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Engineer’s liability to third parties

Traditionally, the engineer’s only responsibilities were owed to the project owner, the client with whom the engineer did business. Evolving legal trends have changed that. Along with every other participant in our economy, engineers now finds themselves exposed to liability to third parties with whom they never did business.

 

The demise of ‘Privity’

“Privity of contract” means that a direct contractual relationship exists between two parties. They have entered into an agreement.

Traditionally, the law held that an engineer could not be sued by a construction contractor or any other third party not in privity with the engineer. The engineer’s pro­fessional obligations were owed strictly to their client, the project owner. It was the owner that the engineer contracted with and the owner who paid the engineer. Therefore, the engineer need consider only the interests of the project owner.

The past 40 years have seen the near total demise of privity as a require­ment for maintaining a lawsuit for commercial damages. The trend began in the context of product liability litigation and spread to every area of law in­cluding engineer liability.

Today, it is safe to say that the lack of privity of contract will rarely protect an engineer in a suit alleging the negligence or professional malpractice of the engineer. As a result, engineers are being sued by contractors, subcontractors, bonding companies, construction lenders, and other parties on the construction project with whom the engineer has no contractual relationship.

 

Foreseeable harm

With the demise of privity the new operative phrase is “foreseeable harm.” Today’s rule can be summarized as follows: In carrying out his or her professional responsibilities, an engineer has a duty to exercise ordinary skill and due care. This engineer’s duty is owed to all parties who could foreseeably suffer economic harm as a result of the engineer’s failure to exercise due care. If one of the parties is harmed, as a result of the engineer’s lack of due care, that party may maintain an action against the engineer for negligence.

 

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A mechanical engineer prepared drawings pursuant to agreement with an owner. The contractor later complained that the drawings were inaccurate and sued the engineer for the increased cost of performing the construction work.

The engineer responded that their only obligation was to its client, the owner. The engineer said it had no contract, and therefore no legal obligations, with regard to the contractor.

The Superior Court of New Jersey ruled that the contractor could sue the engineer for its increased costs. Privity of contract is no longer required in order to maintain a suit of this nature. Engineers may be held liable to any party for the economic consequences of their professional negligence if it was reasonably foreseeable that the injured party would be affected by the engineer’s performance of their professional duties.

Conforti & Eisele, Inc. v. John C. Morris Associates, 418 A.2d 1290 (N.J.Super. 1992).

 

Common claims against engineers

The most common source of third-party claims against engineers is the engineer’s inspection and certification role in the construction process. This is discussed in detail below. The other two common sources of third-party claims are design deficiencies and delayed response to request or submittals.

Design deficiencies would include inaccuracies or conflicts in the plans and specifications, as well as any insufficiencies in the design documents. The plans and specifications must be complete and sufficient so that if they are adhered to by a construction contractor, a complete, operational project will result.

Contractors are entitled to rely on the plans and specifications when bidding and planning a job. To the extent design deficiencies increase the cost of the contractor’s performance, the engineer may well be held liable to the contractor.

An engineer’s delayed response to requests or submittals is another source of claims by contractors. When a contractor seeks clarification or direction from the engineer when faced with an unanticipated problem, the engineer has an implied obligation to respond within a reasonable period of time. If the engineer does not and the lack of a response delays the contractor or extends its total perfor­mance time, the engineer may be held liable to the contractor for its delay damages.

Submittals typically involve product catalogs, shop drawings, and other things that must be approved by the engineer before the contractor incorporates them into the project. Sometimes the construction contract stipulates that these documents will be turned around in a certain minimum time. Even if the contract contains no such provision, there is an implied obligation for the engineer to make a decision within a reasonable period of time. Prompt decisions on these matters are fre­quently crucial to the contractor’s ability to maintain its schedule.

 

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An engineer prepared plans and specifications for wastewater treatment plant pursuant to agreement with the owner. The specifications required certain internal components in the sludge pumps. The contractor prepared its bid in reliance to a quotation from a supplier. The engineer refused to accept the particular model pump being offered.

The supplier had to furnish the contractor with a more expensive pump in order to obtain the engineer’s approval. The supplier then sued the engineer for the increased cost, arguing that the engineer had negligently drafted and incorrectly interpreted the specification. The engineer responded that it owed no duty to an equipment supplier.

The Court of Appeals of Minnesota ruled that the engineer did owe the supplier a duty to exercise due care in the drafting and interpretation of specifications.

An engineer’s obligation to exercise appropriate professional skill and judgment extends to all parties who may foreseeably rely on the engineer’s services.

Waldor Pump & Equipment Co. v. Orr-Schelen-Mayeron & Associates. Inc.. 386 N.W.2d 375 (Minn.App. 1996).

 

Engineers are also called upon to make decisions regarding contractors’ change order proposals. This will be discussed at the conclusion of this chapter.

 

Thanks to Ignacio Manzanera for providing this book

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Engineer’s liability to third parties

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