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Legal Theories Advanced

A. Breach of Contract

In a traditional design-bid-build delivery, only the project owner has a contract with the architect that may form the basis of a breach of contract claim. Other construction project participants are generally precluded from bring breach of contract claims and instead must rely on semi-contracts (asserting a third-party beneficiary theory of recovery) or assert tort claims, or claims for breach of imposed duty. While the owner could (and often does) sue the architect for a breach of the contract, the architect’s performance of the contract is entwined with the standard of care—a distinctly tort concept usually involving professional negligence.

Many states have formulaic, but specific, recitations of the standard of care to which design professionals must adhere. More often than not, the standard is based upon the care and skill ordinarily possessed and exercised by similarly situated professionals.[1] When a design professional’s “actions meet the standard of those skilled and experienced in that profession, the [design professional] has met his responsibility.”[2] Unfortunately for the design professional, the existence and breach of duty are typically considered to be questions of fact, precluding an early exit from the owner’s litigation even when only contractual claims are asserted.

B. Tort Claims

Historically, the law prohibited strangers to the contract from pursuing tort claims against architects. Scores of older cases held that because the architect’s contract was with the owner, the architect owed few, if any, duties to other project participants such as contractors, subcontractors, and sureties. Because of the lack of a duty owed, those third parties could not recover purely economic losses unless they also suffered bodily injury or property damage. Courts reasoned that “the line between physical injury to property and economic loss reflects the line of demarcation between tort theory and contract theory.”[3] Thus, the economic loss doctrine shielded design professionals from liability to third parties because of a lack of contractual privity with those third parties. Today, few jurisdictions require privity of contract for a third-party’s tort claim against an architect.

The most common tort claim that third parties assert against design professionals following a contractor’s termination is negligence, or some variation of it. Contractors, subcontractors, and sureties sometimes claim that the design professional was negligent in observing or inspecting work in place; approving payments from the owner to the contractor; providing contract administration services on the project; confirming delivery and payment for supplies; untimely or vaguely responding to requests for information concerning the design documents; or authorizing the release of retained funds. Now, as before, the issue courts face is whether the design professional owed a duty to the claimant. Where contractual privity and the economic loss doctrine used to make the analysis straightforward and predictable, courts today conduct a complex examination of (1) whether the claimed injury to the third party was foreseeable due to the design professional’s negligence or (2) whether the design professional made a misrepresentation that the third party justifiably relied upon as expressed by Section 552 of the Restatement (Second) of Torts.[4]Both examination issues are discussed below.

Is it foreseeable that the complaining party would be adversely impacted?

One of the earliest cases involving foreseeability in this context involved a surety’s argument that its injury was a foreseeable consequence of the design professional’s conduct.[5] In deciding whether a third party’s conduct has a foreseeable impact, the court in United States v. Rogers & Rogers set forth the following factors:

  • The extent to which the transaction was intended to affect the third party;
  • The foreseeability of harm to the third party;
  • The degree of certainty that the third party suffered injury;
  • The closeness of the connection between the design professional’s conduct and the third party’s injury;
  • The moral blame attached to the design professional’s conduct; and
  • The policy of preventing future harm.[6]

Interestingly, in Rogers & Rogers, the court placed significant weight on the architect’s control over the project, noting that the architect had the power to stop the contractor’s work on the project.[7] The fact that modern construction practices and relationships rarely grant the architect such power over a project has not slowed the application of the foreseeability analysis to hold architects liable for negligence. Whether the cause is a lingering misperception of the design professional’s level of control or an unreasonable expectation that a design professional’s involvement is akin to a guarantee of adequate construction, design professionals continue to be frequently targeted when a project fails to proceed as planned.

In response to the changing realities of the construction industry and court decisions in the wake of Rogers & Rogers, AIA standard forms have undergone several revisions. Today, the AIA standard form contract explicitly limits the architect’s control over the project by making the contractor solely responsible for the construction means, methods, techniques, sequences, or procedures except where the contractor makes the architect aware of problems with means or methods.[8] Although the AIA documents attempt to avoid holding the design professional liable for construction errors, the Rogers & Rogers decision remains influential in jurisdictions where suits against the design professional are permitted.

Despite the wording of the standard AIA contracts, some courts continue to focus on the foreseeability analysis; but others have taken a different approach. In some jurisdictions, the courts evade the historical requirement privity of contract by resorting to a misrepresentation theory adopted from the Restatement, which is discussed below.

Misrepresentation: The Restatement’s exception to the economic loss doctrine.

In the absence of contractual privity, older case law applied the economic loss doctrine to prohibit a surety’s recovery from a design professional. However, the Restatement provides an exception to the economic loss doctrine for negligent misrepresentations. Under the Restatement, regardless of the lack of bodily injury or property damage, a party who, in the course of its business provides information to others may be liable for pecuniary loss if the other party justifiably relies on information when the provider failed to exercise reasonable care or competence in obtaining or communicating information.[9]

Several states have adopted this approach. But applying it often raises other questions. For instance, is the architect in the business of providing information? The answer depends on the scope of work the architect undertook to provide. If the architect’s certifications are not the “end and aim” of the work the owner hired the architect to provide, the information supplied may be ancillary or incidental to the actual work the architect was hired to perform.[10] Nevertheless, as the design professional accepts more responsibility, oversight, or control for additional business revenue, it can expect that the “end and aim” of its work may be considered more administrative than construction related. When that happens, the design professional’s role as an information conduit or relay may not be considered ancillary to the construction work, resulting in liability.

[1] Lowes Home Centers, Inc. v. Laxson, 655 So. 2d 933, 945 (Ala. 1994); Greenhouse v. C.F. Kenner Assocs. Ltd. P’ship, 723 So. 2d 1004 (La. Ct. App. 1998); Clark v. City of Seward, 659 P.2d 1227 (Alaska 1983).
[2] The Collins Co. Inc. v. City of Decatur, 533 So. 2d 1127, 1134 (Ala. 1988).
[3] Seely v. White Motor Co., 403 P.2d 145 (Cal. 1965).
[4] The Restatements of the Law are a set of treatises published by the American Law Institute that are not binding in and of themselves but are highly persuasive as they reflect the consensus of the American legal community.
[5] United States v. Rogers & Rogers, 161 F. Supp. 132 (S. D. Cal. 1958).
[6] Id. at 135.
[7] Id. at 136.
[8] AIA Standard Form of Agreement between Owner and Architect A201-2007, § 4.2.2.
[9] Restatement (Second) of Torts § 552.
[10] RLI Ins. Co. v. Indian River School Dist., 556 F. Supp. 2d 356, 362 (D. Del. 2008).

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