Technical Insights: Consultancy Agreements, should you sign them?

TECHNICAL INSIGHTS

The articles featured in Technical Insights are to prompt thought and discussion to assist our members' question and evaluate their understanding of the technical requirements of Australian Standards and other national/international source material. Technical Insights is intended to provide background information, a different viewpoint, a perspective from an individual with lived experience of disability or to prompt further discussion and/or research by you as an access professional.

Consultancy Agreements, should you sign them?

by Howard Moutrie

This issue is not so much a technical insight than a legal insight. Let’s start with some basic principles of law. A consultancy agreement is a contract. It provides a set of agreed terms by which you and your client should abide and should state each other’s responsibilities and expectations.

You may have your own consultancy conditions but when dealing with larger clients, they will inevitably require you to use their conditions. These agreements tend to be a lot less biased towards the Client than they used to be, but they are still written in their best interest. Most tend to be pretty standard in format but the content of some of the clauses varies. The ACAA sought legal opinion on some of the more contentious issues to assist you in deciding whether you should sign these agreements. Certainly, you should not be afraid to request changes – I do so regularly, sometimes without a problem and sometimes with a fight. These opinions are of course general in nature, and you should seek your own advice on specific matters, but at least it will provide guidance.

INDEMNITY

All agreements generally have a clause requiring the consultant to indemnify the Client.

An example is provided below:

Indemnity

The Consultant shall indemnify the Builder in respect of all claims, demands, actions, proceedings, costs, losses, expenses, judgements and damages whatsoever (including legal costs and consequential damages) which are brought against the Builder or incurred or suffered by the Builder and which arise out of or in connection with the performance or non-performance of the Services under this Agreement including without limitation in connection with any services, including the Services, carried out before the date of this Agreement. The Consultant’s liability to indemnify the Builder under this Clause will be reduced proportionally to the extent that a negligent act or omission of the Builder has contributed to the loss, expense or damage.

The legal advice regarding this is:

As drafted, the indemnity is too broad for at least three reasons:

• The consultant would be required to indemnify the builder against all claims made against the builder, whether these claims are genuine or not. The consultant would then also be required to pay all associated costs with defending the claim (which may be without merit), including legal costs.

• Consequential loss can be very far reaching and, consequently, expensive; it should be avoided if possible.

• Acts or omissions should not be limited to “negligent” acts or omissions, and should also apply to the builder’s consultants, contractors or agents.

The legal advice is the clause in its present form is inconsistent with market practice and they propose the following instead:

The Consultant shall indemnify the Builder in respect of direct loss or damage incurred by the Builder that arises out of or is in connection with the negligent performance (including non-performance) of the Services under this Agreement. The Consultant’s liability to indemnify the Builder under this clause will be reduced proportionally to the extent that an act or omission of the Builder (including its employees, contractors, consultants or agents) has contributed to the loss or damage.

Warranties

A warranty clause is also common. A warranty is effectively a promise. Two examples are below. The requirement to provide a “high standard of skill” as noted in 3.4 of the second example is a known legal no-no and will likely void your PI insurance if you agree to it. You are only expected to provide a standard level of skill.

Consultant’s warranties

The Consultant warrants to the Main Contractor that the Services:

a. will comply with, and it is registered or licensed in accordance with, any Legislative Requirements relevant to the Services;

b. will comply with the requirements of the WHS/OH&S Legislation and the Main Contractor’s Work, Health and Safety Management Plan;

c. are fully conversant with the Main Contractor’s requirements and the purposes for which the Services are required;

d. will be suitable, appropriate and adequate for that purpose; and

e. any proprietary products, systems or items used/operated by the Consultant have been used/operated in accordance with the instructions of the manufacturer of those proprietary products, systems or items.

Warranties

The Consultant warrants that:

3.1 in performing the Services:

(1) it has examined XXX’s Project Requirements and is satisfied that it is adequate for the intended purpose of the Services;

3.2 the Services when complete will:

(1) be fit for their intended purpose; and

(2) will comply with the requirements of the Contract;

3.3 it is, and will ensure that the Consultant’s Associates are, appropriately qualified and licenced (if applicable), will comply with all WHS Legislation and will not cause XXX to contravene any WHS Legislation.

3.4 it will at all times exercise a high standard of skill, care and diligence in the execution and completion of the Services:

3.5 it has checked the documents forming the Contract and is satisfied that they are complete and sufficient for it to carry out the Services in accordance with the Contract; and

3.6 the Fee makes sufficient allowances for the Consultant to comply with all of its obligations under this Contract, including performing any Services which are not expressed in the Contract, but which are necessary for the due and proper performance of the Services, the completion and use of the Deliverables or that part of the Project to which the Services relate.

Our legal advice is as follows. If you break the warranty, it is a contractual breach like any other; that is, it would entitle the other party to sue on the breach for the damages that flow from the breach. In the examples above, there are some particularly objectionable warranties, being:

• the promises at (c) and (d) in the first set; and

• the promises at 3.1(1), 3.2(1) and 3.4 of the second set.

In relation tot he first set:

• (c): it is dangerous to promise that you are “fully conversant with the Main Contractor’s requirements and the purposes for which the Service are required”; generally, as a (mere) consultant, I have absolutely no idea what these requirements and purposes are, and I certainly wouldn’t be promising that my Services meet such a vague target.

• (d): presumably, the reference to “that purpose” is a reference back to clause (c), but it’s not clear. In any case, it should be rejected for the same reasons that (c) should be rejected; that is, as a (mere) consultant, I have no idea about the suitability, appropriateness or adequacy of my Services in relation to some unstated (or poorly defined) “purpose”.

In relation to the second set:

Generally, promises that the services will be fit for some broadly or vaguely defined “purpose” or “intended purpose” should be avoided.

• 3.1(1): This whole clause is confused and either dangerous or meaningless. I do not understand how the Project Requirements can be “adequate for the intended purpose of the Services”. What does this even mean?! What are the “intended purposes of the Services”? It should be struck out.

• 3.2(1): Typically, professional consultants should not be promising that their services will be “fit for their intended purpose”. This is because the “purpose” or “intended purpose” is often unknown or vague. In practice, it amounts to a design warranty. Instead, I would expect a professional consultant to promise that it will “perform the Services with the professional skill, care and diligence that would be expected of a professional consultant experienced in providing services similar to the Services”. Those Services will or will not meet some unstated “purpose”, but that is not (or should not be) the consultant’s risk. • 3.4: In line with my comments above as to the standard of a consultant’s work, this clause should be deleted.

Copyright & Moral Rights

The issue of copyright is another common yet complex clause. Many of these clauses are written to address design consultants and are intended to allow the client to make changes to the design without necessarily consulting the designer. For access consultants, however, we typically produce compliance statements and reports and allowing a third party to make a change in my view is untenable. A typical clause is below.

9.7 The Consultant warrants that the Builder and their respective successors, assigns and licenses may:

9.7.1 exercise any and all rights in relation the Copyright Works, without identifying any person as the individual responsible for creating any particular material comprising the Copyright Works;

9.7.2 have the Copyright Works bear the name of the Project, the Builder, or any other person associated with the Project; and

9.7.3 modify, alter, adapt, distort or otherwise change any of the Copyright Works as they deem fit in their absolute discretion including:

(a) adaptation or translation into other dimensions, formal or media of those Copyright Works, and

(b) changing, relocating, demolishing or destroying any two or three-dimensional reproduction of those Copyright Works without notice to or consultation with the Author.

9.7.4 the Consultant shall ensure that any agreement or consent is genuinely given and not obtained by duress or by the making of any false or misleading statement.

The legal advice relating to this clause is that the clause 9.7 extract provided deals with moral rights rather than, more broadly, with copyright. In respect of a building, the relevant moral rights are:

• the right of attribution of authorship

• the right not to have work falsely attributed

• the right of integrity of authorship

Those who hold moral rights are referred to in the Copyright Act 1969 (Cth) as “authors”. Only individuals have moral rights, and the legislation deals (amongst other things) with an author’s entitlements in respect of those moral rights.

Clause 9.7 (and cl 9.7.3 in particular) is designed to allow for an author’s moral rights to, in effect, be ignored. This is not an uncommon provision.

What clause 9.7 does not deal with is things like statements of compliance; it is not designed to allow such statements to be modified. That right may exist elsewhere, but it is not in this extract.

Further advice provided to me was that by making changes to our reports, the Client would then take responsibility for the report. I believe that a clause should be included either within you own agreement conditions or probably more appropriately within the report stating something like “notwithstanding any other agreement, if any changes are made to this report by an entity other than the Consultant then the consultant will no longer be responsible for the accuracy of the contents of the report.”

Termination

Most agreements include a section on termination and cover the situation of insolvency. They do not cover the death of the consultant nor if the consultant decides to close its business. As a lot of access consultants are essentially a sole consultant, I asked the question should these situations be included. The legal advice was that it would do no harm and may be a benefit.

Payment

Agreements tend to adopt a payment process to suit the client’s workflow. This means that payment must be made on a particular day or may require the submission via a 3rd party such as Payapps. The legal advice is that these are valid requirements, but they cannot reduce your rights under legislation as the Security of Payments Act NSW and equivalent legislation in other states. I will add to this, that I refuse to submit payment claims under Payapps or the like and have this very clearly stated on all fee proposals. As a result, I have always been successful in having this requirement waived.

Certification

In NSW under legislation only an accredited certifier can issue a certificate relating to building work. On this basis I have always provided Statements of Compliance rather than the always requested Certificate. I raised this issue with the lawyer. His advice was that anyone can issue a certificate and that the legislation applies only to the statutory certificates such as (in NSW) construction certificate, occupation certificate etc. I will still continue to issue statements of compliance, but it is useful to know that the term certificate can be used.

Pro bono work

Members from time to time may feel it appropriate to do work for no fee, but does this affect your liability? In the words of the lawyer, advice is advice. This means that whether you get paid or not you are liable for the advice given. Your PI insurance may also be affected. It would be wise to verify with your insurer what your policy covers. If the policy is in the name of your company and you provide advice as an individual, you may not be covered. Also bear in mind that PI insurance is not generally a renewable insurance, you obtain a new policy each year. This may also be with a different insurer. You should be aware of the conditions of your current policy.

Conclusion

The terms and conditions can be provided by either party but usually the entity paying the money will generally require their conditions to be used. But you do not and should not accept conditions with which you do not agree with or by which you cannot abide.

The intent of this article is to inform you, so that if you are unhappy with a proposed agreement, you have some background knowledge to seek your own legal advice. I also cannot stress enough that the advice in this article is of a general nature, and you should seek your own advice relating to specific contracts. You may also find that your PI insurer will provide free advice on contracts which will save you legal fees.