O’Hagan Meyer’s Design Professional Team is pleased to share the latest edition of our newsletter, featuring timely insights on contract certainty, financial responsibility, and emerging liability risks in the design and construction industry. In this issue, we feature three articles covering topics that directly affect how firms manage projects, clients, and exposure:
- Just Sign Here: Learn why proceeding before final signatures can expose both the firm and client to unnecessary risk—and what practical steps you can take when a client delays or refuses to sign.
- Nuclear Verdict Alert: A recent $104.6 million verdict highlights how quickly liability can escalate in construction-related litigation. We examine what drove this unprecedented outcome and what it signals for industry stakeholders.
- Check, Please: Even minor design omissions can have major cost implications. This article breaks down the Betterment principle, explores how timing and project complexity affect responsibility, and offers strategies to manage risk through clear contracts and proactive communication.
As always, our goal is to provide actionable legal insights that help design professionals navigate today’s complex project and litigation landscape. If you have any questions or would like to discuss how these issues may affect your practice, please reply to this newsletter and a member of our team will connect with you.
Just Sign Here…
Have you ever started work for a client without getting the client’s signature on a contract?
Is the written contract enforceable? The answer is a resounding
…maybe. Even without a signed document, you still have a contract, but you cannot be certain if you and the other party agree on its terms. More importantly, you probably won’t discover disagreement over the terms until there’s a problem. Written contracts are preferred because they avoid uncertainty. Without a fully executed written contract, you could lose certainty over terms, and you could lose whatever benefits you hoped to gain by having a written contract (fee schedules, scope of service definitions, termination remedies, methods of settling disputes, and so forth). An unsigned or partially signed contract can be enforced in the right circumstances, but which circumstances are the “right circumstances” is difficult to predict. Here are some tips to remember when a client avoids, “forgets”, or refuses to sign a written contract.
If possible, try to get it in writing. Remember, . . .
- Follow up promptly. Contact the client (e.g., owner, consultant, etc.), preferably by a letter or email, to verify that the client received the written contract and remind the client to sign and return it. Confirm your intention to perform according to the terms of the written contract while awaiting the formality of a signature.
- Be diligent. Make more than one attempt to recover the signed contract. A reasonable client will understand the necessity for your actions.
- Assume nothing. Don’t assume silence or prompt payment of monthly invoices means the client has accepted the written contract. Ask the client if he has any questions that may account for the delay in signing. Also, don’t assume that the client consents to the written contract even if the terms are the same as past projects for the same client. Even if the client is familiar with your “standard” contract, a court will not necessarily assume that the client understood or agreed to the “standard” agreement without a signature or some other evidence of assent.
- Takes two to tango. Don’t forget to sign the contract yourself, preferably before sending it to the client. Sending a client a contract you have not signed can be construed as a mere proposal rather than a commitment on your part to perform according to that document. At a minimum, add your signature when you receive the signed contract back from the client, then send the client a copy of the contract with both signatures.
If you still can’t get the client to sign, do the following . . .
- Make a phone call. If the client refuses to sign a written contract, there may be a serious problem. Call and ask why. Is there an unacceptable term? Or is the client purposefully avoiding signing for some tactical advantage. It’s better to expose obstacles or lack of trust at the beginning of the project rather than after the client is way behind on paying for services. If the client is refusing over something you can’t go forward without, consider walking away from the project. Otherwise, make changes you can live with so you can get a signature.
- Record everything. Keep a copy of any emails, letters, and even voice mail messages from the client that reference terms of the written agreement. These communications may support an argument that the client agreed to at least those parts of the contract, and you’ll have a better argument that the client also agreed to the entire contract.
- Always be closing. Just because the client won’t sign doesn’t mean he won’t agree to what is on the piece of paper he won’t sign. Discuss all of the essential elements of the written contract with the client and at least get his oral agreement. There is a better chance that a court will enforce a written contract if there is evidence the parties discussed and agreed orally upon at least some of the terms in the document.
- Actions speak louder than words. Encourage the client to perform in accordance with the contract. Mostly, the client’s performance will be payment for services, so insist on payment per the written documents. Where other client action is called for (design approvals, signatures on change orders, etc.), expect the client to perform exactly in the manner set out in the written contract.
- Name dropping. Reference the terms of the written contract often in communications with the client. “Well, as you know, Mr. Client, what you are asking me to do is an Additional Service for which I’m entitled to additional compensation under Section 1.2.3.4 of our contract …”
Nuclear Verdict Alert
There has been a great deal of discussion over the course of the last few years about “nuclear verdicts,” generally defined as jury verdicts that are over $10 Million and much higher and/or disproportionate to what one would expect given the facts of the case. These have been on the increase in recent years and there is a new candidate coming out of Chicago in the amount of $104.6 Million.
Specifically, in Michael Johnson and Robert Rosa v. Illinois State Toll Highway Authority, a limousine with six passengers crashed in a construction zone on Interstate 90 near O’Hare Airport. The crash occurred when the driver of the limo failed to navigate a construction-related lane shift, struck a temporary concrete barrier, and flipped over.
One passenger was killed, and another was paralyzed from his neck down and now requires full time care for the rest of his life. Plaintiffs sued more than two dozen construction-related entities, including the owner of the roadway, the Illinois State Toll Highway Authority (the “Tollway”). All defendants except the Tollway settled. During the four-week trial, Plaintiffs argued that signs warning drivers of the dangerous curve were missing at the time of the crash, and that the Tollway oversaw and approved deficient design and construction plans.
While the Tollway argued that contractors, engineers, and the limousine driver shared or bore the greater share of fault, the jury disagreed. It found the Tollway knew or should have known about dangerous conditions and failed to act. As the only remaining defendant, The Tollway was found liable on all six counts. The jury awarded a $104.6 million verdict, widely reported as the highest verdict or settlement in a road construction case in Cook County, Illinois.
The Rosa case reflects a broader trend of exceptionally high jury awards across all areas, including the construction industry. This is concerning, as it is hard to imagine a verdict on a case like this of even half that amount just a few years ago.
Check, Please…
No design professional is perfect all the time and no set of construction documents is 100% “complete.” Often omitted items are caught and corrected before any harm occurs. Sometimes omissions from construction documents do cause the owner to spend “extra” money or cause the contractor to lose time, or both. What is the design professional’s monetary responsibility?
In most jurisdictions, the standard of care for design professionals is to perform services with the same degree of care and skill as “those ordinarily skilled in the business,” i.e., your contemporaries. Unless the contract says otherwise (and it shouldn’t!), the architect does not promise a perfect plan. The cases emphasize that the owner does not ordinarily bargain for infallibility in the performance of design services.
So, this begs an interesting question: When something that should be in the drawings is omitted, what is the design professional’s monetary responsibility? Here are some points to keep in mind when the owner asks you for money to purchase and install an omitted element of construction:
- The “Betterment” principle. Suppose the CD’s show a light fixture but omit wiring and a switch. The contractor’s price does not include the cost of the wiring, the switch or the labor to install either. Naturally, the Owner has always wanted a switch, so the contractor issues a change order to install the switch and wire it to the light. Should the design professional pay 100% of the change order? Of course not! The Owner received something of value in the change order — a switch and wiring – that was not included in the GC’s bid. Had the plans included these items, the bid would have been correspondingly higher, and the Owner would have paid more. Should the design professional pay for any of the change order? That’s a bit more complicated …
- The “Out-of-Sequence” principle. Suppose in our example the omission of a switch is not discovered until after the electrician has demobilized following rough-in and drywall has been installed. Now the work required to install and wire the switch includes remobilizing the electrician, tearing out and replacing some drywall. The cost of the switch and wiring have not changed, so the Owner still pays for that, but labor and material costs are higher now because the work is done out of sequence. The Owner gets no value from that portion of the change that is the added cost of out of sequence work, so that portion of the change order is the design professional’s responsibility, unless …
- The “You Didn’t Bargain for Perfection” principle. Suppose in our example the change order for the “switch and wire” job is $5000 and of that, $2500 represents the out of sequence cost. Suppose also that the GMP to construct the project is $5 million. Whether we look at the total cost of the change or just the out of sequence added cost, this is a miniscule fraction of the job cost and should be within the expected range of added costs given the less than perfect standard, unless …
- The “Death by a Thousand Cuts” scenario. Suppose in our example, the switch and wiring change order is one of 315 distinct change orders on the job related to omissions from the plans with an aggregate total cost of $300,000 and aggregate “out of sequence” costs of $200,000. Now the added costs are a more sizeable percentage of total job costs – 4%to 6% depending on what counts. Suppose the industry’s track record shows that, on average, jobs of this type and delivery method typically experience change orders in the range of 2% to 3% of the cost of construction. Does that provide an allowance of sorts? Does the design professional pay for all errors and omissions from dollar one, or just for the compensable costs in excess of the tolerance threshold. The case law is clear as mud on this point, but your contract needn’t be.
- How about Changes Originating from the Owner or the Authority Having Jurisdiction? Suppose in our example 212 of the 315 “omission” change orders are either Owner initiated or required by the AHJ. Does that mean the design professional can disregard those costs when determining whether the level of imperfection in his services is tolerable? With respect to Owner initiated changes, the answer should be yes, but again there is very little case law backing this up. With respect to AHJ related changes, the picture is even murkier. There is certainly an expectation that the design professional is well versed in code requirements and preferences in the jurisdictions in which he practices, but every design professional knows that sometimes there is just no predicting who will review the plans or what will be required. What if the design professional took some chances on what would get through plan review in order to save the Owner money if successful? Again, muddy. Again, these things can be addressed in your contract.
- What about Fast track or Design-Build projects? Suppose in our example the project was fast tracked, or design-build. Does that affect the tolerable error rate? The answer is definitively … maybe! The notion of a financial error rate reflecting the expected level of imperfection in design services is not well developed in the courts. However, there is no reason the chosen style of project delivery may also not have a higher or lower error rate associated with it. Like so many things in this area, it depends on the industry’s experience, and data of this sort is scarce. It is certainly worth considering the complexity and speed of the project when assessing the tolerance for imperfection.
Practice Pointers
- Consider including terms in your contract with the owner that specifically address the issues described above so that you aren’t left guessing what your exposure might be.
- As with most relationships in life, effective communication from the outset helps. Be honest with your client about the fact that, as human beings, design professionals are allowed to be imperfect and, most importantly, the effort to be as close to perfect as possible adds huge costs to design services. One way design services remain affordable is not having senior principles quadruple check every detail on every sheet. While such a practice might cut down on errors, it is expensive.
- Remind your client that you are not a contractor; you are a design professional. The services of each are priced and performed in very different ways. Encourage the Owner to budget for changes or include contingencies.
- Stay closely involved in the change order process. Keep a record of the genesis of each change and recommend/require the contractor to provide back up. Do not let the Owner just roll over on changes that are not really changes just to keep the job moving. Remember, it is neither an error nor an omission if the item that is the subject of a change order was reasonably inferable from the plans and specs. Our light switch example could fall into this category.
- If you discover a mistake, act promptly! Mistakes only get more expensive as construction proceeds, while a mistake corrected immediately after bid negotiation usually has no cost for which the design professional would be responsible.
To learn more about our A&E team, click here.
[1] This article represents the author’s views, is intended for general information purposes only, and does not constitute legal advice. Readers should consult with legal counsel to determine how laws, suggestions, and illustrations apply to specific situations.
[2] This article represents the author’s views, is intended for general information purposes only, and does not constitute legal advice. Readers should consult with legal counsel to determine how laws, suggestions, and illustrations apply to specific situations.