Professional Services Agreement Template for the United States
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What is a Professional Services Agreement?
Professional Services Agreements are used on virtually every United States construction and development project. The applicable rules are largely state law: licensing of design professionals, prompt payment acts, lien rights, statutes of repose and anti-indemnity statutes all vary. The ordinary standard is that of a reasonably prudent professional practicing under similar circumstances, and professional liability policies are written to that standard, so contractual warranties of a specific result frequently fall outside cover.
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Frequently Asked Questions
What standard of care should the agreement state?
The ordinary standard of a reasonably prudent professional practicing under similar circumstances. That is what professional liability insurance covers. A warranty or guarantee of a specific result is a higher standard and is usually excluded, leaving the promise uninsured.
Who owns the drawings and specifications?
Commonly the professional retains ownership of the instruments of service and grants the client a license to use them for the project. What matters commercially is that the license is broad enough to build, occupy and later alter the project, and is not cut off by a fee dispute.
Do design professionals have lien rights?
In many states, yes, for unpaid fees, but the notice and filing deadlines are strict and unforgiving. Whether the right exists and how it is preserved depends entirely on the state where the project sits.
What is a statute of repose?
A state law cutting off claims a fixed number of years after substantial completion, regardless of when a defect is discovered. Typically between six and twelve years, it sets the real outer limit of the professional's exposure.
Are broad indemnity clauses enforceable?
Often not. Many states have anti-indemnity statutes limiting or voiding an obligation to indemnify another party against that party's own negligence. An indemnity drafted without regard to the governing state may be unenforceable when it is relied on.
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About the Professional Services Agreement
A Professional Services Agreement engages a design or technical professional and fixes the scope, the standard of care and the limits of liability. In the United States the governing rules are largely state law, from licensing and prompt payment to statutes of repose and anti-indemnity provisions, so the project's location shapes the document.
When do you need this document?
You need one whenever a professional is engaged on a project rather than supplying goods: appointing an architect or engineer on a development, engaging a project or construction manager, instructing a specialist designer on part of the work, or retaining a technical consultant whose advice will be relied on by others.
What does it cover?
The agreement sets the services by phase, the standard of care, and compensation with a payment mechanism that works with the applicable prompt payment act. It grants the client a license to use the instruments of service, which is what allows the project to be built and later modified, and it addresses liability through a cap, an indemnity drafted to survive the governing state's anti-indemnity statute, and the professional liability insurance behind it. It covers certifications requested by lenders, use of sub-consultants, suspension, termination and dispute resolution.
Common pitfalls
The most consequential error is promising a result rather than a standard of conduct, because professional liability insurance is written to the standard of care and generally will not respond to a warranty or guarantee. The second is an indemnity drafted without checking the governing state's anti-indemnity statute, which can make it unenforceable exactly when it is needed. The third is a license to the instruments of service conditioned on payment of all fees, which can leave a client unable to use designs during a fee dispute on its own project.
GOVERNING LAW
Applicable law
This Professional Services Agreement is drafted to comply with United States law. Key legislation includes:
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