BREACH OF CONTRACT VERSUS NEGLIGENCE

BREACH OF CONTRACT VERSUS NEGLIGENCE Completely apart from the issue of professional malpractice for violating the standard of practice, a design professional may be liable for breach of a specific contractual promise or a specific guaranty or warranty. However, in the absence of such a contractual undertaking or warranty, to what extent is a design professional liable to a third party under principles of contract or tort? Historically, Defendants and design professionals were not liable to third parties for property damage or bodily injury, or to other contractors for their economic losses, in the absence of privity of contract, i.e., a direct contractual relationship with the party making the claim. The principles of privity of contract were eroded over the years both in ordinary negligence cases and in professional liability cases and claims have been allowed in most states against professionals by third parties in spite of the lack of contractual privity. However, at least in Michigan, recently there has been a movement in the opposite direction limiting the liability of contractors and design professionals to third parties. The court in Matrix relied upon a Michigan Supreme Court decision in Fultz v Union-Commerce Associates, 470 Mich 460-463 (2004) which held that a third party cannot sue a contractor without having a contractual relationship with the contractor in the absence of proving some duty owed to the claimant independent of the duties undertaken by the contractor under the contract with the owner. Other states still allow suits by third parties against design professionals in the absence of privity of contract. Third party Plaintiffs which are not in contractual privity with the design professional may also assert that they are third party beneficiaries of the contract between the design professional and the owner and thus entitled to sue. This approach often does not succeed because a third party beneficiary must establish that the parties to the original contract with the owner intended to benefit the third party.