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Where a general contractor prepared its bid in reliance upon information provided by the project owner’s engineer, and the site conditions differed from what was represented, the contractor sued the engineer for misrepresenting the conditions. Both the contractor and the engineer had separate contracts with the owner and there was no contractual relationship between the engineer and the contractor.

In its complaint, the contractor claimed that in preparing its construction bid, it had relied upon site information that the engineer provided to bidders.  Its bid was inadequate to cover the actual project costs, the contractor asserted,  because the site conditions were negligently misrepresented by the engineer.   Two theories were presented in the complaint.  First, the contractor claimed that it was entitled to recovery for breach of contract by the engineer.  Second, the contractor claimed that it was entitled to recovery under the tort theory of negligent misrepresentation of material facts.   Both aspects of the complaint were dismissed by the court.   In dismissing the breach of contract count, the court found that the contractor had no privity of contract with the engineer.  The separate contracts between the engineer and owner and between the contractor and owner did not show any intent to confer any rights upon the contractor against the engineer. The court also dismissed that part of the contractor’s complaint that alleged negligence against the engineer because it was filed beyond the three year statute of limitations period for negligence actions.

Despite finding a lack of contractual basis for a claim against the engineer, the court permitted  the contractor’s complaint to go forward on the allegation of negligent misrepresentation.  As reason for this, the court explained that “the record reveals that the relationship between the plaintiff and the defendants was so close as to be the functional equivalent of privity [of contract].”  Whether the project owner intended the contractor to rely only upon the contractor’s own site investigation was found by the court to be a matter to be decided by a jury.

Another aspect of this case that may interest individual design professionals working in the employ of a firm, is how the court handled that part of the complaint that named an individual engineer as a defendant.  According to the appellate court, it was not appropriate to grant summary judgment in favor of the individual “since as a principal of the defendant professional corporation, he can be held liable for any wrongful act he committed while rendering professional services on behalf of such corporation.”

Pile Foundation Construction Co., Inc. v. Berger, Lehman Associates, P.C., 676 N.Y.S. 2d 664, 1998 N.Y. App. Div.)

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 1, No. 2 (May 1999).