Construction projects, with their multiple layers of contractual relationships, pose a challenge when there is a major dispute. How does one get all the potentially responsible parties together in the same forum?
The Connecticut Supreme Court recently faced a variation of this problem. A project owner alleged that a prime contractor negligently designed and constructed the structural steel of a commercial building. The prime contract called for binding arbitration of disputes. There were five subcontractors involved in this aspect of the project, but they had no contractual relationship – and no arbitration agreement – with the owner.
The project owner, disappointed in the outcome of its arbitration proceeding with the prime contractor, filed negligence suits against the five subcontractors. The owner argued it was unable to compel the subs to participate in the arbitration proceeding, so this was its only available remedy.
The court ruled that the suits were barred. The prime contractor was responsible for the work of its subcontractors. The owner could and should have asserted all subcontractor claims against the prime during arbitration, even though the subs could not be made parties to the proceeding.
The other case in this issue involves a question raised during a pre-bid site inspection. When the answer to the question was formally incorporated into the bid documents, the answer determined the contractual scope of work.
