Disputes Under AIA and Other Standard Form Construction Contracts

Which document actually governs?

Several at once, and they have a ranking. In the AIA family the owner and contractor sign an agreement (A101 for a stipulated sum, A102 for cost of the work plus a fee with a maximum price, A133 for construction management) that incorporates the General Conditions, AIA Document A201. The owner's lawyer or lender then adds supplementary conditions that delete, rewrite or add to A201. Subcontracts (A401 or a contractor's own form) flow the same terms down. ConsensusDocs, EJCDC for engineered works and DBIA for design-build follow the same architecture with different defaults.

The first task in any dispute is to assemble the full set, in the signed edition and year, and read the supplementary conditions against the base form. Owners' modifications commonly shorten claim deadlines, delete the contractor's right to recover delay damages, change the dispute forum, or add pay-if-paid language to the subcontracts. Advice based on the unmodified A201 is often wrong for the project at hand.

How does a claim start under A201?

With a written claim, on time, to the right people. A201 defines a claim as a demand or assertion seeking payment, time or other relief, and it requires the party making one to give written notice within a stated number of days after the event or after the claimant first recognizes the condition giving rise to it, with a copy to the Initial Decision Maker. The 2017 edition changed some of these rules from earlier editions, so the edition on the signature page matters. Claims for concealed or unknown conditions, for additional cost and for additional time each have their own notice requirements and supporting information, such as a schedule analysis for a delay claim.

The contractor must keep working. The form requires the contractor to proceed diligently with performance and the owner to continue making payments while a claim is pending, except where the contract allows suspension or termination. A contractor who stops work to force a claim resolution has usually converted a strong claim into a defense of abandonment.

Example

Suppose a Fort Worth general contractor hits rock during foundation excavation that the geotechnical report did not show. Under the General Conditions it must notify the owner and architect promptly, before the condition is disturbed if possible and within the days the clause allows. The architect investigates and recommends an adjustment, or none. If the contractor disagrees, it files a formal claim with the Initial Decision Maker within the claim period. If the contractor instead keeps excavating, bills the extra cost three months later and first raises the issue when the owner refuses to pay, the owner answers with the notice clause, and the fight is about waiver rather than about rock.

What does the Initial Decision Maker do?

The Initial Decision Maker, the architect unless the agreement names someone else, reviews the claim, may request more information or consult experts, and issues a written initial decision approving, rejecting or partly approving it, or states that it cannot decide. An initial decision is required as a condition precedent to mediation for most claims arising before final payment, with exceptions the form lists. Either party may demand that the other file for mediation within a set time after the initial decision; a party that does not file within the window waives its right to mediate or pursue binding dispute resolution on that initial decision. These windows are short and they are measured in days.

The initial decision is not an arbitration award. It is binding only until overturned through mediation and the binding forum, but it frames the dispute: the architect's reasoning becomes the first exhibit on both sides, and the party that lost will spend the case explaining why the architect, often the owner's hire, got it wrong.

Mediation and the chosen forum

Mediation is a condition precedent to arbitration or litigation under A201. Claims not resolved by the Initial Decision Maker go to mediation, administered under the construction mediation rules of the provider the form names unless the parties agree otherwise, and the binding proceeding is stayed while mediation runs. Only after mediation fails does the dispute move to the method the parties selected in the agreement: arbitration, litigation in a court of competent jurisdiction, or another method they wrote in. If no box was checked, litigation is the default under the 2017 edition.

If arbitration is checked, Texas and federal law enforce it. A written agreement to arbitrate is valid and enforceable under the Texas Arbitration Act (Civil Practice and Remedies Code § 171.001) and, for contracts involving interstate commerce, which construction contracts routinely do, under the Federal Arbitration Act (9 U.S.C. § 2). A201 also addresses consolidation and joinder so that the owner, contractor and subcontractors bound by the same terms can be brought into one proceeding, but a party that never agreed to arbitrate, such as a design professional on a separate contract, usually cannot be forced in. Should a construction dispute go to arbitration or court weighs that choice.

Changes, payment and final payment under the form

Three parts of the General Conditions generate most Texas disputes. The changes article allows work to be added or changed by a change order signed by all parties, by a construction change directive signed by the owner and architect that the contractor must perform while price and time are resolved, or by a minor change by the architect with no cost or time effect. Work performed on a verbal instruction fits none of these, and that is where contractors lose money. Texas gives a partial statutory answer: under Property Code § 28.0091 a contractor or subcontractor may decline owner-directed extra work that lacks a signed change order once such work exceeds ten percent of its contract amount, without liability for the refusal. Change order disputes covers the rest.

The payments article runs on applications for payment, the architect's certificate, and the owner's right to withhold for listed reasons such as defective work, third-party claims or failure to pay subcontractors. Texas layers the Prompt Payment Act on top: a proper pay request must be paid within 35 days and passed down within seven, and only a good faith dispute justifies withholding. The subcontract's pay-when-paid or pay-if-paid clause decides whether the subcontractor bears the owner's nonpayment; pay-when-paid and pay-if-paid clauses in Texas explains how those are read.

Final payment carries waivers in both directions. Under A201 the owner's final payment waives the owner's claims except those arising from unsettled liens, defective work appearing after substantial completion, failure to comply with the contract documents, and the terms of special warranties. The contractor's acceptance of final payment waives all of its claims except those previously made in writing and identified as unsettled at the time of the final application. A contractor that takes the last check without listing its open claims in writing has usually ended them.

Which Texas statutes override the form?

Only a few, but they matter. Lien and payment bond rights under Property Code chapter 53 cannot be waived in advance: a contract term purporting to waive the right to file or enforce a lien or claim is void as against public policy except in the narrow single-family situations the statute allows (§ 53.286), and a waiver is enforceable only on the statutory forms. The Prompt Payment Act deadlines, interest and suspension right apply to private projects whatever the form says about payment timing. Lien notice and affidavit deadlines run on the statutory calendar regardless of the contract's claim procedure, so a subcontractor following the A201 claims process must still send its chapter 53 notices on time. Beyond those, Texas courts enforce construction contracts as written, including notice clauses, no-damages-for-delay clauses within the limits Texas law places on them, and limitation of liability terms, so a party that agreed to the form is generally held to it.

Common mistakes under standard forms

• Reading the base A201 and never the supplementary conditions.
• Telling the architect about a problem at a site meeting and treating that as the written claim.
• Letting the Initial Decision Maker's decision sit past the mediation demand window.
• Stopping work while a claim is pending, without a suspension or termination right.
• Accepting final payment without listing open claims in writing on the final application.
• Assuming the form's claim procedure also satisfies lien and bond notice deadlines.

A termination fight under the same forms is covered in terminating a contractor, or being terminated. Tina Wysk represents owners, contractors and subcontractors in disputes under AIA and other standard form contracts in Dallas–Fort Worth courts and arbitration.