General Terms and Conditions, frequently referred to as “Boilerplate,” defines how the Client and Consultant will relate to each other in a business relationship without regard to a specific project. The following is a critical “Boilerplate” item that if not clearly and equitably stated will likely result in misunderstandings and confrontational situations:
An indemnification is simply an agreement by one party to accept responsibility for someone else’s loss. Common law provides that if a person’s negligent act damages another person, the damaged party deserves compensation from the damaging party. In the practice of engineering and architecture in connection with indemnification, the operative term is “negligence”. The indemnified party deserves compensation resulting from the negligent acts that occur during the performance of the Consultant’s work. Consultant liability occurs only when the Consultant’s negligent acts result in damages to the indemnified party. Expansion of this concept to include any or all acts of the Consultant and collateral or consequential damages is inappropriate and should be avoided. Professional liability insurance provides coverage only for damages that result from the Consultant’s negligent acts. The Consultant’s professional liability insurance broker should review the Indemnification clause for insurability. Early review of this item is essential when considering entering into a contract. Participation by the professional liability insurance broker when discussing this matter can be helpful.