The new version of A201 does not contain the notice or specificity requirements, placing the contractor in a weaker position in the event of termination.
A contractor may now recover a termination fee if the owner terminates the contract for convenience, but only if that fee is set forth in the contract materials. The section on termination also provides that costs incurred by the contractor due to the owner’s termination include costs attributable to termination of subcontracts, which will help contractors in getting their subcontractors paid. An owner is also obliged to pay the contractor for work “properly executed,” but the contractor’s expected overhead and profit are not included by default as part of any amounts due upon termination.
These are only some of the many new terms contained in the 2017 AIA versions of A101, A102, and A201. There are a host of other changes to these and other 2017 versions of the AIA form construction contracts. An experienced construction attorney can walk contractors through these changes and help them understand the effects of the changes before beginning negotiations on a new project. Where contractors are already committed to a project and find themselves in a dispute over the meaning and effect of the AIA contract terms, a qualified construction litigation firm can help contractors maximize their leverage and achieve the best outcome.