09/15/2022

Editor's Notes

The use of design-build contracting has become common in recent decades. There are multiple ways to structure the contracting, but the most common arrangement is a prime contract awarded to a constructor, which then subcontracts with the necessary design professionals.

 

A project owner realizes advantages from having a single source of responsibility for the entire design and construction process, but there’s one disadvantage that is seldom discussed—if the owner has a complaint with the professional performance of an architect or engineer, the owner may not be able to hold that design professional responsible.

 

A recent case in Texas presented this dilemma. The project owner’s building was not constructed in accordance with code, which prevented permanent occupancy. The owner blamed the project engineer but had no contract with the engineer and therefore could not sue for breach. Moreover, Texas law—consistent with most states—does not allow a professional negligence claim for purely economic contractual expectations.

 

The second case in this issue involved increased wage rate determinations in an option year of a construction contract. Was the contractor entitled to a price adjustment? Or, was the contractor’s only protection a contingency carried at the time it bid the option year work?

 

The third case addressed a corporate shareholder’s authority to settle a contractor’s dispute with the project owner, waiving and releasing any contractor claims. Did the shareholder have actual authority to bind the contractor or the apparent authority or no authority?

 

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