|
ConstructionRisk.com
Report
Vol. 3, No.2 – Feb. 2001
=====================================
In
This Issue:
*
Risk of Differing Site Condition Not Shifted to
Contractor
*
A/E Not Liable for Negligence or Negligent
Misrepresentation Without Expert Testimony
*
Substantial Completion Not Granted Until Fire Alarm System
is Successfully Tested
=====================================
Risk
of differing site condition not shifted to contractor
Contract provisions requiring contractors to perform site
investigation and inspection prior to bidding did not impose the risk of
subsurface conditions on the contractor, and therefore, did not preclude
a claim for equitable adjustment. When the contractor began work it discovered a deep scour
hole in the river bottom that prevented it from building cofferdams
where indicated on the plans. Additional
work and expense was required to solve the problem.
The public authority acknowledged that the scour hole would
require additional work but rejected the contractor’s demand for
almost $200,000 in additional compensation.
The trial court ruled that the contractor was not entitled to
change orders. This was
reversed on appeal, with the court holding that although the authority
could legally shift all the risk to the contractor, it’s ambiguous
contract language had failed to accomplish that.
In reviewing the legality of shifting the risk to the contractor,
the court noted that under federal contracts, the contractor is entitled
to be compensated for changed conditions despite language requiring
pre-bid investigations and site inspections.
It also noted that under New Jersey law, a public owner may
allocate the risk of the unknown to the contractor so long as it
contains a strong clause imposing the risk of subsurface conditions on
the contractor. The
language in this particular contract provided the following:
“The
contractor acknowledges that he has satisfied himself as to the nature
and location of the work, the general and local conditions, particularly
those bearing upon transportation, disposal, handling and storage of
materials, availability of labor, water, electric power, roads and
uncertainties of weather, floods or similar physical conditions at the
site, the topography and conditions at the ground, the character of
equipment and facilities needed preliminary to and during the execution
of the work, and all other matters upon which information is reasonably
obtainable and which can in any way affect the work or the cost thereof
under this Contract. The
Contractor further acknowledges that he has satisfied himself as to the
character, quality and quantity of information regarding the above that
is reasonably ascertainable from an inspection of the site, including
all exploratory work done by the Authority or Engineer, as well as
information contained in Drawings and Specifications forming a part of
this Contract…. Any failure of the Contractor to acquaint himself with
all the available information will not relieve him from the
responsibility for estimating properly the difficulty or cost to
successfully perform the work.”
The trial court granted summary judgment in favor of the
Authority, saying that it had made no “affirmative
misrepresentation” regarding existing conditions. Although the appellate court agreed that there had been no
affirmative misrepresentation concerning the scour hole in the river
bottom, it held that the contract was ambiguous concerning whether the
contractor had assumed the risk concerning subsurface conditions. Rather than being responsible for all subsurface
conditions, the contractor was responsible only for those that were
reasonably ascertainable from information that was reasonably
obtainable. These standards, said the court,
imply that conditions not known to the Authority or the
contractor, and which cannot be reasonably ascertained by the
contractor, may be the basis for a claim for extra work.
For these reasons, the court reversed the lower court decision
and sent the matter back for a trial on its merits. SMC
Corporation, Inc. v. New Jersey Water Supply Authority, 759 A.2d
1223 (N.J. Super.A.D 2000).
Copyright ă 2001,
ConstructionRisk.com, LLC - Virginia
=====================================
A/E
not liable for negligence or negligent misrepresentation without expert
testimony
A court dismissed a developer’s suit for fraud, negligent
misrepresentation, and breach of warranty against the design firm (A/E)
that provided engineering and surveying services for the development of
a residential community. The
developer argued that the A/E was negligent in failing to perform
various tests to determine the extent to which the land was within the
100-year flood plain, and either intentionally or negligently
misrepresented the actual status of the land.
The court concluded that the negligent misrepresentation claim
had to be dismissed because the plaintiff failed to present expert
testimony showing that the A/E had not complied with the proper standard
of care. Since the claim
was based on the tort of negligence and not breach of contract, the
court held that the breach of warranty claim also had to be dismissed.
And finally, because there had been no showing that the A/E made
representations knowing them to be false or with reckless disregard of
whether they were true or false, the fraud count was also dismissed.
The plaintiff, developer, began developing 31 acres
that had at one time been designated by the Federal Emergency Management
Agency (FEMA) as within the 100-year flood plain.
That designation had been recently revised so that only a small
portion was within the flood plain according to the most current FEMA
map. The developer
asked it’s A/E how many of the proposed building lots would be within
the flood plain, and, according to the developer, the A/E advised that
“three or four” would be in the flood plain.
The A/E testified that he told them that
“Five or more” lots would be in the flood plain.
After the project began, the flood administrator for the area
determined that a total of thirteen lots were within the flood plain and
would, therefore, require flood insurance.
In response to the developer’s appeal of that decision, FEMA
concluded that all the land was in the flood plain.
The developer then sued the A/E for all the reasons stated above,
and the trial court dismissed the case.
On appeal, the developer argued that the trial court
erred by rejecting the negligence claim and negligent misrepresentation
claim on the basis that it had failed to present expert testimony
regarding what tests or investigations a reasonably prudent civil
engineer and land surveyor in the A/E’s position would have performed
in order to determine the true location of the 100-year flood plain.
It's theory for why expert testimony was not required was that it
believed that the A/E’s failure to perform simple tests could be
understood by a lay person without the aid of expert testimony regarding
the proper standard of care. This
was rejected by the court, which stated that proof of the standard of
care and competence that a business or profession requires must
necessarily be provided through expert testimony unless the lack of
skill or care is so apparent as to be within the comprehension of laymen
and requires only common knowledge and experience to understand and
judge it.
In rejecting the plaintiff’s claim that the A/E had
breached an express warranty of fitness of the lots for sale, the court
held that even if the plaintiff’s testimony were accepted as true
concerning what was said to him by the A/E concerning the number of lots
that might or might not be able to be developed, the statements by the
A/E fell short of being a warranty.
But even if the statement had risen to such a level, the court
held that because the defendant merely made representations to the
plaintiff in the course of his professional dealings concerning the
development of the subdivision and was not selling something, this could
not be a warranty case. It
must properly be viewed as sounding in tort (negligence), rather than
contract. For
these, and other reasons, the appellate court affirmed the trial
court’s decision dismissing the case.
Dickerson Internationale,
Inc. v. Richard W. Klockner, 2000 WL 1513920 (Ohio App. 2 Dist, Oct.
13, 2000)
Copyright ă
2001, ConstructionRisk.com, LLC - Virginia
=====================================
Substantial
completion not granted until fire alarm system is successfully
tested
Where the government took beneficial occupancy of a building
after the scheduled completion date, it assessed liquidated damages
against the contractor for late completion.
This was on the basis that until the contractor successfully
tested the fire alarm system it had installed, the work was not
substantially complete. The
contractor argued that the project was substantially complete and that
the building was ready for occupancy as of the date that the system was
installed. In
deciding in favor of the government, the court focused on the contract
provisions defining the parties’ expectations as to the owner’s
reasonable use of its facility.
According to the court: “A finding of substantial completion is
only proper where a promisee has obtained, for all intents and purposes,
all the benefits it reasonably anticipated receiving under the contract.
The doctrine [of substantial completion] should not be carried to
the point where the non-defaulting party is compelled to accept a
measure of performance fundamentally less than had been bargained
for.” In this case, the court said the government bargained not
only for operational installation of the fire alarm system, but for
testing of that system to demonstrate that the system was operational.
“Clearly, fire alarm testing was an important requirement to
the Air Force before the building could be used for its intended
purpose.” Finding that
the decision of the Board of Contract appeals from which the contractor
had appealed was not arbitrary and capricious, the court affirmed that
decision. Kinetic
Builders, Inc. v. F. Whitten Peters, 226 F.3d 1307 (Fed. Cir. 2000).
Copyright ă 2001,
ConstructionRisk.com, LLC - Virginia
=====================================
LIMITED
ADVERTISING SPACE AVAILABLE
We will accept a few advertisements in this
newsletter from firms offering claims consulting, loss prevention,
insurance, risk management and educational services.
We’d prefer not to include ads, but our webmaster (Joel – the
16 year old son of Kent Holland) is insisting on being paid for all his
work since it takes time away from his income-producing website design
business (http://www.dynamichorizon.com).
He is also busy at Kidz Online, where you can see him on a video
presenting the latest web technology. (http://www.kidzonline.org/powerup/)
For
information and pricing information for advertising, go to http://www.constructionrisk.com/advertising/
=====================================
RED
VECTOR
Visit
Red Vector for Online continuing education courses for design
professionals and contractors. http://www.redvector.com
=====================================
WEB
DESIGN BY DYNAMIC HORIZON
For
information on designing a website for design professionals, consultants
and contractors, visit http://www.dynamichorizon.com
=====================================
NO
SELLING OR LEASING OF OUR SUBSCRIBERS E-MAIL
ADDRESSES
People have asked whether we lease or sell the
addresses of the over 8,000 individuals who subscribe to this
newsletter. The answer is
NO. We do not make these addresses available to anyone.
This website and newsletter are offered a free public service,
and we want everyone to feel comfortable using both the website and
letter.
=====================================
DISCLAIMER
This newsletter is distributed with the understanding
that ConstructionRisk.com, LLC and the editor and writers are not hereby
engaged in the rendering of legal services. Further, the comments in
this newsletter are for general distribution and cannot apply to any
single set of specific circumstances. If you have a legal issue to which
you believe this newsletter relates, we urge you to consult your own
legal counsel. ConstructionRisk.com expressly disclaims any
responsibility for damages arising from the use, application, or
reliance upon the information contained herein.
=====================================
Copyright
ă 2001, ConstructionRisk.com, LLC -
Virginia
Editor:
J. Kent Holland, Jr., J.D.
1313
Dolley Madison Blvd.
Suite 333
McLean, VA 22101
703-623-1932
webmaster@constructionrisk.com |
