Contract documents

July 24, 2024

Construction contract administration services are a time-consuming and record-intensive portion of the architect’s duties on the project. Contract administration activities can be time-sensitive and carry legal ramifications. Recently, the Appeals Court of Massachusetts discussed issues stemming from an architect’s contract administration services on a residential project. The case highlights the consequences of the architect not having knowledge of the terms of the homeowner-contractor agreement that impacted the architect’s performance of these services.

In Cutting Edge Homes, Inc. v. Mayer, 229 N.E.3d 613 (Mass.App.Ct., 2024), a dispute arose out of an agreement between a homeowner and Cutting Edge Homes, a contractor, to provide construction and repair work on the homeowner’s residence (“Service Agreement”). Under the Service Agreement, the contractor was to regularly provide the homeowner with an account summary showing the budgeted amount and actual cost of the work.[1] The parties also stipulated that the contractor would be paid in accordance with a monthly payment schedule, rather than a percentage of work completed.

At the beginning of the project, the homeowner informed the contractor that it must collaborate with Mayer, an architect providing professional design services and contract administration services for the project, including reviewing the contractor’s invoices.[2] During analysis of the invoices, the architect repeatedly concluded that the contractor was overbilling. The architect discussed his conclusions with the homeowner. Despite the architect’s claims, the homeowner continued to pay the invoiced amounts, in hopes that the project would be completed as soon as possible.

At the time the architect began reviewing invoices, he had not reviewed the Service Agreement. The court mentioned that the architect’s conclusion that overbilling occurred may have been influenced by his view that the homeowner should be paying the contractor based upon a percentage of work completed to date and the use of AIA Document G702^®-1992, Application and Certificate for Payment.[3]

The architect sought to avoid confusion by regularly communicating with the contractor and frequently addressing the overbilling concerns. Despite these efforts, similar disagreements continued throughout the project. Eventually, the architect e-mailed the homeowner that he believed the overbilling “[was] sufficient grounds for dismissal.”[4] The homeowner subsequently terminated the contract with the contractor.

The contractor brought suit against the architect alleging intentional interference with advantageous business relations. To prove its claim, the contractor needed to show:

(1) the contractor had a contract with the homeowner,

(2) the architect knowingly induced the homeowner to break the contract,

(3) the architect’s interference was improper in motive or means, and

(4) the contractor was harmed by the interference.

In affirming the lower court’s ruling for summary judgment in favor of the architect, the Appeals Court agreed that the evidence fell short of generating a genuine issue of fact as to the third element – the architect’s improper motive or means.[5] No evidence was proffered showing that the architect harbored an improper motive.[6] Rather, the evidence showed that the architect initially did not heed the payment provisions of the Service Agreement, which gave rise to an ongoing disagreement over amounts invoiced. The evidence also showed that the architect made mistakes in his reviews and calculations. The court noted that the evidence did not show conduct amounting to deceit, intentional misrepresentation, or dishonesty. While the architect was critical of the contractor’s billing practices, the evidence did not show that architect communicated his concerns to the homeowner “for a reason other than to fulfill his professional obligation consistent with the [homeowner’s] wishes.”[7] The Appeals Court concluded that the evidence reflected an “honest disagreement and efforts to work through issues, not bad faith.” [8]

This case demonstrates the importance of the architect’s performance of contract administration services and the perils of performing the same without a complete understanding of the terms impacting such services. In this case, the underlying business terms of the homeowner-contractor agreement conflicted with the architect’s usual and customary practice of invoice review. This lack of understanding created ongoing disagreements throughout the project and ultimately led to a lawsuit. When construction administration services are performed on a project, it is important for all project participants to be aware of the terms and conditions that impact the performance of the architect’s duties under its respective contract with the owner. By collaborating and sharing this information, project participants may be able to avoid unnecessary disputes, costs, and delays.

[1] Id. at 615.

[2] Id. at 616

[3] Id.

[4] Id.

[5] Id. at 618-619.

[6] Id. at 619.

[7] Id.

[8] Id.

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AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.