Suppose that you (the Contractor) had extra costs and want payment for those extra costs from the designer. But,
- No property was damaged,
- Nobody got hurt (thankfully), and
- There is no contract between you and the designer.
Likely Result: You cannot recover from the designer because of the economic loss doctrine, which usually applies when the facts listed above are true.
Possible Solutions:
- Carefully negotiate your scope of risk under the contract;
- Trust but verify (consider using an independent design reviewer pre- or post-bid and pre-construction);
- Manage, coordinate, and communicate; and/or
- Apply an exception to the rule (depending on which State you’re in and the unique facts of the scenario).
Here’s a recent example from the highest court of Maryland where the contractor (unfortunately) lost:
Under a contract with the City of Baltimore, the Contractor agreed to construct improvements to a wastewater treatment plant including construction of giant concrete tubs to hold untreated wastewater. The Contractor constructed the tubs per the third-party engineer’s design, but the tubs leaked. The Contractor sued the engineer for money damages, no persons were injured and no property was damaged from the leaking tubs.
The highest court in the State of Maryland denied the Contractor’s recovery from the engineer. The court denied the contractor’s request for two main reasons. First, the City, Contractor, and engineer had carefully limited their risk by the complex construction contracts, so there was no need for the court after-the-fact to adjust the limits of that risk. Second, adjusting the limits of the agreed-upon risk could result in higher costs for future public construction projects and, since public projects are often funded with taxpayers’ dollars, then taxpayers would be funding the potentially higher costs. [Editorial note: I generally agree with the court’s first reason, but find the second reason flimsy.]
Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl, LLP, 451 Md. 600 (2017)
Adding Terms to a Government Contract without Saying So
Imagine an incredulous Contractor asking, “Show me in the Contract where it says I’m supposed to do X?” The Government Contracting Officer smugly answers, “even though the Contract doesn’t say so, you must do it anyway.” Is that even possible, when, how?
Differing Site Conditions: When the Part Does Not Equal the Whole
If all apples are fruit, then why are all fruit not apples?
Forum Selection Can Be a Home-Court Advantage
I promise that any disputes between us will be argued at your house. Time passes and a dispute begins to brew. Now, I want to argue at my house, not at yours. You pay costs to argue at my house that you wouldn’t have incurred had I done as agreed. Should I have to reimburse your costs?
No-Damage-for-Delay and Owner-Related Dispute Clauses are No Defense to Surety Liability Under Miller Act
Prime Government Contractors - you may need to update your interim payment waivers.
Contractual Fairness is Whatever the Parties’ Agreed
When you know a current action or inaction is wrong, but you do not object, should you be allowed to object later?
Which Comes First – Specifications or Drawings?
Sometimes it's not better to ask for forgiveness after-the-fact.
Government Contract Claims: When Appeal is Rejection of Settlement
Without a reservation of rights, appealing a Contracting Officer’s Final Decision is a rejection of any offer of payment or settlement included therein. So, the contractor had only three options.
Linking Obligations
If you want to bind the subcontractor to the prime in every way the same as the prime is bound to the owner, then the incorporation clause of the subcontract should be: . . .
Termination of Government Contracts for Convenience (T4C)
Imagine you’re a Government Contractor under a firm, fixed-price contract and you’ve done nothing wrong. Nevertheless, the Government has decided to unilaterally end its contract with you. Yes, the Government can do this...
