The American Institute of Architects, or AIA, is an organization for design professionals in the construction industry. They produce and sell a suite of construction contract document templates that are used on many projects. They offer templates for design contracts, construction contracts, change orders, payment applications, notices of completion, and many more. The AIA A201 General Conditions is an important document referenced in all contracts provided by the AIA.
Because AIA documents are used on so many projects, their templates have become the “norm” in the industry. Banks often require the use of AIA contracts and forms on projects they are financing. Although they are developed by architects, they have become more friendly to contractors and subs over the years, which is good news for the construction pros who use them.
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What is the AIA A201?
The AIA A201-2017 General Conditions of the Contract for Construction, as it’s officially called, is a document that provides baseline terms that define the rights, responsibilities, and relationships of the parties to the contract. It provides basic rules that govern the relationships between the parties.
Everything you need to know about construction contracts
The AIA A201 is important because it is referenced in all AIA-provided contracts: This includes agreements between the owner and the architect/designer, owner and contractor, and contractor and subcontractor. It defines these roles as they are used in the traditional design-bid-build project delivery method.
The AIA A201 affects everyone
Contracts tie all the parties to the project to the same basic set of documents. These documents include the plans, specifications, reports, and contract terms that the owner and general contractor agree to.
When a project uses the AIA suite of contracts, each one ties the parties to the original owner/contractor agreement, and the drawings, specifications, reports, and general conditions that were agreed to. In this way, subcontractors are held to the same rights and responsibilities as the general contractor.
The AIA A201 provides an explicit connection between the parties to the contract and the project as a whole. Terms in the document detail how the provisions flow down from one level to the next — from the prime contract to the subcontracts and all others below them.
Most of the time subcontractors don’t have a say in the owner/contractor agreement. That’s why it’s important to request a copy of all the contract documents before signing a contract. Subs may feel slightly uncomfortable doing so, but it’s necessary in order to know the complete set of terms for the project.
Important A201 provisions for payment
The AIA A201 is broken up into fifteen articles. They deal with all the contractual relationships, including subcontractors, as well as time, changes to the work, payments, claims, termination, and insurance and bonds.
There are a few specific articles that contractors and subcontractors should be aware of when it comes to payment.
Providing Notice – Article 1.6
This article of the AIA A201 defines the ways that official notices can be delivered on the project. The standard terms state that the notice shall be in writing to the representative of the party, and can be delivered in person, by mail or courier, or by electronic means if a method is defined in the contract. Notice of a claim has to be in writing and can only be delivered by certified or registered mail, or by courier with proof of delivery.
It’s important to know how disputes and claims are to be communicated ahead of time in case you need the knowledge later. Noting that notification by email is only acceptable if the contract allows for it is an important point to be aware of. Always follow important electronic communications with written notices through the mail or by courier.
Subcontractual Relations – Article 5.3
Here the terms state that subcontractors are to be bound by the same general conditions and terms as the general contractor. Subcontractors are to be subject to the same obligations and responsibilities as the GC under the contract.
This part of the AIA A201 also protects the rights of the owner and the architect with respect to the sub’s work to the same extent as they are protected with respect to the GC’s work. These terms also flow down to sub-subcontractors and require that GCs and subs provide copies of the contract documents upon written request.
These general conditions are meant to cover all parties to the project, and this article provides the vehicle for those provisions to flow down from the owner/architect/general contractor to the subcontractors and sub-subcontractors. This ensures that all parties working on the project are being governed by the same rights and responsibilities.
Progress Payments – Article 9.6.8
As long as the owner has paid the GC, the GC has to protect the owner from liens and other claims against the project. This applies to claims made by any tier of subcontractor or supplier. A GC may elect to bond off the claim or lien if it’s allowed.
The GC acts as the last line of defense against liens and claims, as long as the owner has fulfilled their obligation to make timely payments. The GC has to foot any additional expenses, including attorney’s fees, that are incurred as a result of the lien or claim.
If a sub is having a payment dispute with the GC, the sub should review the payment terms in the AIA A401 Subcontractor Contract for the process that needs to be followed prior to a lien filing. Note that this provision does not protect the owner if they aren’t current with their payments.
Termination by the Owner – Article 14.4.3
According to this AIA A201 article, if the owner terminates the general contractor’s contract for their convenience, the owner shall pay the GC costs for the work completed, and termination costs, including those for terminating subcontracts.
If a GC incurs additional costs by terminating a sub’s contract, when the overall contract is terminated by the owner, the GC can pass those costs along to the owner. Subcontractors should consider looking at the costs incurred to stop work and develop a termination fee to help them recover their costs.
Know your general conditions
It’s important to know your responsibilities and obligations before a project begins.
The key to understanding any contract document is to read it carefully. If it references documents you don’t have, ask the party providing the document for a copy. This includes the AIA A201.
Although the document is considered the standard for the industry, it’s important to know what provisions may affect your role in the project, especially when it comes to payments. Know what you’re going to be responsible for before the project begins, so you don’t lose your payment rights.
Check out our Resources page for a virtual library of construction payment laws in all 50 states.