Construction Law

On the surface, it does seem fair for a contractual indemnity obligation to be mutual --- but in a professional design contract, it is actually fair for it to be one-sided, i.e., the design professional gives an indemnity to the owner, but not the other way around. Here's the reason:

The design professional, in designing a facility for the owner, is providing a valuable service to the owner based on the designer's unique knowledge, skill and judgment. If the design professional is negligent in performing that service, there is at least a reasonable chance that a third party could be harmed as a result of that negligence and if that happens, that the third party will bring a claim against the owner --- after all, it is the owner's facility and the owner may be held responsible, as to third persons, for the injury. It is right that the design professional indemnify the owner in such a circumstance.

On the other hand, the owner's main obligation under a design contract is to pay the designer. The owner is not providing a professional service which, if performed negligently, may cause injury to a third person who could then hold the designer responsible for the owner's actions. In other words, the risks of the respective parties under a design contract are not reciprocal and, therefore, the obligations under a design contract should not be reciprocal.

That this is the right way to think about it is borne out by the fact that the AIA, in its new edition of its standard form design agreements, includes an express indemnification from the architect to the owner, but does not make it reciprocal. (This post published by Karen Estelle Carey, a member of the construction practice at Womble Carlyle.)

Full post as published by Womble Carlyle Constrution Industry Blog on July 14, 2008 (boomark / email).