AIA Agreements Part 2

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In part two, we will continue the discussion on AIA agreements. If you’re an owner, a contractor or subcontractor, contact me here with questions or comments about AIA agreements.

Get landlord signoffs wherever appropriate.

The owner of the property, the landlord, has to sign off on practically every little bit of work before it is started. If not, the work will likely be considered a breach of your lease agreement. In this case, you could end up spending a quarter of a million dollars having work done on your property only to have the landlord then claim you breached the lease in doing so, and may even be able to have you evicted.

Determine damages if there is to be a breach of contract.

In the event a problem occurs and the contract is breached, you want to make sure that the exact form of damages are provided for and clearly spelled out. The damages have to be reasonable and they cannot be punitive. It can be very difficult to figure out what the right numbers are in these cases, because you are making a prediction as to how much revenue will be lost in the event of a speculative breach. Let’s say a new company signs the contract, how will you determine how much profit they will be likely to make on a month-to-month basis if the work is finished on time?

These figures require a pretty thorough negotiation and, even if it is somewhat arbitrary, should at least be agreed upon beforehand and written into the contract. You could have a liquidated damages clause in which the contractor owes a certain set amount for each day late the work is completed. Another option is to provide incentive bonuses to the contractor for completing jobs earlier than expected on a staged basis. This would be easier to get the contractor to agree to than a liquidated damages clause, obviously.

As mentioned, both parties should really contact counsel to help craft clauses in the AIA contract they sign to ensure their rights and interests are being adequately protected.

To learn more, contact me here.

Aaron Pierce
(212) 882-1752
299 Broadway, Suite 1405
New York, NY 10007

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