MODULE 5: AGREEMENTS  Agreements lacking all the required elements of a contract may also

AGREEMENT VS. CONTRACT be more viable in situations where the drafting of a contract would
 An agreement is any understanding or arrangement reached between prove prohibitively burdensome on the parties involved.
two or more parties.  The main advantage of contracts is that they spell out the specific
 A contract is a specific type of agreement that, by its terms and terms that the contracting parties have agreed upon, and in the event
elements, is legally binding and enforceable in a court of law. of a breach – where one or more parties fail to fulfill their obligations –
COMPARISON CHART serve as a guide for a court of law to determine the proper remedy for
Definition the injured party or parties.
A = usually informal between two or more parties that is not enforceable by law  The use of a contract provides an extra layer of assurance that the
C= A formal arrangement between two or more party that, by its terms and obligations entered into under the contract will be fulfilled as the
elements, is enforceable by law. parties themselves intended.
Validity on  Contracts are generally advisable over less stringent agreements in
A: Mutual acceptance by both (oral) parties involved. any official business or commercial matter due to the added
C: Mutual acceptance by both (or all) parties involved. protection they provide.
Does it need to be in writing?  A contract does not need to be in writing, and in many cases, an oral
A: No agreement with all of the elements listed above will constitute a valid
C: No, except for some specific kinds of contracts, such as those involving land or and enforceable contract.
which cannot be complete within one year. THE NEGOTIATION CHECKLIST FOR ARCHITECTS & DESIGNERS
Consideration Required 1. UNDERSTAND YOUR OBJECTIVES:
A: No A clear understanding of your objectives before entering the negotiation. Its need
C: No to be specific about what you’re trying to achieve and the limits of what you’ll
Legal Effect accept.
A: An agreement that lacks any of the required elements of a contract has no
legal effect. Consideration Required 2. BE AWARE OF TIME CONSTRAINTS:
C: A contract is legally binding and its terms may be enforceable in a court of law Time can be your best friend or worst enemy during a negotiation. Don’t rush the
process, just because you’re keen to wrap things up – you’ll appear desperate!
▪ REQUIREMENTS Instead, slow things down and be patient.
In order to reach an agreement, parties need only come to a common
understanding as to their relative rights and responsibilities, what is often termed 3. COMMUNICATE EFFECTIVELY:
a “meeting of the minds.” The requirements for the formation of contract are more Take care to make sure your body language is positive; your tone is calm and
precise and comparatively stricter. A contract must contain the following essential reassuring, and your words are precise.
elements:
4. LISTEN:
*OFFER AND ACCEPTANCE: Ask the right and listen actively to the response. Teach about the Clients interests
Every contract must include a specific offer, and the acceptance of that specific to create options for mutual benefit.
offer.
M, C, C, L 5. CREATE MULTIPLE SOLUTIONS:
(MC) Mutual Consent: Never offer just one solution. Instead always propose a range of solutions for
- must be freely consented to by the parties, without coercion. All consideration, based around the Clients interests (options for mutual gain). It help
parties must agree to the same terms, and all must intend for a open-up the dialogue while also demonstrating your commitment to finding a
binding agreement to be formed. mutually acceptable solution.
(C) Consideration:
- This is something of value that is exchanged between the parties. 6. DON’T BE AFRAID OF A “NO”:
Consideration can take the form of money, goods, or services, but Remember that it’s just as important to discover what won’t work as it is to
both parties must provide something of value for a contract to be discover what will work. Don’t be afraid of a “NO” as that will help you define what
formed. If only one side provides something, it is a gift, not a contract. a “YES” might look like.
(C) Competence:
- Both parties must comprehend the situation and understand what the 7. TALK WITH THE DECISION-MAKER:
contract will entail. Thus, no party can be a minor that would prevent Try to negotiate with the decision-maker; if this is not possible be prepared for
them from understanding the terms of the contract. A non-competent tiered negotiation
party to a contract may disavow the contract, which would render it
void. 8. KEEP CALM:
(LP) Legal Purpose: Never be too quick to accept an offer or counterproposal and be prepared to
- The purpose of the contract must fall within the confines of lawful support your requests with constructive reasoning
conduct. In other words, a court would never enforce a contract
regarding something illegal. 9. NAME THE ELEPHANT IN THE ROOM:
EXAMPLES When there is an elephant in the room, name it and you’ll tame it. This seems
Common examples of contracts are: counterintuitive. However, by naming the problem you’re demonstrating that
 non-disclosure agreements, you’ve recognized the problem and you’re working on a solution, thus helping to
 end-user license agreements (both despite being called diffuse the issue.
“agreements”),
 employment contracts, 10. WHEN TO ACCEPT/REJECT:
 Accepted purchase orders. If you choose not to accept a project, be sure to leave the meeting on amicable
Regardless of how it is named, as long as an agreement contains the required terms by confirming that the door is always open for future discussions.
elements of a contract enumerated above, a court may enforce it as such.
❑ HOW A CONTRACT NEGOTIATION CAN BENEFIT BOTH ARCHITECT
BENEFITS
AND CLIENT?
 An agreement that does not meet the criteria of a contract is that it is Architect and his or her client should use the contract negotiation process to
inherently informal. begin to develop their working relationship. Getting to a shared understanding of
 Where the agreeing parties have a longstanding relationship and the project scope, necessary services, and risk management for all parties is
share a considerable degree of trust, the use of a non-contract crucial to a project’s success. Using the agreement as an upfront interview tool
agreement can save time and allow for more flexibility in the fulfillment with your client can go a long way toward improving the process and outcome.
of the agreed-upon obligations.
▪ WHAT’S THE PROBLEM?
Insurance carriers regularly report that the breakdown in communication and
project understanding is a big driver in claims. When client expectations are
unmet, the disappointment can lead to blame and disputes. Many of those unmet
expectations, however, are a direct result of a lack of upfront discussions
between the architect and the client about the client’s project needs and the
architect’s plans to meet those needs.
❑ HOW A CONTRACT NEGOTIATION CAN BENEFIT BOTH ARCHITECT
AND CLIENT
The client can gain a better understanding of all that architects typically do and
what is uniquely required for a particular project. The architect can learn what
keeps the client up at night and develop strategies to address those concerns.
▪ TALK TO YOUR CLIENTS
Discussing the project’s detailed needs is an excellent opportunity to have an
extended conversation with the client. All this chatter can build a mutual
understanding and the confidence to discuss the more challenging aspects of the
project.
▪ USE THE AGREEMENT AS AN INTERVIEW TOOL
The first part of the owner-architect agreements is the Initial Information section.
Use this structure to listen to the client define their expectations for the project.
Ask questions about possible unique services and describe the potential risks.
Help your client think critically about what is really needed for a successful
project. He or she will appreciate the help.
▪ DEFINE THE PROJECT FIRST, THEN THE AGREEMENT
This is an opportunity to share with the client what you will be doing and what the
owner’s role will be. As the agreement is built, so is the positive working
relationship between you and your client. This building of confidence is the oft-
overlooked benefit of contract negotiation.
▪ ESTABLISH A PATTERN OF COMMUNICATION
Begin with the easy issues such as site, budget and schedule. Owner furnished
consultants, expansion provisions and the like. If you manage the conversation
during the presentation to win the work, you will outline the issues to be
addressed, work through each and then sum up what was decided. Approaching
the negotiation process as a conversation makes achieving agreement easier.
▪ BALANCING THE RISK
Do not ignore project risks; talk with your client to identify their severity and
likelihood. The negotiated agreement should allocate risk to the party best able to
manage it and be clear on insurance requirements.
▪ IDENTIFYING THE INS, THE OUTS, AND THE MAYBES
The conversation can easily turn to making the right selections from the menu of
services that an architect can provide—those beyond the traditional basic
services. But it is as important to be equally clear on what is not provided. Be
clear about what is in and what is out, and then be clear about the “maybes.” Alert
the owner that unforeseen circumstances may lead to more than the anticipated
services and discuss how to deal with such an occurrence through approval
processes and contingency funding.
▪ TAILORING THE SERVICES AND COMPENSATION
Once the scope of the project, scope of services, and plan for contingencies are
mutually understood, compensation can be discussed and tailored to fit that
understanding. The amount and method of compensation should reflect the
architect’s ability to manage and predict the costs of providing the services and
the level of risk assumed. Reaching agreement on compensation should be
easier when you and your client have a better shared understanding of the project
and the risks each is assuming.
▪ ONE LAST CHECK
With this foundation, derived from talking with the client, your support team—
attorney, insurance counsel, etc.—can verify that the agreement is ready to
execute. Senior management may need to approve the decisions; they can bring
a wealth of experience into the conversation. Your insurance provider can review
the agreement for conformity with coverage and potential risks not previously
identified or discussed. And, now that you have struck the basics of the bargain,
the attorneys can conduct a review and advice from the legal perspective
CONCLUSION
A one-to-one conversation between architect and client can set the stage for a
successful project. Reaching a shared understanding of mutual expectations,
balancing the project risks, and planning together for the inevitable change can
turn potential opposing parties into collaborators. Begin the conversation, build
the relationship, and only bring the lawyers if you must.
OWNER-ARCHITECT
THE PROJECT/LOCATION
ARTICLE 1. SCOPE OF WORK
That the scope of work to be done by the Architect, as herein authorized by the
Owner for the subject Project herein referred to, consists of professional services
ARTICLE 2. ARCHITECT’S BASIC SERVICES
The Architect’s Basic Services consist of the following:
2.01 Project Definition
• Gathers relevant information and data
• Reviews and refines the owner’s space requirements and translates them into
an architectural program.
• Prepares an initial statement of probable construction cost
2.02 Schematic Design Phase
This phase consists of the preparation of schematic design studies derived from
the Project Definition Phase, leading to conceptual plans.
• Evaluates the Owner’s program, schedule, budget, project site and proposes
methods of project deliveries.
• Prepares the initial line drawings representing design studies leading to a
recommended solution, including a general description of the project for approval
by the Owner.
• Submits to the Owner a Statement of the Probable Project
Construction Cost (SPPCC) based on current cost parameters.
2.03 Design Development Phase
Based on approved schematics and conceptual plans, the Architect prepares:
• Design Development documents consisting of plans, elevations, sections and
other drawings,
• Outline specifications to fix and illustrate the size and character of the entire
project as to type of materials, type of structural, electrical, mechanical, sanitary,
and electronic and communications systems.
• Diagrammatic layout of construction systems, and
• An updated SPPCC for submission to the Owner.
2.04 Contract Document Phase
Based on the approved Design Development Documents, the
Architect:
• Prepares the complete Contract Documents consisting of detailed designs and
construction drawings, setting forth in detail the work required for the
architectural, structural, electrical, plumbing/ sanitary, mechanical, electronic and
communication works prepared by the Architect and the respective professionals
involved.
• Prepares Technical Specifications describing type and quality of materials,
finish, manner of construction and the general conditions under which the project
is to be constructed.
• Submits to the Owner seven (7) sets of all construction drawings and technical
specifications for purposes of obtaining a building permit.
• Updates the SPPCC based on changes in scope,
• Assists the Owner in filing the required documents
2.05 Bidding or Negotiation Phase
• In this phase, the Architect: a. prepares the Bid Documents such as forms for
contract letting, documents for construction, forms for invitation and instruction to
bidders, forms for bidders’ proposals, general / specific conditions of contract, etc.
b. assists the Owner from the early stage of establishing a list of prospective
Contractors to awarding of the construction contract.
• The Bid Documents are the intellectual property of the Architect (Sec. 33 of R.A.
No. 9266), and must be returned by all entities acquiring bid documents.

The Owner also must not use the documents for any other purpose other than the
project for which the Owner and Architect signed an agreement.
a. helps in organizing and conducting pre-bid conferences,
b. responds to questions from bidders,
c. assists the Owner in obtaining proposals from Contractors, analyzes bid results
and prepares abstract of bids, notice of award, notice to proceed and other
construction contracts.
• For negotiated contracts, the Architect performs similar functions as in item
• But negotiates with one Contractor instead of many bidders.
2.06 Construction Phase
In this phase, the Architect performs the following:
• makes decisions on all claims of the Owner and Contractors on all matters
relating to the execution and progress of work
• prepares change orders, gathers and turns over to the Owner written
guarantees required of the Contractor and Subcontractors.
• makes periodic visits to the project site to familiarize himself with the general
progress and quality of work and to ascertain that the work is proceeding in
accordance with the Contract Documents. The Architect shall not be required to
make exhaustive or continuous 8-hour on-site supervision to check on the quality
of the work involved and shall not be held responsible for the Contractor's failure
to carry out the Construction work in accordance with the Contract Documents.
During such project site visits and on the basis of his observations, he shall report
to the Client defects and deficiencies noted in the work of Contractors,
• Should more extensive inspection or full-time (8-hour) construction supervision
be required by the Client, a separate full-time supervisor shall be hired and
agreed upon by the Owner and the Architect subject to the conditions provided in
the SPP Document on Full–Time Supervision. When the Architect is requested
by the Owner to do the full time supervision , his services and fees shall be
covered separately in conformance with the applicable and appropriates
Document.
ARTICLE 3. ARCHITECTS’ FEE AND MANNER OF PAYMENTS
• That the Owner agrees to pay the Architect for professional services, a fee of
____________________, with other payments and reimbursements hereinafter
provided, exclusive of twelve percent (12%) Value-Added Tax (VAT), the said
amount hereinafter called the Basic Rate.
• Payments to the Architect on account of the agreed Professional Fee shall be
made by the Owner on the different phases of the work of the Architect as
follows:
• Upon signing of the Service Agreement: An amount equivalent to five percent
(5%) of the agreed Professional Fee shall be paid by the Owner as engagement
fee or as the acceptance fee of the
• Upon the completion of the Schematic Design Phase: Upon completion and
submission of the documents under Schematic Design
Phase as stipulated in the Service Agreement, but not more than 15 days after
submission of the documents to the Owner, the Owner shall pay the Architect a
sum equal to fifteen percent (15.0%) of the Professional Fee, or a sum sufficient
to increase the total payments on the fee to twenty (20.0%) percent of the
Professional Fee (amount paid under Section shall be deducted from the total
amount). The Professional Fee shall be computed based on the Statement of
Probable Project Construction Cost (SPPCC) that shall be part of the documents
to be submitted at this particular stage.
• Upon the completion of the Design Development Phase: the Owner shall pay
the Architect a sum equal to twenty percent (20.0%) of the Professional Fee, or a
sum sufficient to increase
• The total payments on the fee to forty (40.0%) percent of the Professional Fee
(accumulated amount paid under Section shall be deducted from the total
amount).
• Upon the completion of the Contract Document Phase: the Owner shall pay the
Architect a sum equal to fifty percent (50.0%) of the Professional Fee, or a sum
sufficient to increase the total payments on the fee to ninety (90%) percent of the
Professional Fee (accumulated amount paid under Section shall be deducted
from the total amount).
• Bidding or Negotiation Phase: Within 15 days after the award to the winning
bidder or bidders the payment to the Architect shall be adjusted so that it will
amount to a sum equivalent to ninety (90%) percent of the Professional Fee,
computed upon the lowest bona fide
Bid or Bids or upon the winning Bid Price.
• Construction Phase: The remaining of the ten (10%) percent of the
Professional Fee is broken down as follows:
a) Five (5%) percent for Architect's Liability under the Civil Code,
b) Five (5%) percent for the Periodic Construction Supervision (PCS)
Progress Billing can be done on the remaining ten percent (10%) of the
Architect’s Fee based on the original Statement of Probable Project Construction
Cost (SPPCC).
(The Owner can make partial payments during each of the various stages of the
Architect’s work, upon request of the Architect, provided that such payments are
within the framework of the manner of payments outlined above)
ARTICLE 4. THE OWNER’S RESPONSIBILITIES
• Project Construction Cost (PCC) as herein referred to, means the cost of the
completed building to the Owner, including the structure, plumbing/sanitary and
electrical fixtures, and etc. specifications prepared by the Architect and his
consultants. The cost of materials used and the labor for their installation are part
of the PCC.
ARTICLE 5. PROJECT CONSTRUCTION COST
ARTICLE 6. BASIC FEE AND BASIC RATE
The “Basic Fee” and “Basic Rate” refers to the compensation to the
Architect on account of his delivery of the Regular or Basic Services referred to in
Article 2. Where the Architect has to render more than the regular or basic
services, it shall be the subject of a special additional charge commensurate with
the special services required. Such special charge shall be in additional to the
basic fee provided herein.
ARTICLE 7. OTHER EXPENSES CHARGEABLE TO THE OWNER
• Government Taxes on Service: The Architect’s Fee is a net amount. Any tax
(exclusive of income tax) that the national and/or local government/s may impose
on the Architect as a consequence of the services performed for the project shall
be paid by the Owner.
• Different Periods of Construction: If portions of the building/s are erected at
different periods of time, thus increasing the construction When the suspension of
construction exceeds a period of six (6) months, the fee for the remaining works
shall be doubled.
• Services of Specialist Consultants: If the Owner requires the services of
specialist consultants, they shall be engaged with the consent of the Architect.
The cost of their services shall be paid for separately by the Owner and shall not
be deducted from the Architect’s fee.
• Other Professional Services:, and other service providers are to be
recommended by the Architect for the Owner’s approval. Costs for these services
are to be paid for separately by the Owner and shall be subject to a coordination
fee payable to the Architect.
• Separate Services: Should the Owner require the Architect to design movable or
fixed pieces of cabinets and other architectural interior
• Miniature Models: Should a scale model, 3D models and/or walkthrough
presentation of the architect’s design be necessary for exhibition and display
purposes,. Costs for these services are to be paid for separately by the Owner
and shall be subject to a coordination fee payable to the Architect.
• Per Diems and Traveling expenses: A per diem of not less than
__________ Pesos (P0,000.00) plus traveling and living expenses shall be
chargeable to the Owner whenever the Architect or his duly authorized
representative is required to perform services at a locality beyond 50.0 kilometers
(air, straight line or radial distance) from his established office as it appears in the
Architect’s letterhead.
• Extra Sets of Contract Documents: The Architect is to furnish the Owner seven
(7) sets of Drawings, Specification and other Contract Documents. Cost for
printing or reproduction of extra sets of Contract Documents when required by the
Owner or his representatives to be paid by the Owner at a cost equivalent
If the Architect renders additional professional services due to changes ordered
by the Owner after approval of the Architect’s outputs, the Owner shall pay the
Architect for extra time, resources/ drafting, or other office expenses.
• Work Suspended or Abandoned: If the work of the Architect is abandoned or
suspended in whole or in part, the Owner shall pay the Architect for the services
rendered corresponding to the amount due at the stage of suspension or
abandonment of the work.

ARTICLE 8. FULL-TIME SUPERVISION

• Upon recommendation of the Architect and with the approval of the Owner, full-
time construction supervisors as will be deemed necessary shall be engaged and
paid by the Owner. Info Project / Construction Manager is present, the full-time
construction supervisor shall be under the technical control and supervision of the
Architect and shall make periodic reports to the Owner and to the Architect
regarding the progress and quality of the work done.

ARTICLE 9. ESTIMATE
• Any SPPCC or any Cost Estimate submitted by the Architect can attain only a
certain degree of accuracy. As the Architect has no control over the cost of labor
and materials, or the many factors that go into competitive bidding, he does not
assume any professional responsibility for such cost estimates, unless glaring
errors or discrepancies are clearly evident.

ARTICLE 10. COST RECORDS

• During the progress of work, the Owner shall furnish the Architect a copy of the
records of expenses being incurred on the construction. Upon completion of the
project, the Owner shall furnish the Architect a copy of the summary of all cost of
labor, services, materials, equipment, fixtures and all items used at and for the
completion of the construction.

ARTICLE 11. DESIGN AND PLACEMENTOF SIGN

• All signboards of the General Contractor, sub-contractors, jobbers and dealers
that shall be placed at the project site during the progress of construction shall be
approved by the Architect as to size, design and contents. After the completion of
the project, the Owner or his building lessee shall consult the Architect for the
design, size of all signboards, letterings, directories and display boards that will
be placed on the exterior or public areas attached to the building project in order
to safeguard the Owner’s interest.

ARTICLE 11. OWNERSHIP OF DOCUMENT

• All designs, drawings, models, specifications and other contract documents and
copies thereof, prepared, duly signed, stamped and sealed and furnished as
instruments of service, are the intellectual property and documents of the
Architect, whether the work for which they were made is executed or not, and are
not to be reproduced or used on other work except with a written agreement with
the Architect (Sec. 33 of R.A. No. 9266).

ARTICLE 12. SUCCESSORS AND ASSIGNS

• The Owner and the Architect each binds himself, his partners, successors, legal
representative and assign to the other party to this Agreement, and to the
partners, successors, legal representative and assigns of such other party in
respect of all covenant to this Agreement. Except, as above, neither the Owner
nor the Architect shall assign, sublet or transfer his interest in this Agreement
without the written consent of the other.

ARTICLE 13. ARBITRATION

• All questions in dispute under this Agreement shall be submitted in accordance
with the provisions of the Philippine Law on Arbitration and provided for in Art.
2042 of the New Civil Code of the Philippines and the provision of the Republic
Ac. No. 876, (but all litigations shall be confined under the jurisdiction of
city/municipality and both parties agree not to adjudicate in any other areas for
that matter.)The Parties in dispute under this Agreement hereby agree to full
performance of the covenants contained herein.