How many times have you suggested a standard form of appointment such as the ACE model form, the RIBA SFA 99 or NEC3 Professional Services Contract on a project, only to receive the response from the client’s advisers that the suggested form is “institutionally unacceptable” to the client and the client’s funder? Instead, you are faced with a bespoke form of appointment to sign up to. Why is this?
In an ideal world, there would be a standard form of appointment that strikes a fair balance between the interests of the client on the one hand and the consultant on the other. The result would be a form of appointment which could be entered into by both parties without requiring lengthy and costly negotiations by their advisers. But we do not live in an ideal world.
What is an “institutionally acceptable” form?
When lawyers claim that a clause or provision in an appointment is “institutionally unacceptable”, what do they mean? The phrase relates to what is commercially acceptable to the interests of funders and financiers of development projects. It is usual for funders to have a checklist of items. If the appointment does not meet the set criteria then the funder will not provide the lending to the client for the project. This has led solicitors to draft bespoke amendments to the forms of appointment to take on board all the requirements of the funder making that form “institutionally acceptable”.
The issue for consultants is that, while these bespoke appointments are certainly acceptable to clients and financiers, they are not so for the consultants and their insurers. Inevitably such bespoke appointments are more pro-client than the industry standard forms. As a result, the consultant’s insurers and solicitors argue that these bespoke forms place far more risk on the consultant and attempt to resist the incorporation of the terms, leading to protracted and costly negotiations.