Kentucky Appellate Court Holds That a Contractor May Pursue Claim of Negligent Misrepresentation Against Architect Despite Lack of Contract, the Economic Loss Rule, and Project Waivers

D.W. Wilburn, Inc. v. K. Norman Berry Assocs., No. 2015-CA-001254-MR, 2016 Ky. App. Lexis 206 (Ky. Ct. App. Dec. 22, 2016)

This case arose out of a construction project in which the Oldham County Board of Education (the “Board”) was the owner, K. Norman Berry Associates (“KNBA”) was the architect and D.W. Wilburn (“Wilburn”) was the general contractor. The Board’s contract with Wilburn provided that: (i) change orders must be signed by the architect, contractor, and owner; (ii) claims for additional time, money or delay damages must be submitted within twenty-one days of the event giving rise to the claim; (iii) change orders resolved all claims for time and money relating to the scope of the change order, and (iv) the contractor’s acceptance of final payment waived its claims, except those identified in writing as unsettled at the time of final application for payment.  Pursuant to the contract, the parties executed twenty-one change orders and Wilburn submitted a final payment application and closeout form.

Later, Wilburn was sued by one of its subcontractors for delay to the project. Wilburn then sued KNBA in a third party complaint asserting that KNBA was liable for the delay as a result of its defective plans and specifications.  The trial court granted KNBA summary judgment, dismissing Wilburn’s claim for lack of contractual privity.  Wilburn appealed, and the Court of Appeals reversed. Continue reading “Kentucky Appellate Court Holds That a Contractor May Pursue Claim of Negligent Misrepresentation Against Architect Despite Lack of Contract, the Economic Loss Rule, and Project Waivers”

Texas Court of Appeals Holds That Owner’s Change to Contractor’s Means and Methods Resulted in a “Breach,” Instead of a “Change” Subject to the Changes Clause

Port of Houston Auth. of Harris Cnty. v. Zachry Constr. Corp., 2016 Tex. App. LEXIS 13306 (Tex. App. Houston 14th Dist. Dec. 15, 2016)

This contract dispute dates back to 2004, when the Port of Houston Authority contracted with Zachry Construction to build a shipping wharf in Harris County, Texas. Zachry’s bid proposed, as part of its means and methods, building the wharf “in the dry” by using a frozen earthen wall to seal out water from the construction area. Several months into the project the Port Authority decided to extend the wharf. Zachry again proposed freeze-wall technology for the extension, and the parties entered into a change order.

The Port Authority then refused to approve Zachry’s frozen wall design, and directed Zachry to either present an alternative design or alternate means of mitigating risk. Unable to identify a viable alternative design, Zachry switched from the frozen wall design and completed the construction “in the wet”. Continue reading “Texas Court of Appeals Holds That Owner’s Change to Contractor’s Means and Methods Resulted in a “Breach,” Instead of a “Change” Subject to the Changes Clause”

Virginia Supreme Court Holds That Subcontractors Did Not Waive Statute of Limitations, With The Result That The General Contractor Was Liable To Owner For Defective Work But With No Recourse Against Subcontractors Who Performed The Work

Hensel Phelps Constr. Co. v. Thompson Masonry Contractor, Inc., et. al., No. 151780, 2016 Va. LEXIS 166 (Va. Nov. 3, 2016)

The dispute arose from the construction of a student health and fitness center at Virginia Tech. The prime contractor, Hensel Phelps, and its subcontractors substantially completed their work in 1998, and Virginia Tech made final payment in 1999. In April 2012, Virginia Tech discovered defects in the work, elected to repair them, and then sought to recover the costs from Hensel Phelps. Despite the significant passage of time between completion of the work and Virginia Tech’s assertion of its claims, Hensel Phelps could not invoke the statute of limitations because under Virginia Code § 8.01-231, statutes of limitation do not apply to claims asserted by Commonwealth agencies such as Virginia Tech.  Ultimately, Hensel Phelps paid $3,000,000 to Virginia Tech to settle the defective work claims.

Hensel Phelps, in turn, sought to recover from the subcontractors that performed the defective work. When the subcontractors refused to pay, Hensel Phelps commenced an action alleging, among other things, breach of contract against the subcontractors and their sureties. All of the defendants argued that Hensel Phelps’ claims were barred by the applicable statute of limitations. The lower courts agreed. On appeal, the Virginia Supreme Court affirmed. Continue reading “Virginia Supreme Court Holds That Subcontractors Did Not Waive Statute of Limitations, With The Result That The General Contractor Was Liable To Owner For Defective Work But With No Recourse Against Subcontractors Who Performed The Work”