CCIDC _ California Council for Interior Design Certification

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California Council for Interior Design Certification
Provides for the protection, health, safety and welfare of the public by administering the California Certified Interior Designer Title Act.

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Analysis of Contract Section 5807


ANALYSIS OF CONTRACT SECTION 5807
In effect as of January 1, 2014

As of January 1st 2014 the amended statute Section 5800 of the California Business & Professions Code regarding Certified Interior Designers will go into effect. There are several new sections to the statute and the one on “contracts” appears to be confusing to some CIDs judging by some of the phone calls we have received.

The following is an attempt to assuage any fears that some of you may have and to clarify the intent of the new statute.
 
Firstly, the statute is intended not only to protect consumers, but CIDs as well. Adopting these provisions into your standard letter of agreement or contract is designed to keep your business dealings with your clients on a professional level at all times, and especially if any disputes arise at any time.

Technically, CCIDC cannot enforce any of these provisions because it is not a “state” board with cite and fine authority over its certificate holders. The only time CCIDC could possibly review your letter of agreement or contract is if a dispute arose and a complaint was filed against you by a consumer, and that consumer was willing to share the letter of agreement or contract with CCIDC. One of reasons the legislature felt compelled to include this section within the CID statute is because it is a mandatory requirement in all other construction related professions overseen by state boards like architects, engineers and contractors.

We have broken down Section 5807 into its various components as written in order to clarify each item. The preamble to the section is as follows:

Section 5807 is added to the Business and Professions Code, to read:

5807.  

(a) A certified interior designer shall use a written contract when contracting to provide interior design services to a client pursuant to this chapter. The written contract shall be executed by the certified interior designer and the client, or his or her representative, prior to the certified interior designer commencing work. The written contract shall include, but not be limited to, all of the following:

      For the purposes of CIDs the “Contract” could be referred to as a “Letter of Agreement” depending upon the level and sophistication of the client and the project. For example the word “contract” may be intimidating to a residential project client, but not to a commercial client. Use your own judgment in this case.

(1) A description of the services to be provided to the client by the certified interior designer.

      This is the section where the CID describes what services they are going to provide to the client. This is a case where “Less is More” does not apply, and the fuller the description the better for both parties in order to clearly clarify the scope of the entire project. It may also be prudent to include what is not going to be done under the agreement as well, so there is no confusion as to what you are going to do and what you are not going to do.

(2) A description of any basis of compensation applicable to the contract and the method of payment agreed upon by the parties.

      Clearly spell out the fees you expect to receive for your services for the entire project. Clearly explain how the fees are going to be charged. For example it could be based upon an hourly fee, a lump sum, by phase, or by square foot, depending on the type and size of the project. In the event of an hourly fee you should consider putting a not-to-exceed limitation on the number of hours so that the consumer is aware of their total obligation ahead of time as this lessens the possibility of a dispute later on.

      The next step is to describe the method, or timing, of the payment(s). For example it might be billed on a monthly or by phase basis. As a consultant you will need to receive timely payments in order to keep your business running and to pay your bills. Think about your own internal billing and payment cycles and adjust your contracts accordingly. Again, this section should be based upon the size and complexity of the project.

      One important ingredient of the compensation process is whether you will require a retainer or not in order to start the project, and how that retainer will be applied to the contract.

(3) The name, address, and certification number of the certified interior designer and the name and address of the client.

      This is typical standard contract information in order to identify the various parties to the contract. We would also advise you to add the name and address of the project if it is different than that of the client. In many commercial projects this is often the case.

(4) A description of the procedure that the certified interior designer and the client will use to accommodate additional services.

      Often the scope and services on a project may change as the project progresses. It is important that both the client and the designer track these changes for billing purposes, so that the client is not “surprised” upon the project completion by a large extra bill. One way to do this is to issue “Change Order” notices against the original contract covering all of the above information with respect to the client, designer, project name, scope of work changes, and any additional fees associated with those changes. The client should sign off and agree to this additional work before it is commenced.

(5) A description of the procedure to be used by any party to terminate the contract.

      Sometimes it is necessary to terminate a contract prior to completion. There could be many reasons such as a lack of funding, a death in the family of the client, or just an inability to get along between the client and the designer. In any case there should be an “at will” cancellation clause in the contract or letter of agreement stipulating how the contract can be terminated without going through a lengthy and costly legal process. One of the most common ways is for either party to notify the other in writing with 10 days notice that they wish to terminate the contract. It should spell out the conditions such as full payment from the client for all work done up to that point and release of the work by the designer also done up to that point.

(6) A three-day rescission clause in accordance with Chapter 2 (commencing with Section 1688) of Title 5 of Part 2 of Division 3 of the Civil Code.

      This may be the most intimidating part of this new statute, but in reality it is quite simple. This only applies to residential projects where the contract or letter of agreement are signed in the clients home or place of residence. It was originally implemented many years ago to protect consumers from high pressure sales tactics that did not allow consumers to back out once they decided upon reflection that they didn’t want the products or services. This statute allows the consumer to have a 3 day cooling off period during which they can cancel the contract. After the 3 days have elapsed they are then bound by the agreement they have signed. Again, this only applies to residential projects where the contract has been signed in the consumer’s home.

      Does it apply if the contract is signed outside the home? The answer is no, so a consideration might be signing it at the designers office, or a neutral location like a restaurant or coffee shop. There are some professions exempt from this statute like insurance sales people or real estate agents, unfortunately interior designers are not exempt.

(7) A written disclosure stating whether the certified interior designer carries errors and omissions insurance.

      If you already carry Errors and Omissions (E&O) insurance this really doesn’t impact you other than you should tell your clients that you do carry it. If you don’t carry E&O insurance it is important that you tell your client as they may require you to do so. In this case you are entitled to add the cost of such insurance to your fees. Either way, E&O insurance protects both the designer and the client and affords them peace of mind should anything go wrong.

      The following sections of this statute do not require a contract unless for some reason the client expects or demands it. They may want it for general liability reasons even though you are providing services for free, and you should consider it as well, if for nothing more than to protect yourself from any eventualities or to legally bind those services to another professional.

(b) Subdivision (a) shall not apply to any of the following:
(1) Interior design services rendered by a certified interior designer for which the client will not pay compensation.
(2) Interior design services rendered by a certified interior designer to any of the following:
(A) An architect licensed under Chapter 3 (commencing with Section 5500).
(B) A landscape architect licensed under Chapter 3.5 (commencing with Section 5615).
(C) An engineer licensed under Chapter 7 (commencing with Section 6700).

      This last item covers the common usage of electronic documents and clarifies that even in electronic form a written contract or letter of agreement is the same as a printed or written one.

(c) As used in this section, “written contract” includes a contract in electronic form.


Summation: If you already have a contract or letter of agreement that you use, please check it against all of the above to make sure you comply and have all the bases covered. You should also consult with your attorney or legal representative to ensure you comply as well.

If you do not have a contract or letter of agreement an excellent book to acquire on this subject, with sample contracts that you can use, is “Professional Practice for Interior Designers” by Christine M. Piotrowski. Chapter 24 covers this topic extensively and is a good resource. Aside from this topic, the book is an excellent resource manual for interior designers on a host of subjects relevant to the practice of interior design.

Last word: Always consult an attorney to verify the contract or letter of agreement you are using is valid and defensible in a court of law.

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