12 Red Flags Hidden in Owner-Drafted Architect Contracts
No wise pilot, no matter how great his talent and experience, fails to use a checklist.
– Charlie Munger
Many architects know that using an owner drafted contract can result in the contract having terms biased in favor of the owner. However, besides overt owner bias, owner drafted contracts can also result in a variety of pitfalls to the unwary design professional.
Why owner contracts are risky
Some risks are obvious. Others are hidden in plain sight. Either way, owner-drafted agreements often create problems for architects before negotiations even begin.
- They often exclude architect-protective provisions: Many owner forms omit terms architects rely on, such as clear definitions of additional services or protections for reliance on owner or consultant provided information. If the clause isn’t there, you don’t have the protection.
- “Standard” formatting creates a false sense of safety: A contract that looks familiar feels safe. It isn’t always. Owners sometimes modify standard forms (including AIA templates) in ways that quietly shift risk. Familiar formatting can make architects read less carefully. This can result in risks slipping through the cracks.
- They start negotiations from an owner-friendly baseline: The first draft sets the tone. When the owner controls that draft, every requested change can feel like a concession. This shifts leverage before discussions even start.
- They are designed to allocate risk downstream: Many provisions are structured so responsibility flows from the owner, then to the architect, and, finally, to the consultants. If you don’t adjust the language, you may end up carrying risk you never intended to accept.
Owner contracts aren’t inherently bad, but they are never neutral and should always be reviewed with a grain of salt.
A quick red flag checklist
One of the fastest ways to spot risks in an owner-drafted contract is to review it against a checklist. Rather than reading line-by-line without direction, a checklist helps you focus on the provisions most likely to shift risk onto the architect and gives you a structured process for deciding what to negotiate, what to accept and when to walk away.
- No limitation of liability: If a contract does not cap liability, the architect may be responsible for the full amount of any claim arising from the project. A limitation clause sets a predictable ceiling. Without one, exposure is theoretically unlimited.
Example:
In no event shall either party’s aggregate liability exceed the total fees paid during the twelve months preceding the claim.
- Broad indemnity clause: Indemnity provisions shift responsibility for losses. That is normal. However, problems arise when the language is drafted so broadly that it requires the architect to cover damages even when caused by the owner or third parties. This expands liability beyond what would be reasonable.
Example:
The indemnitor (architect) assumes an unqualified obligation to hold indemnitee (owner) harmless for all liability … even if due to the sole negligence of indemnitee (owner).
- Unlimited revisions language: Language requiring revisions until the owner is “satisfied” exposes the architect to open-ended obligations. There is no clear stopping point. This makes it difficult to control workload or charge for additional services. Satisfaction is subjective. Scope should not be.
Example:
Architect shall revise drawings and documents as required by Owner until Owner is satisfied with the design.
- Vague scope or lack of additional services clause: If the scope is broadly defined or the contract does not explain how additional services are approved and compensated, the architect may be expected to perform extra work without additional fees. Ambiguity invites disagreement. Disagreement also leads to disputes.
Example:
Architect shall provide all services necessary for completion of the Project.
- Aggressive standard of care: Language requiring “highest,” “best,” or “perfect” performance raises the architect’s legal duty beyond the normal professional standard. The benchmark for most agreements is reasonable skill and care, not perfection. Elevated standards increase exposure and may not be covered by insurance.
Example:
Architect shall perform its services in accordance with the highest standards of the profession.
- Pay-if-paid payment terms: These clauses make payment contingent on the owner receiving funds from another party. This means the architect assumes the risk of upstream nonpayment. Even if services are performed properly, payment may never arrive.
Example:
Payment to Architect is contingent upon Owner’s receipt of funding from the Lender.
- No schedule of protections: Strict deadline obligations without qualifications can expose the architect to liability for delays caused by others. This includes owner decisions, consultants, contractors, or regulators. Without protective language, the architect bears risk for events it cannot control.
Example:
Time is of the essence.
- One-sided termination: If only the owner may terminate for convenience, the architect bears performance risks while the owner retains exit flexibility. This creates leverage imbalance and financial uncertainty.
Example:
Owner may terminate this Agreement at any time for convenience upon written notice.
- IP ownership transfer: Automatic assignment clauses transfer ownership of drawings, models, or designs to the owner. Without limits, the architect may lose control or reuse, derivative work, or portfolio use. This can permanently transfer valuable intellectual property. But outright assignment language is not the only risk. Some contracts use licensing language that function similarly in practice. For instance, in the below example, the language does not formally assign ownership but grants rights so broad that the distinction between assignment and licensing becomes academic. The architect retains title while losing meaningful control. Architects should watch for language granting rights that extend beyond the specific project and language that provides for overly broad use rights.
Example:
Owner is hereby granted an irrevocable, perpetual, royalty-free license to use, reproduce, modify, and create derivative works from all drawings, specifications, and documents prepared by Architect for any purpose, including future projects unrelated to the original scope.
- No reliance limitations: If the agreement does not state that the architect may rely on information provided by the owner or consultants, responsibility for inaccurate data may shift to the architect. This expands liability beyond the architect’s own work.
Example:
Architect represents that all information used in preparing documents is accurate and complete.
- Duty beyond professional standard: Language that guarantees results, compliance, or perfection creates strict liability. Courts interpret guarantees literally. Professional services should be tied to reasonable skill and care, not outcomes.
Example:
Architect guarantees that the Project will comply with all applicable laws and regulations.
- Unfavorable Dispute Resolution Terms: Dispute resolution clauses determine how and where conflicts are resolved. Owner drafted contracts sometimes require disputes to be litigated rather than arbitrated, or specify a location for hearing the case that is inconvenient or costly. Other owner contracts waive the architect’s right to recover attorney’s fees even when the architect prevails. When reviewing owner contract dispute provisions, architects should watch out for mandatory litigation in a distant venue, one-sided fee shifting provisions, or clauses that waive mediation as a first step.
Example:
Any disputes arising out of this Agreement shall be resolved exclusively by litigation in the courts of Alaska, and each party shall bear its own attorney’s fees and costs regardless of the outcome.
Most risky clauses don’t look dangerous at first glance. Risk is often created by wording or even by what is not stated explicitly in the contract.
How to use a checklist
With a checklist in hand, you now need to ensure you use it methodically. A checklist only works if you use it consistently when reviewing your contracts.
The goal, however, is not to review every clause equally.This is because certain clauses carry more risk than others.
- Step 1 - Look for the high-risk clauses first: Start with provisions that can create outsized liability, like indemnity, standard of care, limitation of liability, the definition of services and additional services.
- Step 2 - Flag whatever is unclear: If you don’t understand what a clause means, you shouldn’t assume that it is okay to accept. Sometimes the riskiest provisions are those drafted with the most legalese.
- Step 3 - Look for missing protections: As mentioned above, risk is not always what a contract says, but what it omits. Check for provisions that should be there (e.g., additional services) but are not.
- Step 4 - Prioritize before negotiating: You don’t need to negotiate every issue. Focus on negotiating clauses that could increase liability, remove payment certainty, transfer ownership of IP, or create open ended obligations.
- Step 5 - Decide whether to revise, accept, or walk away: Once you’ve started negotiations and have received the owner’s comments, you have several options. If the owner presents completely unreasonable demands, you don’t need to accept them - you can walk away. In the alternative, if the owner’s proposals are not unreasonable but need revision, you can think about what revisions will have the highest impact on your business.
Final takeaways
Owner-drafted contracts are not inherently problematic. But they are never neutral. The language they contain determines who carries risk, who controls decisions, and who absorbs losses when something goes wrong.
Most risky clauses do not look risky at first blush. They appear routine. They sound standard. And they are often buried in the familiar. That is why a system for reviewing is important.
Architects do not need to become lawyers to protect themselves. But they need to recognize some of the key provisions that change risk profile. A short checklist, used consistently, can prevent costly surprises later.