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Every large construction project involves many parties, all working together to construct a building according to the project plans. Most often, the construction activities are performed in sequence. First, the earth work is performed – excavation, earth removal, grading, leveling, etc. Next, the foundation is poured. Then, steel beams are erected as the internal core of the structure. Once the beams are in place, the concrete for the floors, stairs, and elevator shafts can be poured. The work of each subsequent party is dependent on the work of the previous party meeting the project plans.
What happens when one party in the sequence does not do its job? In the very recent case of Rojas Concrete v. Flood Testing Laboratories, Inc. (December 15, 2010), the Illinois Appellate Court considered just this problem. This is an important case for owners, contractors, subcontractors, engineers, architects, consultants, and material suppliers involved in construction projects. The Court’s reasoning is instructive, so we recount it in a little detail below.
The underlying project in this case was the construction of the UIC Forum, consisting of offices, classrooms, and an entertainment facility at the University of Illinois at Chicago. The plaintiff, Rojas Concrete, Inc. (“Rojas”), was hired by one of UIC’s contractors to provide concrete work for the Forum, including providing and installing the concrete for the floor decks, grade beams, roofs, and stairs. Flood Testing Laboratories, Inc. (“FTL”) had a separate contract directly with UIC to monitor and test the concrete poured at the Forum to ensure that the concrete conformed to the project plans. Rojas did not have a contract with FTL for the testing or inspection of the concrete.
In its lawsuit against FTL, Rojas alleged that on several occasions during the course of the project, FTL tested and approved concrete which did not conform to the project specifications. UIC required Rojas to remove the nonconforming concrete lost Rojas in excess of $950,000. Rojas sued FTL for negligence alleging that FTL owed Rojas a duty to use reasonable care in testing and inspecting the concrete to ensure that it conformed to project specifications. Rojas also alleged that FTL made negligent misrepresentations to Rojas by advising Rojas that the nonconforming concrete passed inspection and complied with the project specifications. FTL asked the Court to dismiss Rojas’ complaint, arguing that Rojas did not successfully allege that FTL owed a duty to Rojas, and that Rojas sought purely economic losses that are not recoverable in tort (this is called the “economic loss” doctrine).
Ultimately, the Appellate Court found that FTL did not owe Rojas a duty and dismissed Rojas’ complaint. The Appellate Court analyzed three possible bases that might result in FTL owing a duty to Rojas.
1. Did FTL’s Contract with UIC Create a Duty to Rojas?
The Appellate Court first analyzed whether or not FTL’s contract with UIC gave rise to a duty owed by FTL to Rojas with whom it did not have a contract. The Court found that FTL’s contract stated that FTL’s contractual obligations to UIC did not extend to third parties such as Rojas. Specifically, FTL’s contract stated:
Inspection and testing services are required to verify compliance with requirements specified or indicated. These services do not relieve Contractor of responsibility for compliance with Contract Document requirements.
Nothing contained herein shall create a contractual relationship with, or any right in favor of, any third party, including any Subcontractor.
Based on these provisions in FTL’s contract with UIC, the Court reasoned that although FTL had contractual obligations that it owed to UIC, it did not owe Rojas any duty to inspect, test, or approve Rojas’ concrete before it was poured.
2. Did FTL’s Relationship with Rojas Create a Duty to Rojas?
The Appellate Court also considered whether FTL owed Rojas a duty of care based upon their unique relationship on the project. Rojas relied on cases holding that certain relationships between two parties working on a construction project may create such a duty. For example, in one of those cases involving a project engineer the Appellate Court held:
A supervising engineer must be held to know that a general contractor will be involved in a project and will be directly affected by the conduct of the engineer. This relationship of supervising engineer and general contractor gives rise to a duty of care on the part of each party to the other. Such a duty exists even in the absence of a direct contractual relationship.
Rojas also cited another case holding that a supervising engineer owed a duty of care to a general contractor despite the lack of a contract between the two. Nevertheless, the Court rejected Rojas’ argument. Despite apparent similarities, the Court distinguished the cases cited by Rojas solely on the basis that FTL was not a supervising engineer and Rojas was not a general contractor.
3. Did a Duty Arise under the Voluntary Undertaking Doctrine?
Rojas argued that the “voluntary undertaking doctrine” imposed a duty of care on FTL. This legal doctrine imposes a duty on a person who voluntarily agrees to perform a service necessary for the protection of a third party or that third party’s property. However, under Illinois law the harm suffered as a result of the volunteer’s failure to exercise reasonable care must be bodily harm. Because Rojas could not allege bodily harm, the Court rejected this argument.
Unfortunately, the Court did not offer guidance about the level of foreseeability that is required to create a duty on the part of one party to a construction project to another. However, the Rojas Concrete case does teach valuable lessons for everyone involved in a large, multi-party construction project. Third parties such as engineers, architects, consultants, and testing companies that are hired directly by the owner should include language similar to the language used by FTL in its contract with UIC.
Specifically, the contract signed by such parties should include language similar to the following clauses:
These services do not relieve Contractor or Subcontractor of responsibility for compliance with Contract Document requirements.
Nothing contained herein shall create a contractual relationship with, or any right in favor of, any third party, including any Contractor or Subcontractor.
Although owners are probably unlikely to comply, contractors and subcontractors who know that their material and work will be inspected and tested by a third party may try to convince the owner to specifically reference the contractors or subcontractors as third party beneficiaries of the owner’s contract with the engineers, architects, consultants, and testing companies.
Ultimately, the Illinois Courts will need to better define the relationships that give rise to duties between non-contracting parties on a construction project. In addition, litigants will likely continue to test the boundaries of what is foreseeable on the part of engineers, architects, consultants, and testing companies performing services on a construction project.
At Coman & Anderson, P.C., our litigation and transactional attorneys have represented all parties to construction projects – large and small. Please contact Thomas Oddo with any questions you might have.