Contract review may not be the most enviable task in the design professions, but its importance cannot be overstated—your contract is the foundation of your risk management strategy. You may have won the project, but if you don’t understand the business risks and insurability pitfalls contained in your contract, you could end up losing money.
Yet, as critical to your success as contract review is, many people simply don’t want to do it for various reasons: it’s too complex, they don’t have the time to learn, and they’d rather rely on someone else or an AI tool to do it for them.
What does reviewing a contract involve?
There’s no need to regard contract review as an insurmountable task. Let’s look at a few of the basic elements involved, keeping in mind that you won’t be doing it alone (more on that later). The three most common types of contracts you’ll encounter are:
- Your firm’s standard contract that contains your terms and conditions
- A standard-form agreement from a professional organization, such as the American Institute of Architects, Engineers Joint Contract Documents Committee, Royal Architectural Institute of Canada, or Canadian Construction Documents Committee
- A client-written contract, which is the focus of this article
Your overall goal for reviewing a contract is to identify where the risks lie and try to negotiate more favorable terms or develop a plan to mitigate the risks throughout the life of the project. You can do this by learning to identify onerous contract terms and unacceptable business risks often found in client-written contracts. Frequently, these agreements attempt to shift a disproportionate amount of project risk onto your shoulders.
Here are some general steps involved in reviewing a client-written contract:
- First, quickly scan the entire contract to get a general sense of what it contains and the client's overall approach and language. Does it properly allocate risk? Are there exhibits you’ve never seen? You’ll get an idea of how much time it might take to thoroughly review the agreement and any documents incorporated by reference so you can allocate the appropriate time and resources to the review. Consider not just your own time, but also the time of others you may wish to enlist, including outside legal counsel.
- Next, look for specific clauses. For example, are there indemnities and are they insurable? Does the contract specify who will own the documents? Does it state that you’ll collect your fees promptly? It’s best to have a checklist of common contract clauses that are important to your firm. See “Exhibit 1 – Sample Contract Review Checklist” in the 色多多视频Contract Guide for Design Professionals, which can serve as a template. (The Contract Guide is available to 色多多视频Design Professional policyholders when logging into the .) Tailor it to your firm’s risk appetite and use it to review certain contract clauses and determine which clauses might be missing. Compare the client’s language with the sample language provided in the Contract Guide. How does the contract compare to the professional association standard agreements? How do the associations treat a particular issue? How does your client's language differ? The Contract Guide includes “Appendix 3 – Contract Comparison Table,” to help you compare specific clauses in professional association agreements with their equivalent clauses in the Contract Guide.
- Then, go back and carefully reread the entire document, line by line, applying a worst-case interpretation to the wording. For instance, if the contract reads, “All services are to be performed by fully licensed architects,” a worst-case interpretation might be that you can’t assign any unlicensed designers or draftspersons to the project. It’s best to identify any language that’s open to multiple interpretations, is impossible to comply with, or otherwise creates uncertainty or unintended burdens. Many clients are willing to discuss the reasoning behind a specific contract clause. Once they understand why certain language might be problematic for your firm, they may be willing to negotiate that language.
Given today’s litigious environment where the stakes are high and cases are won or lost based on contract language, your broker and insurance carrier should only serve in a limited capacity to answer specific insurance questions.
Who should review your contract?
Some design firms rely on their broker to review their contracts; however, many brokers limit their review to specific contract clauses’ insurability. Over the years, contracts have become increasingly complex, and the law continues to evolve. If your firm doesn’t have a general counsel or legal department, you need to consult directly with competent legal counsel, well-versed in the laws of your jurisdiction, who can help you understand the ramifications of specific contract clauses and the contract as a whole. Only then can you make an informed business decision about the degree of risk your firm is willing to assume.
Legal counsel can advise you during negotiations to help you understand how adverse a proposed term is and whether it fits your firm’s risk appetite. For example, some firms may be willing to assume the risk of an uninsured provision—something your legal counsel (and your broker or insurer) would not recommend. Moreover, your communications with your counsel will be privileged and not subject to disclosure years later in a lawsuit. Given today’s litigious environment where the stakes are high and cases are won or lost based on contract language, your broker and insurance carrier should only serve in a limited capacity to answer specific insurance questions.
Many firms use AI to review their contracts. Most AI-assisted contract review tools currently on the market are large-language models (LLMs). Use caution when working with generative AI contract-review tools. These tools may learn and recommend contract clauses commonly found in publicly available contracts even though they represent a heightened level of risk for design professionals. Many signed public agency agreements are available on the internet. To the extent a generative AI tool trains on these contracts, it runs the risk of recommending language from these contracts that is not favorable for design professionals.
With some important safeguards, AI will become a trusted partner in reviewing contracts. One of those safeguards is combining the use of AI tools, no matter how advanced, with careful human review to verify accuracy and conform to your firm’s risk profile. (See the article, “Artificial intelligence, genuine risks for design professionals.”)
Your best bet
Engage an expert lawyer, one who is knowledgeable about design and construction and has years of experience writing, reviewing, and negotiating industry-relevant contracts. There is no substitute—not even AI—for having in-house or outside legal counsel (or both) review your contracts. You may also need counsel’s help with a variety of contract-related services, such as preparing a standard agreement tailored to your firm's services, reviewing an onerous client-generated contract, or handling a complex negotiation. Be sure to budget legal fees for contract review and negotiation.
Having a knowledgeable lawyer doesn't absolve you from learning the fundamentals of professional services agreements and contract review. A firm grasp of contract basics enables more effective communication with legal counsel—you can ask pertinent questions and fully comprehend their advice. This knowledge also empowers you to make well-informed decisions aligned with your firm's strategic goals. Moreover, it better equips you to negotiate favorable terms with clients.
How 色多多视频Design Professional can help policyholders
Our learning management system, the EDGE, provides many resources for 色多多视频Design Professional policyholders, including online courses, on-demand webinars, and more to help you learn to review contracts so you can work more effectively with a lawyer. As a policyholder, you can log into the to access the following links:
Online courses:
On-demand webinars:
You should also consult our , especially these sections:
- Using the Guide for Contract Review
- Contract Basics
- How to Review Client-Generated Agreements
- Appendix 3 – Contract Comparison Table
- Exhibit 1 – Sample Contract Review Checklist
Our quarterly practice management newsletter, , often contains articles that provide additional insight into contract language and risk.
Don’t let a contract’s length and complexity prevent you from carefully reviewing it. By taking advantage of the resources above and working with a lawyer, you’ll gain confidence with each review. Before long, you’ll look forward to reviewing and negotiating contracts to your firm’s advantage.
