Threading the Chain

• Jurisdiction: Kansas,United States
• Pages: 14
• Publication year: 2008
• Citation: Vol. 77 No. 8 Pg. 14
• Date: 01 September 2008

Threading the Chain No. 77 J. Kan. Bar Assn 8, 14 (2008) Kansas Bar Journal September, 2008

Threading the Chain

By Christopher F. Burger, Stevens & Brand LLP, Lawrence

Under common practice and the specter of the economic loss doctrine, tracing the chain of contractual privity remains essential in bringing and defending claims among owners, contractors, subcontractors, and suppliers. Regrettably, it is a necessary evil to join every party in the chain, even if the dispute is between only the links at the ends. So what do we do to try simplifying and streamlining a claim between the outer links on the chain? A liquidating agreement is a good solution.

Kansas has recognized the effectiveness of using liquidating agreements to pass-through claims in Roof-Techs International Inc. v State of Kansas, 30 Kan. App. 2d 1184, 57 P.3d 538 (2002). The principle is summarized as:

'Pass-through claims' are claims by an allegedly damaged party against an allegedly responsible party with whom it has no contractual relationship. These claims are presented by or through an intervening party in privity with both. The most common example of a pass through claim is a claim by a subcontractor arising out of the actions of the owner that is passed through to the owner by the prime contractor.

A "liquidation agreement" is a form of a settlement agreement in which a dispute between two parties with contractual privity is liquidated (settled) on terms delineating the rights, responsibilities, and procedures for presenting a pass-through claim to a third party and allocating the costs expended and benefits received when doing so. It is an attempt by the parties to avoid an extra layer of litigation (i.e., litigation between themselves) with its attendant costs and risks by focusing on the party responsible. Id. at 1201.

The real magic in the agreements is the...