This year, the American Institute of Architects (AIA) revised the A201 series of standard Contract Documents for the first time in a decade. This article is the first in a series of articles that will highlight and discuss some of the more significant 2017 revisions.
The 2017 revisions impact the roles, rights and responsibilities of the various participants on construction projects, including owners, architects, contractors and subcontractors. AIA Document A201-2017 General Conditions of the Contract for Construction replaced the previous 2007 General Conditions. A201-2017 is adopted by reference in the AIA’s Conventional (A201) family of documents – which includes the agreements between the Owner and Architect, the Owner and Contractor, and the Contractor and Subcontractor for design-bid-build projects. In revising the documents, the AIA Documents Committee attempted to provide standardized general conditions that follow recent trends in the construction industry, including changes in the law. It is important for contracting parties to understand the revisions to the A201 series of standard Contract Documents, whether the parties intend to use the standard form documents as written or to negotiate and modify their terms.
Notice And Communication
The 2017 version of A201 requires that all agreements must be in writing, including subcontracts. See Section 5.3. Relatedly, all notices under the Contract exchanged between the parties must be “in writing.” Section 1.6. In addition to requiring written notice, the General Conditions set forth the various forms of service for notices. Notably, bucking the trend in modern business practice, A201-2017 does not permit Notices of Claims to be served by email. The permitted forms of service of Notices of Claims are described in Section 1.6.2.
A201-2017 reduces the time period within which the Contractor must notify the Owner and Architect of discovered, concealed or unknown conditions. The A201-2017 notice period is 14 days. The previous notice period was 21 days. Section 3.7.4.
A201-2017 facilitates direct communication between the Owner and the Contractor, rather than requiring that all communications go through the Architect. The parties must, however, include the Architect on any communications that relate to the Architect’s services or professional responsibilities. The Owner is obligated simply to notify the Architect of Project-related communications when they do not relate to the Architect’s services or professional responsibilities. Section 4.2.4.
A201-2017 permits the Contractor to reject minor changes issued by the Architect when and if the Contractor believes that a minor change will impact the Contract Price and/or the Contract Time. The Contractor’s failure to object to a minor change will result in a waiver of the Contractor’s claim for adjustment based upon the minor change. Section 7.4.
An Owner’s ability to fulfill its financial obligations can be unclear to the Contractor, particularly given that owners are often single-purpose, limited liability corporations (LLCs). Consequently, A201-2017 assists contractors in obtaining financial information about owners. Section 2.2 directs the Owner to submit “reasonable evidence” of its ability to fulfill the Contract’s financial obligations in response to a written request received from the Contractor. The Owner’s obligation to provide this information is continuing, and the Contractor can invoke its right to request financial information during its performance on the Project under certain conditions. Additionally, the Owner must provide the Contractor with prior written notice of material changes to its financial arrangements. The Owner’s failure timely to provide the evidence of its financial condition may entitle the Contractor to increases in the Contract Time and Contract Sum. A201-2017 also obliges the Contractor to treat the Owner’s financial information as confidential.
Insurance And Bonds
A201-2017 shifts a number of the insurance provisions in the previous version of A201 to the Insurance and Bonds Exhibit attached to the Owner-Contractor agreement. The insurance and bonding requirements mandate that the Owner identify the sub-limits on its Builders Risk policy. Insurance and/or bonds must be issued by companies lawfully licensed to issue insurance and/or bonds where the Project is located. See Article 11.
Section 3.5.2 of A201-2017 specifies that the Contractor’s warranties are for the Owner’s benefit. The provision requires that “material, equipment, or other special warranties required by the Contract documents” be issued in the Owner’s name or otherwise be transferable to the Owner.
Section 3.10.1 of A201-2017 sets forth additional requirements for details to be included in the Contractor’s construction and submittal schedules.
The Contractor must submit changes to the Schedule of Values to the Architect, which will be used to evaluate applications for payment. Additionally, the Contractor must substantiate changes to the Schedule of Values with data satisfying to the Architect. Section 9.2.
In the event the Owner wrongfully terminates the Contract for default or for cause, A201-2017 provides that the Contractor may recover the following from the Owner:
- payment for the Work executed;
- reasonable overhead and profit on Work not executed; and
- direct costs incurred by reason of such termination.
Section 14.1.3. On the other hand, in the event the Owner terminates the Contract for convenience, the Contractor’s recovery from the Owner includes:
- payment for Work properly executed;
- direct costs incurred by reason of the termination; and
- the termination fee, if any, set forth in the Agreement.
Section 14.4.3. The Owner-Contractor agreements set forth the “termination fee” and require that the parties establish a “termination fee” payable if the Owner terminates the Contractor for convenience.
The AIA notes that the standard AIA Contract Documents may require modification to comply with state or local laws, especially as they relate to professional or contractor licensing, building codes, taxes, arbitration and indemnification. Users are encouraged to consult with counsel before completing or modifying any AIA document.