Product Family

“Contract corner” is a series of columns occasionally published our Design Profession team’s monthly newsletter, Communiqué. These columns focus on onerous contract clauses and provide guidance for negotiating a contract that will help you prevent problems. This month, we look at what you can do to protect yourself when an owner wants to require you to hire a specific subconsultant.

We understand that owners can be very demanding when it comes to their projects—they might want you to specify a particular material or mimic a design they’ve seen elsewhere. They also might insist you hire a specific subconsultant—one you may not know or don’t want to work with, or a sub that may be unqualified—as part of your project team.In addition to the lack of autonomy such a requirement may represent, it forces you to assume the liability for the services of the sub based on privity of contract. It also requires you to protect yourself from any demands against you based on the negligence of a subconsultant you never planned to hire in the first place.The solution can be found in trying to reason with the owner and, failing that, incorporating the right protection into your contract with the owner. Here, you and your lawyer might want to get creative. For example, if the contract provides the owner with third-party beneficiary status, the owner, in certain cases, could pursue a cause of action directly against the subconsultant without bringing you into it.When you find yourself being pressured by an owner to hire a specific subconsultant, here are a few different suggestions for how you might deflect the owner’s wishes and, if the owner’s not willing to back down, how you might structure your contract:

  • As you know, my reputation, along with my exposure to liability, is on the line whenever I design a project. My custom is to work with subconsultants with whom I’ve worked well in the past, or for whom I’ve received a sterling recommendation from others I depend on. Why don’t we agree that I will evaluate any recommendation you have and, if the subconsultant measures up, I will seriously consider hiring him or her for the project?
  • While I prefer to hire subconsultants with whom I’ve worked in the past, I will hire the subconsultant you want as long as the contract gives me your assurance that you will make no claim or bring any action against me as a result of this subconsultant’s services. In addition, the contract should contain an indemnification that satisfies the following requirements:
  • States that I have hired this subconsultant at your instruction and as a convenience to you
    Obligates you to defend and indemnify me for all damages to you or to any third party that have been caused by the negligence of the subconsultant you’ve instructed me to hire
    Applies without requiring me to prove negligence by the consultant, causation, or damages
  • If you want me to hire a specific subconsultant, then let’s write a contract that provides you with third-party beneficiary status. That way, if you seek damages that you believe have been caused solely by a subconsultant’s negligence, you’ll be able to pursue a cause of action directly against the subconsultant without involving me. We’ll also need to include language that makes it clear that you’ve instructed me to hire this subconsultant and I am doing so as a convenience to you.

Work with your lawyer to draft language that encompasses these requirements. In addition, insist on a solid contract with each subconsultant that contains a clear scope and a strong indemnity, and check to see that the subconsultant is properly insured, particularly for professional liability.


More Articles

Global Asset Protection Services, LLC, and its affiliates (“AXA XL Risk Consulting”) provides risk assessment reports and other loss prevention services, as requested. This document shall not be construed as indicating the existence or availability under any policy of coverage for any particular type of loss or damage. AXA XL Risk. We specifically disclaim any warranty or representation that compliance with any advice or recommendation in any publication will make a facility or operation safe or healthful, or put it in compliance with any standard, code, law, rule or regulation. Save where expressly agreed in writing, AXA XL Risk Consulting and its related and affiliated companies disclaim all liability for loss or damage suffered by any party arising out of or in connection with this publication, including indirect or consequential loss or damage, howsoever arising. Any party who chooses to rely in any way on the contents of this document does so at their own risk.

US- and Canada-Issued Insurance Policies

In the US, the AXA XL insurance companies are: AXA Insurance Company, Catlin Insurance Company, Inc., Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance America, Inc., XL Specialty Insurance Company and T.H.E. Insurance Company. In Canada, coverages are underwritten by XL Specialty Insurance Company - Canadian Branch and AXA Insurance Company - Canadian branch. Coverages may also be underwritten by Lloyd’s Syndicate #2003. Coverages underwritten by Lloyd’s Syndicate #2003 are placed on behalf of the member of Syndicate #2003 by Catlin Canada Inc. Lloyd’s ratings are independent of AXA XL.
US domiciled insurance policies can be written by the following AXA XL surplus lines insurers: XL Catlin Insurance Company UK Limited, Syndicates managed by Catlin Underwriting Agencies Limited and Indian Harbor Insurance Company. Enquires from US residents should be directed to a local insurance agent or broker permitted to write business in the relevant state.