Negligence: the Construction Claim Panacea?
| Publication year | 1986 |
| Pages | 1992 |
1986, November, Pg. 1992. Negligence: The Construction Claim Panacea?
Negligence claims have become increasingly common in construction litigation. Courts frequently approve recovery under both tort and contract theories for negligent acts which also breach contractual duties. At the same time, owners, architect-engineers and contractors routinely use contract provisions limiting or eliminating consequential damages, including crucial damages for work delays or disruptions. Surprisingly, using a negligence theory to overcome such provisions has received little attention. However, when a party has suffered substantial delay damages on a construction project, whether an owner deprived of the use of a building or a contractor delayed or disrupted in the completion of work, a negligence suit may be the only means of redress.
This article examines the advantages and availability of negligence claims in construction litigation and explores the possibility of using such claims to overcome exculpatory contract provisions.
Although numerous cases have approved the use of a negligence theory in construction litigation, little attention has been given to the advantages of using negligence as opposed to contract claims. Before turning to the availability of such claims, their benefits should be analyzed.
The greatest advantage is allowing actions against a party with whom there is no privity of contract. This is particularly beneficial if the other contractual party is insolvent. Furthermore, a party may avoid contractual limitations of liability and contractual defenses, such as failure to give timely notice. This opportunity may be particularly helpful, for example, for contractors who have been delayed or disrupted due to poor coordination or scheduling or due to defective plans and specifications, since the party primarily responsible frequently will not be in privity with the contractor or will have the benefit of contract protections.
The typical "flow down" clause, such as the one contained in the commonly used American Institute of Architects ("AIA") standard form agreement, which provides that subcontractors have the same rights and remedies against the general contractor which the general contractor has against the owner, makes negligence claims similarly attractive to subcontractors. Conversely, owners may avoid insolvent contractors or contractual protections by bringing a negligence claim directly against a subcontractor for improperly performed work.
Moreover, since "the issue of negligence presents a question of law only in the clearest of cases and should normally be reserved for the jury," negligence claims render motions to dismiss or for summary judgment difficult to obtain. This preserves a trial by the fact-finder and potentially enhances the case's settlement value.
Finally, negligence claims may provide the only recourse. For example, the 1965 case of H.P. Bolas Enterprises, Inc. v. Zarlengo(fn2) generally limited implied warranty claims to first purchasers. Since then, Colorado has virtually required that construction claims between builders and subsequent purchasers be brought in negligence.(fn3) In addition, Colorado has held that claims against architects for substandard work are cognizable only in negligence, with implied warranties being excluded from such service contracts.(fn4)
However, the advantages outlined above traditionally have not been available for construction claims. Rather, claims arising out of construction projects, as with all contractual relations, were within the exclusive domain of contract law. Courts precluded negligence claims between the contracting parties, reasoning that the parties were free to agree on allocating the risks in the contract. The contract exclusively defined the parties' respective rights, not the more generalized concepts of tort law.(fn5) Courts feared that imposing negligence theories in a contractual context would impair a party's ability contractually to condition or limit liability and would undermine carefully balanced commercial law.(fn6)
The traditional rule also precluded claims by third parties for the negligent performance of contractual duties because no privity of contract exists and a duty in performing the contract is owed only to the promisee.(fn7) Additionally, courts have disallowed negligence claims after an owner's acceptance, reasoning that if contractors were liable to third parties for negligence even after work was accepted, there would be no end to a contractor's potential liability.(fn8) Even after the fall of the privity defense for personal injuries resulting from the sale of defective goods, courts continued the early nonliability rule in the construction context, particularly where only economic interests were at stake.(fn9)
Although Colorado courts historically have recognized the nonliability rule,(fn10) Colorado has been in the vanguard of the assault on the traditional rule's barriers and in allowing negligence claims in construction litigation. The barrier to asserting a negligence claim between contracting parties fell rather unceremoniously in the unheralded landmark decision of Lembke Plumbing & Heating v. Hayutin.(fn11)
The plaintiff homeowner in Lembke filed a negligence claim against a contractor for the installation of plumbing in the plaintiff's new home. The court held that the contractor had a fundamental duty to exercise due care, caution and skill and that neither acceptance of the work by the homeowner nor the contractual provisions abrogated or modified the common law duty. Thereafter, parties in Colorado have had a choice of proceeding on the contract or in tort for negligence.
The Colorado Supreme Court...
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