Designer LiabilityLorman Education Services

June 25, 2003

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Brian W. EriksonQuilling, Selander, Cummiskey & Lownds, P.C.

2001 Bryan Street, Suite 1800

Dallas, Texas 75214

214-880-1844

Traditional Organizational Chart

Owner Designer

General Contractor

2

General Contractor

Trade Contractor

Trade Contractor

TradeContractor

Etc.

Construction Manager Chart

Owner Designer

General Contractor

ConstructionManager

3

General Contractor

Trade Contractor

Trade Contractor

TradeContractor

Etc.

Designer Liability

• Contract

• Tort– Negligence

– Professional

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– Professional negligence

• Vicarious

Designer Liability

• Architect/Engineer Liability– Liability to Owner

– Liability to Contractor

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– Liability to Contractor• Contractor not third

party beneficiary

• Professional negligence

• Texas law in flux

Designer Liability

• Architect/Engineer Liability– Owner or contractor

must show causal

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must show causal connection between A/E negligence and specific damages

Contract Liability

• Economic Loss Rule– Liability for breach of

contract damages

– No negligence claims

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– No negligence claims by party with privity

Economic Loss Rule

• Does not apply to physical property damage or personal injury

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injury

Contract Issues

• Contract Formation– Capacity &

consideration

– Validity of contract

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– Validity of contract

Contract Issues

• Intent of the Parties– Determined from

agreement as a whole

– Contemporaneous

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– Contemporaneous construction by the parties

Contract Issues

• Rules of Construction– Ambiguity

• Construing against drafting party

– Boiler plate provisions

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– Boiler plate provisions• Lose out to negotiated

provisions

– All provisions to have some meaning

– Avoidance of illusory promises

Contract Issues

• Parol Evidence Rule– Excludes prior

inconsistent communications or agreements

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agreements

– Does not bar consistent communications or agreements

Contract Issues

• Parol Evidence Rule– Does not bar evidence

of fraudulent statements or writings

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– Does not bar subsequent modifications to contract

Contract Issues

• Contract Forms– Oral contract not

worth the paper its not printed on

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– AIA B141

– EJCDC

– AGC Design Build

Contract Issues

• Key Provisions– Scope of work

• Inclusions

• Exclusions

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Contract Issues

• Key Provisions– Schedule for

performing design services

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• Delays

Contract Issues

• Pay When Paid vs. Pay If Paid

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Contract Issues

• Notice Requirements– AIA B141

• “Prompt notice”

– A 201

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– A 201• “21 days”

– Cf. Texas Civil Practice & Remedies Code §16.071

• Notice requirement less than 90 days is void

Contract Issues

• Attorney’s Fees– Provision for recovery

by prevailing party

– Texas Civil Practice &

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– Texas Civil Practice & Remedies Code §38.001

Contract Issues

• Alternative Dispute Resolution– Mediation

– Arbitration

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– Arbitration

– Standing arbitration panel

– Summary jury trial

Contract Issues

• Mediation– Confidential

– Inexpensive

– Effective

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– Effective

– Virtually mandatory

Contract Issues

• Arbitration– Private

– Knowledgeable fact finders

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finders

– Limited appeal rights

– Faster

Contract Issues

• Standing Arbitration Panel

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Contract Issues

• Summary Jury Trial

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Contract Clauses

• Implied Contract Obligations– Owner not to delay or

obstruct designer or

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obstruct designer or contractor

– Contractor to perform in good and workmanlike manner

Contract Clauses

• Implied Contract Obligations– Owner’s failure to

provide adequate plans

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provide adequate plans and specifications

• The Longeran case vs. the Shintech case

Contract Clauses

• Implied Contract Obligations– No implied duty of

good faith

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good faith

– Disclaimers

Contract Clauses

• Differing Site Conditions– Equitable allocation of

unknown risk

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unknown risk

– Pros and cons of inclusion

Contract Clauses

• Differing Site Conditions– Type I

• Conditions materially

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• Conditions materially different from contract indications

– Type II• Unusual conditions not

ordinarily encountered

Contract Clauses

• Differing Site Conditions– Site inspection

obligations

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obligations

– Disclaimers

Contract Clauses

• Exculpatory Clauses– Indemnity

– No Damages for Delay

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Delay

– Disclaimers of Liability

– Limitations of Liability

Contract Clauses

• Exculpatory Clauses– Indemnity

• Express negligence doctrine

• Fair notice

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• Fair notice– Conspicuousness

• Texas Civil Practice & Remedies Code §130.002

Contract Clauses

• Exculpatory Clauses– No Damages for

Delay• General rule

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• No damages for delay clause at work

Contract Clauses

• Exculpatory Clauses– No Damages for

Delay• Exceptions

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– Delays not contemplated

– Owner’s active interference

– Bad faith

– Intentional misconduct

Contract Clauses

• Exculpatory Clauses– Disclaimers of

Liability• No damages for delay

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• Defects in plans and specifications

• Extra costs

• Soil conditions

• Regulatory changes

• Shifting of risk

Contract Clauses

• Exculpatory Clauses– Limitations of

Liability• Liability limited to fee

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• Liability limited to insurance proceeds

• Liability limited to set amount

• Liability on comparative negligence basis

Extras and Changes

• Scope of Work– The Devil is in the

Details

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Extras and Changes

• Constructive Changes– Change that only one

side recognizes

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Extras and Changes

• Pricing– Examine Contract

Terms

– Unit Prices from Bid

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– Unit Prices from Bid

– Negotiated Amount

– Time and Materials

Extras and Changes

• Change Orders, Exceptions and Reservations– Exceptions

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– Exceptions• Quantum meruit

• Waiver

• Breach of contract

• Oral Contract

• Promissory Estoppel

Project Delivery Methods

• Design / Build– Design / Build Team

– Sole Design Builder

– Design Build

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– Design Build Developer

Project Delivery Methods

• Design / Build– Advantages

• Accountability

• Lower costs

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• Faster completion

Project Delivery Methods

• Design / Build– Pitfalls

• Design / Builder’s mind reading ability

• Design / Builder’s

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• Design / Builder’s conflict of interest

• Fewer checks and balances

• Fewer deep pockets

Project Delivery Methods

• Design / Build– Pricing

• Guaranteed max

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Designer Liability

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Brian W. EriksonQuilling, Selander, Cummiskey & Lownds, P.C.

2001 Bryan Street, Suite 1800

Dallas, Texas 75214

214-880-1844