Exploring AIA Contracts Between Owners and Contractors

The fundamentals of AIA Contracts

The AIA agreement is one of the most widely used contract forms in the country. The American Institute of Architects strives to develop construction industry standards by holding meetings with other construction-related organizations and industry leaders. These meetings are used as a basis for developing AIA agreements, ensuring that the terms and conditions represent the views of the entire market . Since these documents are drafted using input from various stakeholders in the construction industry, the AIA documents have made it easier for parties to negotiate their agreements. The parties start out with a standard document that already reflects the expectations and concerns of each party. This allows the parties to focus on whether the standard terms are right for their project, rather than having to debate every facet of the contract. The standardized terms also enforce consistency between similar contracts where the parties have the same expectations.

Key Provisions in AIA Contracts

AIA agreements between owners and contractors establish the project’s scope, production, and remuneration. As a result, three components are usually the focal points for negotiations, drafting, and execution.
Scope of Work
The purpose of a contract is to clearly define what each party is supposed to do. This includes the scope of work. The scope of work should specify what the contractor, subcontractors, and the owner are respectively required to provide. For example, the scope of work generally specifies what materials the contractor must provide and what materials the owner will provide. It also specifies the contractor’s payment terms for the specified materials as well as when the contractor will provide them. The scope of work may also include the timeframe the project should be completed.
Payment Terms
Payment terms are crucial to prevent disputes over each party’s respective payments. Typical payment terms include AIA G702 and G703 forms. The owner can be certain that invoices will be paid on time if AIA G702 and G703 forms are included in the agreement.
Deadlines
Deadlines are closely related to scope of work. If the scope of work defines a "reasonable" duration instead of a particular timeframe, the parties could end up with a disagreement over curtailing the duration or extending it if the project takes longer than anticipated. It is also important to clearly define payment deadlines for the parties. The contractor is especially reluctant to front materials and labor costs without knowing when he or she will be paid.

Advantages of AIA Contracts

The use of the AIA agreements between owners and contractors is beneficial for all parties involved. The first benefit is standardization of the contracts. The basic forms of most contracts, whether it is for the owner or contractor, as well as all of the forms used by a subcontractor, are standardized. All of these forms are readily available online (with the exception of amendments) and can be adapted for whatever job the parties are undertaking. The adaptability of the form enables all parties to understand the basic responsibilities that they are to follow regardless of the individual job.
It is important for all parties that the contract terms between the owner and contractor are clear and unambiguous. AIA documents do an excellent job of condensing the responsibilities of all parties into easy to understand language. Although not everyone involved in the drafting or execution of the contract is a lawyer, having contracts drafted in plain English will reduce the number of ambiguities that otherwise could open the door to claims and other legal ramifications.
The final benefit of the AIA contracts is that they are the products of the most highly regarded architectural and construction attorneys in the country. The AIA contracts have been drafted by the best and the brightest attorneys in the industry which as a party to a contract will ensure that you have a leg up on the other party in any future dispute.

Common AIA Contract Types

Common AIA Agreement Types Between Owners and Contractors
For almost a hundred years, architects, engineers and contractors have used AIA Contracts so for the information that I’m providing the content I’m giving you in this post are "off the shelf" contract forms offered by the American Institute of Architects. You can go on the website AIA.org or purchase a hard copy to get the exact definitions of each of these and the rules associated with the contract forms.
The AIA publishes more than 160 documents, more specifically agreements and forms. For this post I’m going to focus on the main construction contract forms – which I’m going to designate as all agreements between owners and contractors. Here are some of the key agreements and forms down the list, including the architectural, landmark, engineering and design, and project management forms as well – but it is important to understand the key differences between these agreements. Therefore, here are just a few of the key ones.
A101 is the Standard Form of Agreement between Owner and Contractor where the basis of payment is a Stipulated Sum. A101 form sets forth many of the standard provisions agreed upon between the parties and is often problematic when incorporating terms of the form to the local state law.
The A102 is an actual standard form for a stipulated sum agreement that includes a lump sum or fixed price. It is commonly used when the parties agree upon a specific total. A102 incorporates A201 as an additional document. A 103 is a similar form.
The A201 is the standard general conditions incorporated as the practical construction details of the agreement between the contractor and the owner. A201 is based upon the International Family of Codes or I.C.C., an international group based upon the idea of making uniform codes throughout the country. If you look to the specific forms that are incorporated within the contract, such as the General Conditions of the Contract for Construction A201, immediately following the title or heading, it says, "This document has been adopted by the American Institute of Architects," which fulfills the res ipsa locutor requirement for prompt publication as well as the legal incorporation by reference of materials in this document which may have merit in courts of law. Therefore, where the parties agree to incorporate the AIA 201 into the agreement, for example, the parties should refer to the specific provisions of the AIA 201 to determine the relative responsibilities and obligations of the parties under the AIA contract form.
A104 is a common small project form where the owner provides either the architect, engineer, designer or other professional. This type of form is a simplified true and correct way to carry out the project on small projects, which are less than $500,000, again where the party has a legitimate need and a legitimate good faith effort to issue the form without litigation.
The B101 is a standard form for the Owner and Architect. It is basically a species of the A101 form, but is only specific to the relationship between the owner and the architect. Whether or not the A101 form is specifically used so that the final contract price is actually a specific amount or a lump sum or fixed price, or whether the agreement provides for a specific rate, this form is the basic general form for the design professionals referred to as the B101.

How to Modify an AIA Contract

AIA contracts are drafted with certain conditions, terms, limits, and exclusions. If a particular article in the AIA agreement is not appropriate for a specific project scope or type of contract, the parties can choose not to include it in the final agreement. For example, if the project will require more than one hundred consecutive days of construction activity, then the parties may want to consider eliminating the requirement for liquidated damages, which generally only applies if work is not substantially complete within one hundred days after the date of commencement of the work. There is no real need for a liquidated damages provision if the project requires an extended schedule that extends beyond this initial period.
There are provisions in the AIA contract forms that are more easily modified than others. Inserting clarifying language in Sections 9 and 10 for the General Conditions of the Contract for Construction or the General Conditions of the Contract for the Architect are examples of how small changes can greatly assist the parties. The parties should also be able to make clarifying edits and modifications to border section pages that contain important information. The parties can insert clarifying language in Section A of the Document as long as it does not alter substantive obligations described in the subsections appearing within Section A. Additionally , as long as the scope, description of the Work, and contract sum all align and have not changed qualitatively, the parties can alter the other sections of the Contract. Therefore, inconsistent changes made to one provision may allow for the other sections of a Contract to remain unmodified.
The parties should choose the appropriate agreement form based on the type of project being built. For example, a larger project is likely to utilize a different document form than a building renovation project. In addition, changes and negotiations are specific to the project. Therefore, the Owner and Contractor may need to alter the following contract provisions during negotiations: time and materials provisions, warranty requirements, permit requirements, and payment terms.

Troubles with AIA Contracts

Depending on the contractor, the proposed contract price, the project budget, and any one of a number of other factors, AIA Document A101, the standard form of agreement between owner and contractor for construction, may not be the best fit for every scenario. We recommend that before signing any agreement, whether standard-form or a custom form, the owner and contractor carefully review and consider in detail all of the terms of the proposed contract to make sure it fits the specific project just right. After the contract is signed, it may be too late to go back to the drawing board if issues start to come up in the project. One such recurring problem occurs when, under standard contract terms, the contractor is entitled to additional compensation or time due to events that were not foreseeable at the time of contract or that could not be controlled by the contractor. Examples include unexpected permitting delays, weather-related delays not covered by the force majeure provision, and value engineering that becomes necessary after construction begins. Additional compensation may be due under a number of different contract provisions, including: Such unforeseen events can cause significant budget overages, not to mention stress-inducing headaches that do not go away easily. The surest way for an owner to avoid the substantial expenditures of time, money, and energy incurred to amend an existing agreement or fight over entitlements under the contract is to take time upfront to amend the standard form or custom form contract to account for these issues and properly protect the project in order to prevent them from happening in the first place.

Legal Implications and Requirements

While the AIA provides standard form contracts to the design and construction industry, it is important to remember that those are simply a starting point. As always, each contract should be initially reviewed and, ideally, negotiated by legal counsel for both owners and contractors. In addition to traditional contract terms such as scope of work, schedule, and pricing, attorneys need to pay attention to legal issues specific to the project or parties involved. For example, considerations such as licensing, lien rights, waivers, and dispute resolution are best left up to the lawyers. There are also applicable state and federal laws that can come into play when using AIA contractual agreements. It is important that the owner and contractor familiarize themselves with Ohio and federal law, especially in the construction realm, so that their contracts reflect the requirements of those laws and, hopefully, avoid any pitfalls regarding liability and injury to persons or damage to property during the course of the project. Because of the particularities of construction projects and the fast-changing nature of the law, it is particularly important for the parties to have an attorney vet the form agreements before executing them.

Final Words and Recommendations

AIA agreements between owners and contractors are important documents that must be carefully prepared in order to ensure that the interests of both parties are protected and that there is a clear understanding of the rights and obligations of each. Construction projects can be lengthy and expensive, making it critical to set the stage for clear communication, as well as the potential for a successful outcome. Parties may proceed with the work, but have disagreements later on about how costs are supposed to be allocated. In addition, if remedies (like liquidated damages) are due for non-compliance with the contract , whether or not the parties agreed to such a clause can be subject to interpretation and litigation. Disputes can lead to costly delays and result in job site adversarial relationships, which can cause even greater delays. Furthermore, disagreements between the owner and contractor can also result in negative reactions from inspectors, suppliers and subcontractors. This type of environment will almost invariably increase costs to the owner and general contractor. The best practice is, when contracting and managing a project, to review the A201, the General Conditions to the AIA Agreements, to make sure that the rights and obligations of the parties are clear and, to the extent possible, to obtain an agreement between the owner and subcontractors that mimics that relationship.