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The importance of a signed contract

Thursday, 14 December 2017

As an insurer of architects, experience has shown us the importance of agreeing to all terms with a client upfront and ensuring that you end up with a signed contract at the end of the negotiations.  

We have often seen the impact that an unsigned contract can have not only on an architect’s business, but personally too. That is where Errors & Omissions insurance comes in. 

Errors & Omissions insurance protects, amongst other, design professionals in the event of a law suit, in case of negligence.  Auto & General provides the added benefit of assisting clients in defending claims, provided they have a legally binding client contract.    

Here’s an example:

Recently, an architect was informed by his client that he was expected to pay for the cost of demolition, debris removal, the redrafting of new plans and the rebuilding of a structure in order to comply with building regulations.

The problem was that this architect drafted the plans which were later found to be in breach of building regulations. The building had already been built, but approval from the local authorities had not been obtained, meaning that the building was not approved in its current form.

One can question why the building activities had started before the plans had been approved, but this is not the only issue to consider. All building plans have to be submitted to the relevant local authority for approval. The National Building Regulations & Building Standards Act (No. 103 of 1977) stipulates that no person may erect, alter, add to, or convert any building without the prior approval of the local authority. How then did this event take place and who was responsible for securing the approval?

One first has to look at the original contract drawn up between the parties. Was the architect asked to merely draw up the plans, or was he expected to secure the approval of the plans from the appropriate authority? 

The Architects Code of Professional Conduct states that the professional must set out in writing the terms of the appointment which must include, inter alia, the scope of the work and the services to be provided.  It goes on to say that they must submit the plans to the local authority for approval.

If these requirements had not been met, the architect could be in breach of the code of conduct and this could lead to a disciplinary hearing by the governing body. The architect would have to explain the circumstances which led to the oversight.  If the contract proves that obtaining local authority approval was never part of the scope of work to be carried out, all good and well. However, if this point is vague or worse, if no contract had been signed, then the reliance on a verbal contract comes into play. All too often at this point, the parties’ recollection of what had been agreed on tends to differ in interpretation.

Do not run the risk of this happening to you. Get a contract signed before the start of any project and should there be amendments along the way, reduce the changes to writing and have it signed by both parties.

 For more information or an obligation free quote on Errors & Omissions Insurance contact us on 0861 11 13 53 or SMS “quote” to 45577. Terms and Conditions apply. This article has been written by Auto & General Insurance Company Limited, an authorised financial services provider. (FSP number 16354).                                                   


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