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Designer LiabilityLorman Education Services
June 25, 2003
1
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
4
– Professional negligence
• Vicarious
Designer Liability
• Architect/Engineer Liability– Liability to Owner
– Liability to Contractor
5
– 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
6
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
7
– No negligence claims by party with privity
Economic Loss Rule
• Does not apply to physical property damage or personal injury
8
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
10
– Contemporaneous construction by the parties
Contract Issues
• Rules of Construction– Ambiguity
• Construing against drafting party
– Boiler plate provisions
11
– 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
12
agreements
– Does not bar consistent communications or agreements
Contract Issues
• Parol Evidence Rule– Does not bar evidence
of fraudulent statements or writings
13
– Does not bar subsequent modifications to contract
Contract Issues
• Contract Forms– Oral contract not
worth the paper its not printed on
14
– AIA B141
– EJCDC
– AGC Design Build
Contract Issues
• Key Provisions– Scope of work
• Inclusions
• Exclusions
15
Contract Issues
• Key Provisions– Schedule for
performing design services
16
• Delays
Contract Issues
• Pay When Paid vs. Pay If Paid
17
Contract Issues
• Notice Requirements– AIA B141
• “Prompt notice”
– A 201
18
– 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
20
– Arbitration
– Standing arbitration panel
– Summary jury trial
Contract Issues
• Mediation– Confidential
– Inexpensive
– Effective
21
– Effective
– Virtually mandatory
Contract Issues
• Arbitration– Private
– Knowledgeable fact finders
22
finders
– Limited appeal rights
– Faster
Contract Issues
• Standing Arbitration Panel
23
Contract Issues
• Summary Jury Trial
24
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
26
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
33
• No damages for delay clause at work
Contract Clauses
• Exculpatory Clauses– No Damages for
Delay• Exceptions
34
– Delays not contemplated
– Owner’s active interference
– Bad faith
– Intentional misconduct
Contract Clauses
• Exculpatory Clauses– Disclaimers of
Liability• No damages for delay
35
• 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
36
• 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
37
Extras and Changes
• Constructive Changes– Change that only one
side recognizes
38
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
40
– Exceptions• Quantum meruit
• Waiver
• Breach of contract
• Oral Contract
• Promissory Estoppel
Project Delivery Methods
• Design / Build– Design / Build Team
– Sole Design Builder
– Design Build
41
– Design Build Developer
Project Delivery Methods
• Design / Build– Advantages
• Accountability
• Lower costs
42
• Faster completion
Project Delivery Methods
• Design / Build– Pitfalls
• Design / Builder’s mind reading ability
• Design / Builder’s
43
• Design / Builder’s conflict of interest
• Fewer checks and balances
• Fewer deep pockets
Project Delivery Methods
• Design / Build– Pricing
• Guaranteed max
44
Designer Liability
45
Brian W. EriksonQuilling, Selander, Cummiskey & Lownds, P.C.
2001 Bryan Street, Suite 1800
Dallas, Texas 75214
214-880-1844
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