Due to the increasing adjustment of the profession to meet present day business conditions, some architects are now requested, in large development and building projects, to accept a portion of their compensation in the stock of the corporation conducting the work or carrying out the plan of development. In the case of a great modern hotel or apartment house, for instance, the architect is often asked by the promoters to accept stock in part or even in full payment of his services. When the architect undertakes work on this basis, he will do well to bear several cautions in mind.

When the stock of a corporation is issued, it is ordinarily what is known as fully paid stock. By this term is meant, in the law, stock, payment for which, has been made in full at the time of its issuance. If stock has a par value of $100, for example, the company when the stock was issued must have been paid $100 per share in cash, or been paid in the form of property valued by the directors at the full par value of the stock issued in return for it. In recent years, a new class of stock has come into general use, known as stock of "no par value." Where this is used, the stock to be full paid must be originally issued at the valuation and in return for the consideration, approved by the Board of Directors and authorized by law. When stock has been issued and paid for and then donated back to the company, it becomes treasury stock and can ordinarily be resold or distributed by the directors on such terms as they may deem best in the interests of the company. Stock which has never been issued is not treasury stock, although it is often erroneously referred to as such.

Where stock, when originally issued, was not fully paid for, the stockholder is liable to creditors of the corporation for the difference between the amount

paid for the stock which he holds and its full par value, or the amount of the consideration for which its issuance was authorized, in the event that it is stock of no par value.

The directors of the corporation also can call upon the stockholder at any time to pay this difference to the company. It is readily apparent that the architect should verify the fact that the stock which he receives is full paid and non-assessable. If the stock has never before been issued and is issued in the first instance to him in payment for his services, and by a proper valuation by the directors of those services in an amount equal to the par value of the stock, the stock will be full paid. If it is treasury stock, it should appear that, when originally issued, it was full paid. If it is stock of no par value, it should appear that when originally issued, either to the architect or previously, the value of the consideration for which it was issued was legally established by the directors. and the full value, thus established, received by the corporation in payment for it.

An additional caution is in order at this point, in view of the present day Federal and State income tax laws. If the architect renders a bill for $10,000 and accepts payment of it, $5,000 in cash and the balance in stock, he is thereby in effect establishing the fact that the stock received is worth $5,000 and he will have to include this valuation of the stock as taxable income in his tax return. The value of the stock may be, and in many instances will be, highly problematical and the foregoing situation will, in such a case, be unfair to the architect. He should either, in rendering his bill, place the value of the stock at a figure which discounts its speculative character, or else, when it can be safely done, make his bill payable in so many shares of stock rather than in dollars. In following this latter course, it should always be borne

in mind, however, that the situation must be handled in such a way as to have the stock full paid and nonassessable.

The tax and corporation laws are so voluminous and so varied in different jurisdictions, that the client will do well to seek competent legal advice in all matters relating to stock issues and tax possibilities.

When stock is later sold at a profit, the profit is quite properly taxable. The possible danger and injustice to the architect does not lie in such a case, but in the possibility of his being made to pay a profit on the transaction by which the stock is received-a profit which may be a technical profit and not an actual one.

Where the architect is willing to accept stock, in part or full payment of his services, it is important also that he so phrase the contract as to avoid the possibility of being called upon to accept stock of a less value than that contemplated. If the corporation, the stock of which is to be issued to him, is duly organized and functions as a going concern and is successful, the stock which he receives will be of the value which was contemplated by the parties. On the other hand, in many cases, it is quite possible that the corporation for one reason or another may not be successfully launched or operated, or may become insolvent before the stock is delivered. any such event, or in case the plan for financing the corporation falls through, the architect should not be forced to accept stock in a defunct corporation, or in one the future of which is precarious. His agreement with the client as to the stock should provide, therefore, that, in the event that the corporation is not organized as planned or fails to function as a going concern or becomes insolvent, or in the event that the plans for financing the corporation are not

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carried out as contemplated, the compensation which he would otherwise receive in stock shall be paid to him in its specified cash equivalent. The contract should be so worded that it is made clear that the understanding is that the stock to be paid to the architect shall, at the time it is received by him, be of the actual value contemplated by the parties. Of course, if the stock is not a real consideration in the mind of the architect and if the cash fee is sufficient to reimburse him, and he is willing to take his chances as to the value of the stock, he can proceed on that basis. If, however, the stock is a real consideration in his mind, in entering into the contract, and he will not receive a proper reward for his services, in the event that the stock given to him is of little or no value, then, for his proper protection, he should take the precautions suggested. He will not, in that event, be placed in the position of being compelled to accept stock of a negligible value, where he has expected to receive stock of actual and substantial value.

The sum to be paid to the architect for his services is only one of the items which should be clearly understood and agreed upon. In many ways, it is of less importance than other points, such as the right of the architect to make necessary modifications, his right to authorize extras, the fact that he must not guarantee that the work can be done for any specified amount, and similar provisions. These merit discussion under separate headings. They necessarily have a direct bearing upon the preparation of the contract and the compensation of the architect.

CHAPTER III.

THE CONTRACT BETWEEN OWNER AND CONTRACTOR

The interest of the architect in this contract.-The Standard form of the American Institute.-Its advantages and disadvantages.-Desirable that architect should prepare his own contract form.-Meeting of the minds essential to a contract.Mutuality. Offer and acceptance.-Supplemental, additional and collateral agreements.

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While the architect is not a party to the agreement between the owner and the contractor, he has a vital interest in its terms. The relations of owner and contractor can, for our purposes, be best treated by a consideration of the Institute's Standard Form of Agreement. In referring to this agreement I shall have reference, of course, to the complete agreement, viz., the agreement proper and the general conditions, specifications and drawings as well.

Article 3 of the form of agreement proper, as distinguished from the general conditions, provides that the agreement, on the part of the owner, to pay the contractor, is subject to "additions and deductions as provided in the general conditions." The wording of the above phrase might with advantage, it seems to me, be made somewhat broader. The agreement of the owner is subject not only to these additions and deductions, but is subject, and should rightly in every case be subject, to the performance by the contractor of all the substantial conditions specified. It would seem that it would be advisable, therefore, especially if there be any question of the standing of the contractor employed, to amplify the phrase quoted so as to read, in substance, that the agreement of the owner to pay is "subject to the conditions and deduc