Noteable Construction Contract Provision: Architect as Final Decision Maker
By: Robert S. Tanner, Esq.
Florida Bar Board Certified Construction Lawyer
Contract provisions appointing an architect or engineer as the “final decision-maker” are not unusual in prime contracts. It is less common for such provisions to appear in subcontracts.
Trial Court Ignores “Final” Part of Architect’s Determination
However, such a provision in a subcontract was at issue in James A. Cummings, Inc. v. Young, 589 So. 2d 950 (Fla. 3d DCA 1992). Young was the subcontractor (“Subcontractor”) performing demolition, site work, paving, and installation of storm drain systems. The subcontract provision at issue stated that in the event of change orders, James A. Cummings, Inc. (“Contractor”) would issue written orders that included the value of the work to be added or deducted from the subcontract, but in the event that Subcontractor disagreed with the valuation placed on it by Contractor, Subcontractor was required to continue performance and “the determination of the value of the work shall be referred to the Architect, whose decision shall be binding upon both parties.”
Contractor instructed Subcontractor to remove and relocate some boulders. Subcontractor refused to do the work without a change order increasing the contract amount. The Architect informed Contractor by letter that the relocation of the boulders to specific locations on the project site was referred to and contained in the original drawings attached to the contract. Presumably, Contractor presented this letter to Subcontractor. Nonetheless, Subcontractor refused to perform the work. Contractor incurred expenses in completing the work and back-charged Subcontractor accordingly.
This issue and some others gave rise to a lawsuit. At the trial, testimony was given concerning the parties’ interpretation of the contract. Subcontractor argued that it was only required to remove and stockpile the boulders to prepare the site for construction. Contractor argued that Subcontractor had to remove and stockpile the boulders at the beginning of the job but was ultimately required to place them as required by the landscaping plans. The trial court agreed with Subcontractor and ruled that Contractor was not entitled to back-charge Subcontractor for the expenses. Contractor appealed.
Appellate Court Respects Parties’ Selection of Architect As Decision-maker
Contractor’s argument on appeal was that the trial court should not have taken testimony as to the parties’ interpretation of the contract that was clear and unambiguous. The appellate court agreed with Contractor, ruling that the trial court should only have considered whether the Architect made a determination on the issue pursuant to the above-quoted subcontract language. The appellate court applied the rule that, “When parties to a contract agree by its express terms to be bound to the determination by an architect, that agreement is binding upon the parties.”
Final Thoughts: Select Contract Provisions With Care
So, that is the general rule. Parties can agree to have an architect or engineer settle their disputes and when the architect or engineer does so in accordance within the terms of the contract, the determination is final.
Like most general rules of law, there are exceptions to this general rule, too. In instances where there is fraud or a mistake that would amount to fraud, the architect or engineer’s determination may be challenged. However, because Subcontractor had not alleged any fraud or mistake, the Architect’s determination was final.
As with every provision in the contracts you use and enter, the provision concerning a design professional’s authority to decide disputes is an important one. Should the design professional be an initial decision-maker only, giving the parties express rights to have the matter reviewed by an arbitrator or court? Or should the design professional’s determination be final without right to any subsequent review? Should the design professional making the determinations be neutral, otherwise divorced from the project in order his determinations to be binding so that if he is the contract administrator for the owner, his determinations are not binding? Should the contract limit the types of issues that the design professional has authority to decide, such as aesthetic issues or quantities based upon field measurements, while leaving disputes over contract interpretation and sufficiency of performance to arbitration proceedings or litigation? There may be no “right” answer to these questions, but it certainly is better to have considered them prior to signing the contract – and prior to the design professional making a determination affecting your livelihood.