## Facts

- An architect was retained to design an office building for a prospective owner between 1967 and 1968.
- The parties initially reached a verbal understanding that the project could be built within a $20-per-square-foot cost, and the owner’s space needs implied an overall cost near $70,000.
- The parties later executed a written AIA form contract drafted by the architect stating a “preliminary estimated cost” of $70,000 and reciting that it “ratifie[d]” the prior verbal agreement.
- The written contract included boilerplate providing that construction cost statements were the architect’s “best judgment” and that the architect did not guarantee bids would match estimates due to lack of control over market conditions and bidding.
- After plans were completed and bids solicited, the lowest bids were far above $70,000; negotiations reduced the lowest figure to about $105,000, still roughly 50% over $70,000.
- The owner rejected the bids as unaffordable, could not obtain financing at that level, and the project was never built; the owner later sold the land.
- The architect billed for services (less a $500 payment already made); the owner refused to pay and sought return of the $500, asserting an agreed maximum cost limit of $70,000.

## Issues

1. Whether parol evidence was admissible to show the parties agreed to a maximum construction cost limitation when the written contract referred to a “preliminary estimated cost” and included a non-guarantee clause.
2. Whether an architect may recover compensation when bids substantially and unreasonably exceed an agreed cost limitation and the excess is not attributable to the owner.

## Decision

- The Indiana Court of Appeals affirmed judgment for the owner.
- The court held that parol evidence was properly admitted to establish a maximum cost limitation because the written contract was not fully integrated on that point and the evidence did not contradict an express term.
- The court held the architect could not recover fees where bids substantially exceeded the agreed limitation and the overrun was not caused by the owner.
- The court upheld the owner’s recovery of the $500 previously paid.

## Legal Principles

- Parol evidence is inadmissible to vary a fully integrated written agreement, but may be admitted to supply omitted terms where the writing is not complete on the disputed matter.
- In architect/engineer contracts, parol evidence of a maximum cost limitation is admissible when it does not contradict the express writing and the contract is not integrated as to that limitation.
- An architect may be denied compensation when actual bids substantially or unreasonably exceed an agreed cost limitation, unless the excess is attributable to the owner’s actions.
- Boilerplate “no guarantee” cost-estimate language does not necessarily negate a specific, mutually agreed maximum cost limit; interpreting it to always preserve full fees despite extreme overruns is disfavored as a matter of public policy.

## Conclusion

The court enforced a $70,000 maximum construction cost limit shown by admissible parol evidence and denied the architect’s fee because the bids were far above the agreed ceiling without owner-caused changes, while also requiring return of the owner’s $500 payment.


Malo v. Gilman, 177 Ind. App. 365, 379 N.E.2d 554 (Ind. Ct. App. 1978)