Architects who act as contract administrators have an obligation to be fair to all parties. This has dangers that can bring with it serious personal risk
If there is one legal principle architects can be guaranteed to remember it is that they have an obligation to hold the balance fairly between the parties when they are named in the contract as the contract administrator. It appeals to architects’ sense of fair play. The other legal obligation, which is recited much less often but is equally important, relates to the law of agency.
The starting point for any legal review is the contract. There are two contracts to bear in mind. First, the architect’s professional appointment with the client, and second, the construction contract between the employer and contractor.
The obligation to hold the balance fairly between the parties derives from the construction contract. However, to understand the extent of that duty we first need to consider the architect’s role more generally, in relation to the project.
Take a situation where the client appoints the architect to act on its behalf, not just in designing the building, but in running the project. The architect will deal with the contractor as the client’s representative, and often almost as if the architect were the client’s employee. In technical legal language the architect is the client’s “agent”. And this is why architects need to be careful: the law governing agents is complex and acting as an agent can bring with it serious personal risk.
The law of agency seeks to balance the competing interests of the person the agent is acting for and the person the agent is negotiating with. In the context of construction contracts this means balancing the competing interests of the contractor and client.
For most of the time the architect will act for the client in a way that that client is perfectly happy with. The architect will deal with the contractor on the client’s behalf to get the project completed. The problem arises if the architect oversteps the mark. The client may then say that the architect didn’t have authority to take the steps he has taken. The contractor, on the other hand, will say that he thought that he was dealing with the client’s representative.
The law tries to balance these competing concerns by asking whether the client had held out its architect as having authority to reach binding agreements on its behalf. This authority may be given expressly or impliedly. In other words, does the way in which the client has acted give the contractor the impression that the architect can bind it?
To take an obvious example, if the client specifically tells the contractor that its architect has no authority to change the design, then the architect simply has no authority to do so. The contractor should ensure that it gets specific approval from the client for any design changes.
As to whether authority to bind the client can be implied will depend on the factual circumstances and this, in turn, means one often needs to go back to look at the contracts. The architect’s appointment may set down all sorts of restrictions. But because the contractor has often not seen this document, it is unlikely to have any bearing on establishing the extent of the architect’s implied authority. Of much more importance is the construction contract. It is this document that sets out the architect’s duties and powers and which the parties will often need to look to in deciding whether the architect has implied authority to bind the client.
The danger for the architect is if it acts on its discretion within the terms of the construction contract but outside the scope of its authority under the appointment. For example, the architect may have the discretion under the contract to agree changes to the design with the contractor, and because this gives it implied authority, it will bind the client. But the appointment may give the architect no such authority. It will have breached the terms of its appointment with the client and could be liable.
The architect must also not exceed the scope of its duties under the construction contract. And this brings us back to the duty to hold the balance fairly between the parties. This must be carried out by reference to the construction contract. It is a duty to hold the balance in accordance with the rules of the contract itself. The architect may think the contract is unfair but this does not mean it can be ignored.
Michael Sergeant is a partner in London-based solicitor Winward Fearon’s construction department