AIA Short Form Contract – What is It?
The AIA Short Form Contract is no ordinary contract. It represents a balance between brevity and comprehensiveness. Built to fit more modestly sized projects, it provides a streamlined agreement that doesn’t skimp on that usual protection and detail we so value in the traditional AIA documents.
Like all AIA contracts, the AIA Short Form Contract is intended to be modified and subtracted from in order to fit the scope of the project at hand . As a general rule of thumb, the Short Form Contract only makes sense for projects under $1 million dollars in construction cost.
There are four AIA short form contract versions: the AIA A105-2007 for use with Small Projects; the A107-2007 for a Multiple-Project c, the AIA A114-2007 for use for Setting Time and Price for Additional Services; and the AIA A401-2007 for use with Subcontractors.
Getting to the Heart of the AIA Short Form Contract
The AIA short form contract has a simple organizational structure, with numbered articles for easy reference. Much like the full AIA construction contracts, it is divided into 16 articles that correlate directly with the types of information in the contract. Both the AIA terms and the user-defined terms are found in the same article.
The organization of an AIA short form contract is not as precise as a full form. In a full form contract, the contractor’s and owner’s obligations are specified together in each article, whereas in an AIA short form contract, the order of liability may be inconsistent. For example, the contractor’s and owner’s insurance obligations are both found in article 11 of a full form contract, while they are found in articles 11 and 13 of a short form contract — 11 for the contractor, and 13 for the owner.
Apart from that inconsistency, AIA short form contracts are easier to read than full form contracts. The simplicity of the AIA short form contract comes from the fact that it awards the owner a maximum dollar amount, and contains fewer provisions overall. However, the limited number of articles does not limit the ability of either party to negotiate and modify the contract. Just like full form AIA contracts, the parties can strike out provisions or modify the language according to their agreement.
AIA Short Form Contract Benefits
For many types of construction projects, the AIA Short Form Contract is a perfectly sufficient way to establish a contractual relationship between a contractor and its client. The AIA Short Form Contract provides all of the same legal protections as a standard construction contract, while also providing the simplicity and efficiency that will allow the parties to get started on the project that much sooner.
Generally, the more complex a construction project, the more detailed and extensive the terms of the contract will be. The AIA AForm Contract, especially in comparison to many of the other AIA Contract Forms, is very brief. In fact, it is less than two full pages, and contains just fourteen articles. However, the brevity of the contract does not take away from its ability to provide the parties with a range of legal protections, which includes: Complete definitions of all of the important construction-related terms, such as "Construction Documents," "Architect," "Construction Manager" "Owner," "Project Architect," "Project Manager," and "Subcontractor."
It also clearly sets forth the basic responsibilities of the parties. For example, it requires the contractor to: The owner is also required to assume a number of responsibilities, including coordinating any necessary entry into the private property on which the construction will take place. This also means that the owner will be responsible for handling any complaints about the construction work—or at least fielding them if nothing can be done. The entire AIA Short Form Contract is very similar to these short passage: to-the-point and right to the heart of the responsibilities involved in the project.
Additionally, shorter contracts are usually better for those looking to avoid controversy. As stated before, the AIA Short Form Contract may not work for every type of construction project, depending on the size, scope and complexity of the work involved. That said, in many instances, a short contract like this one is just what is needed to keep expenses low and projects moving forward.
For example, where a client’s budget is limited or time is of the essence, a short-form contract like this one is a godsend. Clients, as well as contractors, are generally averse to taking on too much risk at a time when there are already a lot of unknowns. With standard contracts, the length and the detail can act as a disincentive for a client to enter into the contract, as they worry that one misstep could derail an entire project worth tens or hundreds of thousands of dollars. Ultimately, a shorter contract, like the AIA Short Form Contract, can encourage both clients and contractors to maintain the business relationships they have established, and will make it easier for new clients and contractors to find one another.
AIA Short Form Contract Compared to Other AIA Contracts
When comparing the AIA short form contract to other AIA contracts, the first thing to keep in mind is that the short form documents are tailored for smaller projects and construction teams. There simply isn’t the risk or complexity associated with a bathroom remodel, for instance, as there is with the construction of a new university campus. This is why the AIA short form contract is more simplistic in its approaches than the more comprehensive AIA A201 Construction General Conditions of the Contract for Construction.
Some of the areas where the AIA short form is helpful, but not necessarily ideal for, include the following:
The provisions in the AIA short form are limited and written for small projects. For most small projects, the AIA short form contract is fully sufficient. For example, if you did a $500,000 bathroom addition to a library, the AIA short form contract would likely be sufficient for your needs.
However, there are certain situations where a small project contract is not ideal. On a more involved project, use the AIA A101-2017 Standard Form of Agreement Between Owner and Contractor where the basis of payment shall be a Stipulated Sum and where the Construction Contract between the Owner and Contractor is less than $1,000,000.
For specialty trade contractors, the AIA short form contract may not be ideal. The AIA A401-2017 Standard Form of Agreement Between Contractor and Subcontractor is perfect for these situations for their slightly more complex need-to-know approach.
Implementing AIA Short Form Contract
Implementation of the AIA Short Form Contract involves four steps: preparing the form, customizing the form for a specific project, execution, and management of disputes once the Subcontract is in place.
Preparing the form is the first step. Many Contractors in today’s marketplace download a standard AIA C110 or A201, or other publication released by the AIA, and hand it to their potential Subcontractor or Supplier without reading it. These forms do not reflect the negotiating party’s true intent to protect itself during implementation of a project. Starting from the AIA standard form does not account for the potential changes in the Owner/Contractor/Subcontractor relationship that could arise from the construction process. It also gives no insight into the timeframe of the construction to the Subcontractor, and limits the Subcontractor’s rights and remedies for delay or hindrance by providing open-ended deadlines that can affect both parties’ bottom line without any recourse until liability spilled over two additional construction projects. A better solution is to build a fully customized Subcontract from the ground up, one that incorporates all relevant information for the type of project and the relevant stakeholders.
The second step is customizing the form from the AIA publications or creating a new form from scratch. This task is best tasked to the Contractor’s legal representative because that person understands the potential implications and how the contract terms will affect the Contractor’s ability to complete the project, based on the risk of the Subcontractor , Owner, or Designer, etc. A Contractor should not present its form to a Subcontractor or Supplier until that form has been reviewed by legal counsel. Failing to assess the potential risks of the Subcontractor or Supplier can have disastrous effects on a construction project. It is impossible to examine all the potential risks of a project, but the process of customizing and negotiating the Subcontract will allow for a more careful review of the factors affecting the project.
After the Subcontract is created, the Subcontract should be executed immediately to ensure all parties understand the agreement they are making. For some simple, straightforward subcontracts, the Subcontractor may be willing to sign the agreement without a full review. However, for greater success negotiating the terms of the Subcontract, the Contractor should provide at least a few days for the Subcontractor or Supplier to review the Subcontract prior to execution. This provides an opportunity to ensure the Subcontractor is not misrepresenting their ability to perform the duties of the Subcontract, and that the appropriate bond requirement is being met.
After the Subcontract is executed, parties should manage it through the life of the contract as a priority to ensure the project is completed successfully. Failure to do so may create significant risks if a dispute arises, or if a Subcontractor delays or hinders the project, and the Subcontractor is unwilling to rectify the issues. A basic understanding of construction law will allow all parties to ensure a successfully completed construction project.
Clearing Up Myths About AIA Short Form Contract
Common Misconceptions about the AIA Short Form Contract
As the use of the AIA Short Form contract has grown in popularity, misconceptions about the form have grown too. Many projects or project owners use the popular form without being aware of what they are getting into or of the potential consequences of the provisions in the form.
Some believe that the form is a simple contract, and therefore does not require detail. This is not strictly true. It is easy to make assumptions about the rights of the parties based on general past experiences, but what is important to note is that the form acts to limit the parties to those specific obligations stated in the contract. The AIA Short Form includes, and therefore enforces, some obligations that may differ from those expected generally.
In other words, if the contract does not say something, it does not exist. Many assume that if their contract does not say that the contractor shall be paid monthly as work is completed, or that the contractor will be paid by check, that it falls generally under the laws in effect in the governing jurisdiction. The AIA Short Form does not allow for this assumption. If the contractor works under the AIA Short Form, he is limited to those rights specifically granted by the terms of the contract.
Those who base their contracts on general legal principles may also be surprised to find out that the contract is a contract of adhesion. That is, the terms of the contract may be set by one party to the detriment of the other party. In this case, the detriment may be especially unfair to a party, especially a contractor, if they rely on it, without knowing the rights granted to them or perform under the contract.
The AIA forms are a preferred contract structure among contractors and owners as they seek to clarify the roles and responsibilities of the parties. However, it is important to remember that the parties must be aware of the limitations imposed by the construction agreement and how they may change the default rules set forth by the applicable jurisdiction, such as Texas.
Negotiating AIA Short Form Contracts
When it comes time to negotiate the terms of an AIA Short Form contract, parties should approach the situation by remember a couple of things. The first tip is to determine the extent of the negotiations. Some of the provisions in the AIA Short Form contracts are non-negotiable such as the cost-to-compete. However, other provisions should be re-negotiated between the parties. For example, the parties should review the indemnification and warranties provisions carefully to make sure that these sections adequately provide for their best interests. Further, the parties should inquire about removing the arbitration provision. Overall, the parties should communicate to make sure that there is a meeting of the minds in all negotiations with respect to the AIA Short Form contract to insure smooth sailing throughout the project.
Getting More Insight into AIA Contracts
To further your learning on the subject of AIA contracts, the following resources may be useful to you:
American Institute of Architects
AIA offers informative articles and presentations on basic AIA contracts. They also have an AIA Masterspec program which provides specifications for construction projects .
American Bar Association
ABA has a graphic and requires users to provide contact information, but is a good starting point for understanding construction contracts.
Nolo
Nolo’s Learning Center is a good place to start. Nolo is a long standing user friendly legal information site with a lot of practical material on construction and construction contracts.