一、Legal risk case
In June 2007, a designer and a developer signed the design contract of "XX integrated building”. Design services include conceptual design, preliminary design, construction drawing design and construction coordination as agreed in the contract, as well as liability for breach of contract. Each stage of the design cycle shall be calculated by the way that the starting point of the next phase of the design cycle is the completion of the former phase of the design.
During the performance of the contract, the designer submitted all the project design documents. In the initial design process, the developer orally required the designer to deliver preliminary design and construction drawing design documents of a single part of the whole project in advance, and agreed to appropriately postpone term of delivery of preliminary design documents for the other parts of the project. Thereafter, the designer of complete timely the preliminary design documents and construction drawings design documents of the single part according to the requirement of the developer. However, due to crashing, the preliminary design documents of the other parts could not delivered on time. Before completion of all the preliminary design documents, the developer informed the designer by phone that the designing would be suspended because of failure of approval for the project land.
When the designer submitted preliminary design documents and construction drawings design documents of the single part, an employee of the developer signed for it with the developer stamping on it.
One year after the suspension of designing, because the project had no further progress, the designer demand settlement of design fees from the developer, which aroused controversy between the two parties. The designer required the developer to make the corresponding payment of conceptual design of the whole project, preliminary design and construction drawing design of the single part according to the contract. But the developer argued: (1) the developer hadn’t received preliminary design documents and the person signed on the design documents was not the employee of the developer, so the developer has no obligation to pay the corresponding design fees; (2) before design documents in the last stages to be confirmed by the developer, the designer should not to start the next stage of design work early; (3) the designer should assume the liability for breach of contract as agreed in the contract for failure of submitting all of the preliminary design documents.
Because the designer cannot prove to the identity of the signatory, and were unable to provide the proof that the developer required preliminary design documents and construction drawings design documents of the single part delivered ahead of schedule and agreed delay delivery of corresponding design documents of the other parts, the designer were eventually forced to accept a settlement proposed by the developer and suffered heavy losses.
There are three major mistakes causing heavy losses to the designer:
1. the starting time point of the design cycle agreed in the contract is less rigorous;
2.the designer easily believed the developer’s oral requirement without a written confirmation;
3. the delivery procedures of design results are lack of standardization.
二、Advices to pre-control the risk
In order to pre-control the design results delivery and confirm risk, after the discussion of Group Security and Legal Department, Group Planning and Operation Department,and external law firms (Beijing Professional Business Law Office and Beijing Jurisino Law Group), the suggestion of pre-control risks is as followed:
1. The convention of starting point of the design cycle should be rigorous
The contract should agree that "the starting point of the design cycle is subject to the written confirmation of the owners (giving the written confirm of the design results of the previous stage, and written instructions to carry out the next phase of the design work)
2. Confirm procedures of design documents should be strict
1) Strictly implementation of the design contract confirm formalities
2) If the design contract does not have the related conventions, it is recommended that the owner should issue the design documents confirmation with official seal by stage; the content of the confirmation should be clear and without objection; if the design documents of the stage required approval of government departments, the owner shall provide the approval documents.
3) If the owner proposes the matter of the contract change by oral, it should confirm it by supplemental agreement or letter afterwards.
4) Prompt respond should be done after receiving the communication letter of the owner and by written comments
3. Specification design document delivery procedures
1) Strict implementation of the design document delivery procedures
2) If the design contract does not have related agreement, it is recommended that when the design documents are delivered, the design documents delivery list (including the design stage, major, drawing number, quantity, etc., the expression of "a set of drawing" is not appropriate) should be submitted at the same time. The owner should sign and chop with the official seal on the list and retained by the designer. When necessary, it could be delivered by speedpost (indicate the file name and the number in the "name" and "quantity" column), if the owner reject, the mail should be safekeeping and not be opened.