Construction Claims Archives: Managers can be liable for Contractor responsibilities
MANAGERS CAN BE LIABLE FOR
All Metals Fabricating, Inc. v. Foster General Contracting, Inc.,
2011 Tex. App. Lexis 1283
(Feb. 23, 2011)
A contractor couldn’t duck responsibility for poor workmanship by claiming it was only performing the less accountable job of a construction manager.
All Metals Fabricating, Inc. (All Metals) sued Foster General Contracting, Inc. (Foster) for contract breach and breach of implied warranty after foundation movement rendered unstable a building Foster constructed for All Metals’ metal fabrication facility in Allen, Texas. All Metals claimed that the property’s settlement and heaving was the result of Foster’s failure to complete the pre-construction dirt and fill work in a workmanlike manner (i.e. by one who has the necessary knowledge, training and experience). Foster challenged the suit, claiming All Metals was neither a party nor a third-party beneficiary to the contract and that, as con- struction manager, Foster didn’t have such a high standard of workmanlike behavior to live up to.
The project contract identified the “construction manager” as Foster, the “project” as All Metals, and the “owner” as BEBDT Realty, Ltd. (BEBDT). Thus, Foster alleged that BEBDT (though it didn’t sign the contract) was a party to the contract, not All Metals.
All Metals’ president testified that he had hired Foster for the project and identified the contract as “the agreement upon which Foster undertook to construct the Building.” He claimed All Metals performed under the contract by paying for the construction. The president claimed he had signed the contract, but he could not locate a copy with his signature. The president also testified about contract performance and the construction defects discovered. Because both BEBDT and All Metals suffered damages due to the defects, the two parties agreed to assign all of BEBDT’s claims arising out of the construction to All Metals, he stated.
The appellate court found the above evidence sufficient to question whether there was a contract and whether All Metals was a party to it.
Definition of an architect/contractor
Foster also argued that it didn’t breach any duty of a “construction manager.” It claimed its duties under the contract were not the full duties of a “general contractor”, and it pointed to “an irreconcilable conflict” in the contract language regarding the standard of care required. The contract incorporated a standard agreement between owner and construction manager where that manager is also the constructor (SFA). Foster claimed the SFA set Foster’s standard of care at “reasonable skill and judgment” and “best efforts.” The contract also included AIA A201, “General Conditions of the Contract for Construction,” but Foster argued that any higher standard of care outlined there was inconsistent with the SFA and that the SFA governed.
All Metals countered that Foster acted as both the archi- tect and the contractor; a plain reading of the contract supported this point. The SFA noted that “references to word architect refers to construction manager” and “the term ‘Contractor’ as used in AIA Document A201 shall mean the Construction Manager.” AIA A201 bestowed responsibility on the “Contractor” for: controlling construction methods, sequences and procedures; acts and omission of its employ- ees and subcontractors; and “inspection of portions of work already performed to determine that such portions are in proper condition to receive subsequent Work.” Finally, AIA A201 set forth a warranty under which the “Contractor” warranted that the work would be free from defects.
Reading the contract as a whole, the appellate court found that Foster not only had duties of a construction manager but also those of a contractor and architect, including responsibility for the work. The court disagreed about the “irreconcilable conflict” since Foster could perform both its construction manager duties (using reasonable skill/judgment and best efforts) as well as its contractor/architect duties, consistent with the express contract terms.
Thus, the court ruled that All Metals had raised a genuine issue of material fact whether Foster breached its contractual duties and whether the breach caused All Metals’ damages.
Editor’s Note: The parties’ agreement made Foster both construction manager and general contractor. This arrangement is not unusual. However, the construction management agreement was modified with the ambiguous language that “references to word architect refers to construction manager.” It appears that Foster argued ambiguity only, instead of offering a reasonable interpretation for this added clause. The court, however, could not ignore the language, which led to an unpleasant result for the contractor.
Standard AIA contracts (as used in this case) give the project architect responsibilities for work suspensions, change order review, disputes resolution between owner and contractor, and even termination (see the following story, for example). Giving the construction manager this kind of authority over its own work seems unreasonable (aside from the fact that, in this case, the construction manager was not a licensed architect).