The Design Professional’s Obligation of Good Faith

May 2000

Standard AIA documents state that the design professional is obliged to make interpretations and initial decisions which do not show partiality and are rendered in good faith. But what if the architect’s conduct caused or contributed to the contractor’s delays? Sometimes it is best if the design professional removes himself or herself from the decision-making process to avoid even the appearance of impropriety.

by Kenneth A. Slavens
Brown & James, P.C.

There is little doubt that at some point in time you have reviewed project records which included documents promulgated by the American Institute of Architects (AIA) that place a burden on the design professional to render decisions about the performance of the owner or the contractor. In particular, these include AIA A201—General Conditions (1987) and AIA B141—Standard Form of Agreement between Owner and Architect (1987), both of which contain identical provisions in 4.2.12 and 2.6.16, respectively.

When you reviewed the contract documents, did you ever ask yourself about the obligation of the design professional to make “interpretations and initial decisions” which do “not show partiality” and are rendered in “good faith”? If you were unclear on what these provisions mean, the Missouri Court of Appeals has helped to clarify them in its opinion in MECO Systems, Inc. v Dancing Bear Entertainment, Inc., et al., 948 SW2d 185 (Mo App SD 1997).

The MECO lawsuit arose out of an agreement by a contractor, MECO Systems, Inc., to build the Charley Pride Theater in Branson, Missouri, for Dancing Bear Entertainment, Inc., the owner. In a separate agreement, Dancing Bear contracted with an architectural firm to design the theater and provide construction administration services.

After completion of the theater, the contractor filed a mechanic’s lien. The owner then claimed $300,000 from the contractor, contending that MECO had failed to “substantially complete” the work on time in accord with the terms of the contract. The contractor’s response was that the architect had “authorized additional time for substantial completion of the project” pursuant to the terms of the contract documents.

As a result of this response from the contractor, the owner made a claim against the architect. The owner sought an amount from the architect that was equal to any amount the owner would be unable to recover from the contractor because, the owner claimed, the architect-granted time extension for completion of the project was not authorized by the owner.

The architect’s defense to the owner’s claim relied heavily on the contractual language in the AIA documents that is favorable to the design professional. First, the architect claimed that it was required by the contract to:

render written decisions within a reasonable time on all claims [or] disputes ... between Owner and Contractor relating to the execution of the Work….

The architect also referred the court to the language referenced above that the architect “will not be liable for results of interpretations or decisions rendered in good faith.” The architect filed a motion for summary judgment, relying heavily on the contract language. The trial court ruled in the architect’s favor; however, the matter went to the Missouri Court of Appeals for consideration.

The court of appeals considered the evidence that during the project, the contractor had requested an extension of 66 days for completion of the work. The contractor had relied on a letter from the architect to the owner’s lawyer for its belief that the time had been extended. In the letter, the architect expressed the opinion that the architect believed the contractor had a legitimate claim to a 53-day delay for inclement weather conditions and to 13 days because of the local municipality’s failure to timely issue a building permit.

The court looked to the owner’s responses, which were that the owner/architect contract did not give the architect the authority to make binding decisions to extend the contract time and that the contractor had not requested time for the delays in the manner required by the contract documents. In support of its position, the owner pointed out that during the course of the construction project, the owner had told the architect that the owner would not agree to an extension of the completion date because the contractor had not performed the work in a “timely manner.”

The court of appeals, upon consideration of the rulings by the trial judge, first looked to the contract documents that place responsibility for substantiating a claim on the party making the claim [4.3.1 A201]. The contract documents also prescribe time limits for the presentation of claims, as well as setting a time frame in which the architect is to act [4.3.3, 4.4.1, 4.4.3, and 4.4.4 A201]. The documents also require that if the contractor makes a claim for an increase in the time of performance, the claim shall include an estimate of cost impact [4.3.8.2 A201]. If there is a claim for a delay based on adverse weather conditions, the claim must be documented by data substantiating the adverse weather [4.3.8.2 A201].

The court noted that the evidence presented by the architect did not show it had acted within the time constraints set forth in the contract documents, nor did the architect require the contractor to substantiate its claim. The court noted particularly that there was no cost estimate provided as required by 4.3.8.1, nor was there data substantiating the weather conditions as required by 4.3.8.2. The court went on to point out that the architect issued its decision many months after contract administration had ceased. The court of appeals conclude that “[t]hese actions raise genuine issues of fact regarding the Architect’s partiality and good faith.”

An additional issue arose regarding the architect’s partiality and good faith in its response to a 4-page letter the contractor had sent that listed 11 delays on the project which the contractor claimed impacted the completion date. The letter presented claims that were potentially attributable to the architect. The architect’s response to the contractor’s letter never decided, nor even addressed, the contractor’s claims for delay that may have been attributable to the architect.

The court concluded as follows.

Under the circumstances, Architect’s selective decision-making raised genuine fact issues about its impartiality and good faith.

The court’s conclusion was that the architect was not entitled to summary judgment on the issue of the protection provided by the contract for its interpretations and decisions.

When faced with contractually imposed deadlines for the submission of requests, for the taking certain actions, or for the rendering of decisions, the course of action that the design professional needs to follow is clear. The design professional must enforce on itself and others the terms of the contract, and require everyone to live by the time limitations. In addition, if the contractor or the owner does not provide the necessary substantiation required to support the request submitted for decision, the design professional must affirmatively come forward and advise the party submitting the request that the failure to support the claim prevents the design professional from rendering a decision on the merits.

The real dilemma is presented when the design professional’s conduct is purportedly the source of the problem that results in the need for the decision to be rendered. For example, in the MECO case, it was claimed that the architect’s conduct may have caused or contributed to cause the contractor’s delays.

Unlike most of the players on a project, the design professional is a professional with higher duties to those involved, particularly the owner, and requires that those others’ interests be placed before his or her own. The design professional must first decide if he or she can even make the decision. The decision may be so at odds with the design professional’s interests, that the design professional’s best choice may to be to be removed from the process. The design professional may need to advise the owner and others that because of conflicting interests, to assure that all involved receive a decision which does “not show partiality” and is rendered in “good faith,” another design professional must be retained to make the “interpretations or initial decisions” under the contract documents.

As with almost all professionals, design professionals must make their own interests subservient to the clients on occasion, and even the “appearance of impropriety” can cause the design professional’s decisions to be perceived as tainted. Interpretations or decisions—whether ultimately right or wrong—that are perceived as tainted by self-interest are rarely accepted without a fight. The “cost” of advising an owner that the design professional must remove himself or herself from the decision-making process will be small compared to the “cost” of becoming an unwilling participant in the dispute resolution process.

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