The risk of recommending a contractor to a client

If an owner hires a contractor based on the architect’s recommendation, the owner will assume the architect is vouching for not only the contractor’s construction ability, but also its honesty and financial ability. Contractors can get into trouble for reasons other than whether they can properly supervise the work. A contractor may have taken on more than he can handle, or he may not have adequate personnel to properly supervise all the new projects undertaken. In other cases, a contractor’s job may be in financial trouble and he may ‘rob Peter to pay Paul’—using the owner’s payments on one project to pay subcontractors and workers on another. This invariably leads to financial disaster for the contractor and, subsequently, the owner.

If the owner winds up terminating a recommended contractor, the owner may blame the architect for the resulting delay and additional cost to complete the project. Usually, there is also a significant delay in the project that results in additional expense to the owner, such as the cost of having to rent an alternate location, and insurance and taxes during the delay period. Since the owner is unlikely to recover such costs from the defaulting contractor, there will be a tendency to try to recover these ‘damages’ from the architect. The architect most likely has insurance, so there is a potential pot of money for the owner to go after.

Why would the architect be responsible for these damages? After all, standard form documents, such as American Institute of Architects (AIA) B101-2007, Standard Form of Agreement Between Owner and Architect, maintain:

The Architect shall be responsible for the Architect’s negligent acts or omissions, but shall not have control over or charge of, and shall not be responsible for, acts or omissions of the Contractor or of any other persons or entities performing portions of the Work.

While this states the architect is not responsible for acts or omissions of the contractor, it does not mean the architect is off the hook if the contractor was recommended by the architect and the owner subsequently suffers damages. It will make perfect sense to the owner to accuse the architect of improperly or negligently recommending a contractor who cannot perform the work or who is not financially able to complete the project.

An added difficulty for architects is standard AIA documents are often not employed for smaller projects. Instead, the parties may use proposals, letter agreements, or simply handshake agreements. These will likely not include anything regarding the architect’s responsibility for the contractor’s failure to complete the project within a reasonable time or within a budget.

All too frequently, owners and judges are under a misconception as to the ability of an architect to judge the capability of a contractor, financially or work-wise. Add to this the uncertainty of the market, and the architect is even worse than a meteorologist in forecasting how a contractor will perform several months down the road.

What can the architect do when faced with an owner’s urgent request for a recommendation? The first and most obvious answer is: don’t do it. Obviously, if this is unlikely to satisfy the owner, a refusal may not be practical.

The architect needs to be scrupulous in terms of what is disclosed to the owner. One can make a suggestion as to one or more contractors for the owner to interview. For each, disclose all prior dealings and explain why there is a recommendation. If the architect has a financial stake in the contractor, that must be disclosed. Of course, all of this must also be in writing. The architect should also, in writing, tell the owner the architect cannot guarantee the contractor’s performance and the owner should perform his or her own due diligence inquiries, such as contacting former clients of each contractor to see what their experience has been.

There is no perfect answer to protect the architect in these situations. Explaining the limits of the architect’s ability to recommend contractors to the owner is helpful. Keeping a close eye on the progress of the project and warning the owner of red flags in the contractor’s performance will keep the owner on the architect’s side. A good contract is, as always, an excellent idea.

Werner Sabo, FAIA, FALA, is an architect, attorney, and partner at the Chicago law firm, Sabo & Zahn. He is the author of Legal Guide to AIA Documents, now in its fifth edition, published by Wolters Kluwer. Sabo can be reached at wsabo@sabozahn.com.