 |
ConstructionWebLinks.com
Appellate courts in two states came to differing conclusions
in deciding the liability of construction managers for representations
allegedly made to trade contractors working on their projects.
In
a Kentucky case, EH Construction, LLC v. Delcor Design
Group, Inc., No. 1998-CA-001476-MR, slip. op., 2000
WL 339939 (Ky. App. Mar. 31, 2000), an owner hired a construction
manager (Presnell) and separately hired a trade contractor
(EH Construction). Presnell and EH Construction had no contract
with each other. EH Construction sued Presnell and claimed
that Presnell negligently supplied incorrect information
to EH Construction which, in turn, relied on the information
and was damaged. The opinion does not provide further detail.
The trial court granted Presnell's motion to dismiss on
grounds that Presnell had no duty to EH Construction by
contract or otherwise. The Kentucky Court of Appeals reversed.
The
appellate court relied upon the American Law Institute's
Restatement (Second) of Torts §552 entitled "Information
Negligently Supplied for the Guidance of Others." Under
that section, even if two parties do not have a contract
with each other, if one acting in the course of his own
profession negligently supplies false information for the
guidance of the other's business activities, the first is
liable for the resulting damages. The appellate court noted
that the owner had hired Presnell to be in charge of coordinating
construction. Presnell argued that its only duties were
those set forth in its contract with the owner and that
its contract did not describe a duty toward EH Construction.
The appellate court, however, held that §552 created
an additional duty for Presnell to refrain from negligently
providing false information to EH Construction.
In
contrast, a New York appellate court held that a trade contractor
on a multiple-prime-contract project could not state a negligent
misrepresentation claim against the construction manager
absent a showing that it had a "special relationship"
with the construction manager. F. Garofalo Electric Co.,
Inc. v. New York University, 705 N.Y.S.2d 327 (N.Y.
App. Div. 2000). In that case, New York University hired
Morse Diesel International and Morse/Diesel, Inc. as construction
manager and also hired F. Garofalo Electric Co., Inc. as
the electrical contractor. The project was plagued by delays
and lack of contractor coordination. Garofalo claimed that
as a result, NYU and Morse Diesel directed it to perform
extra work and rework that was not required in its contract.
Further, Garofalo alleged that Morse Diesel directed Garofalo
to correspond only with Morse Diesel and not with NYU or
the architect, to keep track of its hours and materials,
and that "it would be taken care of at the end of the
job."
NYU
refused to pay and claimed that Garofalo had waived its
extra work claim by not sending NYU the contractually required
written notice and documentation of its extra work claim.
Garofalo sued NYU for breach of contract and Morse Diesel
for negligent misrepresentation. NYU and Morse Diesel moved
for summary judgment. In opposition, Garofalo claimed that
Morse Diesel, as NYU's agent, either orally modified and
abandoned the notice requirements of the contract or negligently
misrepresented that MDI would take care of payment. The
trial court denied the motions.
The
appellate division reversed. First, NYU's contract with
Garofalo required any modifications to be in writing. So,
Morse Diesel could not orally modify the notice provision,
and in any event Morse Diesel did not have contractual or
apparent authority to make such a modification. Second,
Garofalo could not have a trial on the issue of whether
Morse Diesel was liable for negligent misrepresentation
because in opposing the motion, Garofalo presented no evidence
that it had any sort of special relationship or confidence
with Morse Diesel.
The
law can and does vary from each state to state. Generally,
on multiple-prime-contract-projects, construction managers
should be aware that regardless of their contractual relationships,
they may face claims for negligently providing incorrect
information that they know a contractor will use to perform
its work. The Kentucky court, for example, noted that a
majority of jurisdictions had adopted Restatement §552
(although the New York decision did not mention Restatement
§552). Conversely, contractors on multi-prime contract
projects should be aware that representations by a construction
manager with whom they have no contract probably will not
supersede or alter their contract with the owner. Their
actions in such situations should be guided by the language
of their own contract rather than relying on oral representations
of the construction manager.
If you would like to receive legal reports and updates
more quickly, by e-mail, click here and fill out the mailing list form. If you would like to subscribe to our RSS feeds or learn more about RSS, click here.
©2000 ConstructionWebLinks, Inc.
|
