I’ll walk you through the exact language that you can add for free to an architecture services contract. If you have another type of contract, there is another version of this language you can use. As you see here, this language can be added to the dispute resolution section of your contract.
First, you address disputes where the client claims you caused damage to them. The first sentence reads, “If COMPANY breaches its duty, but does not commit a willful or intentional wrong, and such breach results in foreseeable damage to CLIENT, then COMPANY will pay to CLIENT the lesser of (a) damages suffered by CLIENT (US dollars) multiplied by the proportion of responsibility allocated to COMPANY and (b) the fee paid to COMPANY, which payment is personally guaranteed by the architect of record.”
Notice that three parts of this sentence have double-underlining. Each of these parts is the possible subject of a dispute. For example, take the second part, which says, “damages suffered by CLIENT.” This is the actual value of the damage suffered by the CLIENT, which clearly is disputable. If there is a dispute between the company and client over a double-underlined text segment, then the Expert Determination process can be triggered to resolve that dispute.
The next sentence addresses disputes over clients not paying fees owed. It reads, “The percentage of the COMPANY’s fee that is due is equal to the percentage of COMPANY design, drawing, or management work completed, unless a higher amount is due as per this contract.” Again, a dispute over the double-underlined text segment can be resolved by Expert Determination.
The following paragraph is the mechanism that incorporates expert determination into your contract.
The first sentence reads, “Subject to New York CPLR §7601, “Expert Determination” is the expert determination process, rights, and obligations described by the terms listed in the document archived at bit.ly/2SjoYuv (“Expert Determination Agreement”), which generate a final and binding determination for a matter of fact or law.”
New York CPLR section 7601 is part of New York State legislation that gives legitimacy to expert determination. Next, the term “Expert Determination” is defined as what is described in Smarter Contract’s expert determination agreement. That expert determination agreement is archived at a specific URL. At that URL, you will always be able to access an unchangeable version of the expert determination agreement. Last, this sentence says that the result of an expert determination process is a final decision and cannot be disputed further.
The next sentence starts with, “Whereas the parties to this contract believe Expert Determination is a simpler and lower-cost alternative to litigation and arbitration…”
The purpose of the first part of the sentence is to show anyone reading the contract that the use of expert determination is advantageous to both parties.
The sentence continues with “…they agree to the application of Expert Determination for disputes about any such matter designated by double-underlined text in this contract.”
As I mentioned before, the way we designate what matters in the contract will be resolved using expert determination is by double-underlining text in the contract, as you saw above.
The next sentence reads, “The document archived at bit.ly/2yZvTjM (“Expert Determination Schedule”) contains this contract’s Expert Determination specifications, each of which applies to the matter designated by the double-underlined text segment in this document that shares its superscript number.”
The Expert Determination Schedule is archived at that URL. It specifies certain aspects of the expert determination process, including what specific instructions experts must follow in order to reach a decision. It also specifies how much experts are paid and how long the process lasts.
The next sentence reads, “The Expert Determination Agreement and Expert Determination Schedule are hereby integrated by reference into this contract.”
This is just saying that the parties to your contract are bound to what is written in both the Expert Determination Agreement and Expert Determination Schedule. In other words, using expert determination is not optional. It should not be optional. When you are in a dispute with someone, you do not want to have to agree with them then on how you will resolve the dispute. Both parties will want to resolve the dispute in a way that will result in their winning the dispute, which will make it hard for you and the other party to agree on a single expert determination process.
The next sentence reads, “Smarter Contract Inc, a Delaware corporation, will serve in the role of Administrator indicated in the Expert Determination Agreement, unless it is unavailable to do so, in which case the parties will retain the Centre for Effective Dispute Resolution to select a person to serve in that role.”
This says that Smarter Contract Inc will administer the expert determination process. To be clear, no employee or officer of Smarter Contract Inc will serve as an expert of your dispute. Experts will be independent contractors. If for whatever reason Smarter Contract is not available to help, the Centre for Effective Dispute Resolution will help.
The next sentence reads, “No party to this contract may pursue litigation, arbitration, or mediation that would reasonably be expected to resolve any matter of fact or law materially the same as one that would be resolved by applying Expert Determination to a matter designated by double-underlined text in this contract, even if specifications in the Expert Determination Schedule do not presently allow the party to resolve the so-designated matter by Expert Determination.”
This sentence is how you prevent litigation and arbitration. This sentence addresses all the disputes that we designated for resolution by expert determination. The sentence prevents both parties from pursuing litigation, arbitration, or mediation for all those disputes.
The last two sentences, which are self-explanatory, read, “To initiate an Expert Determination process, a party must contact Smarter Contract Inc by email at firstname.lastname@example.org. The email addresses of the parties to this contract are EMAILS (NAMES).”
Since the expert determination process takes place entirely through email, it requires the parties email addresses.
That’s an overview of the expert determination clause.
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