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A contractor was awarded a design-build contract to design and build a four-story parking deck. The contractor subcontracted the design to an architectural firm. The Owner-Builder agreement between the contractor and owner listed the name of the architectural firm as the “project architect.” Although the design-builder completed the project late, and there may have been payment issues, the architect approved the contractor’s payment applications and did not take any action to withhold liquidated damages for the delay. When the project owner was unable to locate and sue the design-builder, it filed suit against the architect alleging it breached a duty of care owed to the owner by negligently approving the pay applications, by failing to protect the owner against claims by unpaid subcontractors, and failing to account for liquidated damages allegedly owed. Auburn Hills Tax Increment Finance Authority v. Haussman Construction Company. Court of Appeals of Michigan (2018)

Summary judgment was granted, and affirmed on appeal, for the architect, holding that the architect owed the owner no duty under its contract with the design-builder and no duty independent of the contract. The appellate court found that the contract itself didn’t contain any express duties with regard to payment applications or the other issues alleged. It explained that there could be no independent duty owed to the owner absent some special relationship, a voluntary undertaking of a risk, an obligation to the public, or some similar circumstance.

Comment: A project owner on a design-build project may protect itself against problems such as those that arose on this project by retaining under separate contract a construction manager or owner’s representative to be responsible for observing the design-builder’s work and approving such things as change order requests, payment applications and final payment. A design professional that is under contract to the design-builder has the design-builder (and not the owner) as its client.

 

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. 21, No. 3 (Mar 2019).

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