Is it Tort or Contract? Both

Contract law is that body of rules that govern agreements between contracting parties. In contrast, tort laws govern situations where one person has harmed or injured another. Usually, professional liability claims grounded in one body of law or the other. There are various defenses available to the professional to ensure the claim against them falls in one of those categories (if any), but not both. A recent A&E decision would suggest otherwise, however.

The case stemmed from the City of New York’s plans to construct a biology lab for the office of the Chief Medical Examiner.  After the plan was in place, the City relinquished the project to “DASNY” a public authority that provides professional services for financing and construction of public projects.   DASNY entered into an agreement with the City, by which DASNY was to manage, finance, plan, design and construct the project.  DASNY then hired Perkins as the architect for the project.

After the foundation work began on the project, part of the adjacent building began to settle, causing problems and resulting in a delay of the project of over 18 months. Other structures adjacent to the project also sustained damage as a result of the settling that occurred during the foundation work, which resulted in additional costs of $37 million.

The City then filed a breach of contract claim against Perkins arguing that it was an intended third-party beneficiary of the contract.  DASNY also filed a negligence claim against Perkins arguing that Perkins failed to adhere to professional standards of care. Summary judgment was granted dismissing the breach of contract claim against Perkins but not the negligence claim.

On appeal, the court determined that the breach of contract claim was improperly dismissed.  The evidence showed that the City retained control over various aspects of the project including  participation in and approval of the design and selection of the contractors, including Perkins.  Therefore, the City raised an issue of fact as to whether it was an intended third-party beneficiary of the contract.

However, the motion court’s decision to allow the negligence claim was affirmed.  The court found that as the architect Perkins may be subject to tort liability based on its failure to exercise due care in the performance of its duties.  The court relied on prior case law that provides where “the particular project…is so affected with the public interest that the failure to perform competently can have catastrophic consequences” a professional can be subject to tort liability as well.  The court determined there were factual questions as to whether Perkins assumed an independent legal duty to perform its work in a manner consistent  with the accepted standard of care for the industry and whether the project was so affected with the public interest that Perkins’ failure to comply with professional standards could result in catastrophic consequences.

The case is an interesting one for architects.  Both causes of action stemmed from the same wrongdoing and resulting delay and expenses incurred in the project.  However, the negligence claim incorporates the standard of professional care.  It’s an example of how one mishap by the professional can result in more than just a negligence claim and ultimately greater liability exposure.