accl journal winter 2015 pam

Liability for Construction Defects That

Result from Multiple Causes

James S. Schenck, IV

and Kelli E. Goss

I. Introduction—Multiple Causation Cases and the

Problem of Apportionment

When a structural failure or other construction defect causes

harm, what caused the defect and who should bear responsibility

are not always apparent. Investigations ensue, and the usual

suspects—inadequate design, incompetent construction, material

failure, etc. are examined. Experts opine, blame is cast, responsi-

bility is often denied, and so litigation begins. Initially, counsel

for the parties tend to be preoccupied with insurance defense and

coverage issues. This article sets aside the insurance issues and

focuses on another fundamental legal quandary that frequently

challenges both plaintis and defendants in a defect case: the

possibility of multiple causes and its corollary that multiple par-

ties might be held liable.

Many defendants assume at the beginning of a case that only

one defendant will ultimately be found liable. Some plaintis join

in that assumption. In some instances, investigation conrms

that a failure had only one cause and that therefore only one

party should be responsible. In some cases litigation and trial

similarly point to only one true cause of a failure and a single

party who should bear responsibility. Then the injured party, say

the owner, (for the most part this article assumes the owner is

the injured party and is the plainti, although other project

participants and other third parties can be harmed by construc-

tion defects) can condently proceed to seek damages from that

one responsible party.

In some cases, however, and perhaps most cases, it is not so

clear that a failure results from a single cause, or that it results

from a single breach of duty by a single party. The causes of a

failure are often disputed by the potentially responsible parties,

who thereupon deny liability and in some instances blame others,

James S. Schenck, IV, Partner, Conner Gwyn Schenck PLLC, Raleigh,

North Carolina, www.cgspllc.com.

Kelli E. Goss, Associate, Conner Gwyn Schenck PLLC, Raleigh, North

Carolina, www.cgspllc.com.

45© Thomson Reuters E Journal of the ACCL E Vol. 9 No. 1

including perhaps the injured party. An injured party's own

investigators might conclude that a failure resulted from multiple

causes attributable to multiple parties. A bad design can be poorly

constructed with defective materials. A roof can collapse because

of undersized posts and improperly attached beams. A plainti's

expert might conclude that multiple project participants breached

their contractual and professional duties, and that conduct of

those several defendants contributed to the failure. The injured

party must then decide whether to sue multiple defendants, or at

least take steps to reserve its rights against multiple potentially

liable parties. For lack of a better working term, this type of case

is referred to as a “multiple causation” case.

This article begs the reader to shake o the notion that in

every defect case there is ultimately a single cause of failure and

a single liable party. When the trier of fact concludes that

multiple defendants are liable for a defect, counsel, the judge and

the jury will all face a complex problem: how to apportion dam-

ages for the harm done among the parties? The challenge is to

harmonize the need for fair, ecient and equitable apportion-

ment of fault in multi-party defect cases with the freedom of the

parties to contract for specic allocations of risk and responsibil-

ity for damages.

Also, it is important to recognize that any legal

scheme for apportionment will have an eect on contract negotia-

tions, settlement negotiations and litigation strategy.

The apportionment quandary deepens when a construction fail-

ure or defect results solely in economic damages, bringing eco-

nomic loss rules to bear. In a number of jurisdictions, economic

loss rules will limit a plainti's options to breach of contract

claims against parties in direct privity of contract with the

plainti. In those jurisdictions, the plainti's claims must typi-

cally be based on breaches of dierent contracts, and most third-

party claims will be based on some form of express or implied

contractual indemnity. In other jurisdictions, the plainti might

be permitted to bring negligence or other tort claims against par-

ties not in privity of contract with the plainti. Even in jurisdic-

tions allowing negligence claims for economic damages against

parties not in privity of contract, the plainti often is not allowed

to maintain negligence claims against defendants with whom the

plainti did have a contract. In those jurisdictions, the plainti

may assert a mixture of contract and tort claims.

Although this article focuses on defect cases, the underlying problems

similarly arise in other types of contract cases involving multiple causation,

such as concurrent delay cases. The Bussel article discussed below actually

focuses on concurrent delay.

Journal of the ACCL

If multiple defendants are held liable, they face the challenge

of apportioning fault, or perhaps more practically, apportioning

the damages awarded to the plainti. The law governing ap-

portionment in negligence cases (seeking compensation for bodily

injury or property damage) is well developed, but that is not true

where multiple defendants are held liable for breaches of contract

or a mixture of contract and tort defaults. The Restatement

(Third) of Torts: Apportionment of Liability (2012), a monumental

summary of the topic in tort law, in its Introduction describes the

core issues surrounding apportionment as follows:

(1) the legal eects of dierent types of a plainti's conduct,

such as a plainti's intentional self-injury, a plainti's

negligence, and a plainti's voluntarily assuming a risk;

(2) joint and several liability;

(3) apportionment of damages by causation; and

(4) contribution and indemnity.

These “core issues” can also be viewed as opportunities a

defendant has to avoid ultimate liability for plainti's damages

when others are also liable. For example, the defendant can at-

tempt to prove that the plainti's damages are divisible, allocat-

ing precise amounts of damages to dierent defendants based on

who actually caused the damages. A defendant can also attempt

to allocate some fault to the plainti, perhaps even arguing to

avoid liability to the plainti altogether. If multiple defendants

are held liable, each defendant may have equitable or statutory

rights to indemnity or contribution.

If all of a plainti's claims are based on negligence, the

defendants probably will have, in addition to their cross claims

and third party claims for indemnity, claims for contribution, or

the right to seek a comparative fault verdict. If, however, the

claims are all based on breach of contract, or if they are based on

a mixture of contract and negligence, the quandary for the

defendants deepens. As discussed below, contribution and

comparative fault are not usually available in breach of contract

cases or in cases where any single claim arises out of breach of

contract. Joint tortfeasors might by law be held jointly and sever-

ally liable for damages. Co-obligors on the same contract might

by law be held jointly and severally liable for damages.

But

obligors on separate contracts are not necessarily “joint” obligors.

Obligors on separate contracts, not in privity with one another,

are unlikely to have recourse to express or implied indemnity. So

See Restatement (Second) Contracts § 289, and the discussion in Section

IV.C. of this article.

Liability for Construction Defects

if a successful plainti in a multiple causation case elects to exe-

cute on its judgment against one of the liable defendants and

recovers one hundred percent of its damages from that one liable

defendant, how is that defendant to recoup some of those dam-

ages from the other liable defendants?

II. Plainti's Burden of Proof

In a multiple causation case, the plainti (e.g., a project owner)

generally bears the burden of proving that breaches of duties

owed by other parties contributed in a substantial way to the

subject defect or failure. The plainti also will have to prove the

damages caused by the defendants' breaches. It does not neces-

sarily follow, however, that the plainti must prove the percent-

age or portion of responsibility that each separate defendant

should bear.

In negligence cases, the plainti must prove that negligent er-

rors or omissions amounting to breaches by the defendants were

a “substantial factor” in bringing about the failure at the

structure.

The plainti also must prove that the breach caused

damages, and it must prove the amount with reasonable

certainty. This burden applies to all of the claims against the

defendants, regardless of whether their duty to the plainti is

based on tort obligations, professional obligations or contractual

obligations.

What the plainti is not required to do, however, is apportion

or allocate damages among those defendants whom the jury nds

to have caused the failure. Under the Restatement (Second) of

Torts, if the plainti can prove that a breach of duty by each

defendant was a substantial cause of a “single harm,” specically

the failure at the structure, and there is no reasonable basis for

determining the contribution of each cause to the failure of the

structure, then the burden of proof to show that the harm can

somehow be apportioned among the defendants shifts to the

defendants. Section 433B describes the burden of proof on

apportionment:

(1) Except as stated in Subsections (2) and (3), the burden of

proof that the tortious conduct of the defendant has caused the

harm to the plainti is upon the plainti.

(2) Where the tortious conduct of two or more actors has

combined to bring about harm to the plainti, and one or more of

the actors seeks to limit his liability on the ground that the harm

See, e.g., Restatement Second, Torts § 431 (“The actor's negligent conduct

is a legal cause of harm to another if (a) his conduct is a substantial factor in

bringing about the harm.”).

Journal of the ACCL

is capable of apportionment among them, the burden of proof as

to the apportionment is upon each such actor.

(3) Where the conduct of two or more actors is tortious, and it

is proved that harm has been caused to the plainti by only one

of them, but there is uncertainty as to which one has caused it,

the burden is upon each such actor to prove that he has not

caused the harm.

As stated in the Restatement (Second) of Torts § 433B at Com-

ment d.:

The reason for the exceptional rule placing the burden of proof as to

apportionment upon the defendant or defendants is the injustice of

allowing a proved wrongdoer who has in fact caused harm to the

plainti to escape liability merely because the harm which he has

inicted has combined with similar harm inicted by other wrongdo-

ers, and the nature of the harm itself has made it necessary that

evidence be produced before it can be apportioned. In such a case

the defendant may justly be required to assume the burden of pro-

ducing that evidence, or if he is not able to do so, of bearing the full

responsibility. As between the proved tortfeasor who has clearly

caused some harm, and the entirely innocent plainti, any hard-

ship due to lack of evidence as to the extent of the harm caused

should fall upon the former.

Shifting the burden on apportionment to the defendants does not

mean the plainti is entitled to multiple recoveries of the same

damages.

It does, however, often mean that the plainti can

proceed to recover the judgment from any defendant the plainti

chooses until the judgment is satised in full. As discussed below,

the only recourse of the defendants, faced with liability for the

plainti's indivisible harm and damages, is to plead comparative

fault, contribution or indemnity and pursue reimbursement from

the other liable parties.

The Restatement (Second) of Contracts does not directly ad-

dress apportionment of liability among several defendants for

harm caused by breaches of separate contracts. Corbin on Con-

tracts has this to say on the subject of multiple causation:

The plainti's total injury may have been the result of many factors

in addition to the defendant's tort or breach of contract. In such a

case must the defendant pay damages equivalent to the total harm

See, e.g., Lexton-Ancira Real Estate Fund, 1972 v. Heller, 826 P.2d 819,

823 (Colo. 1992) (“Generally, a plainti may not receive a double recovery for

the same wrong.”); Crider & Crider, Inc. v. Downen, 873 N.E.2d 1115, 1119

(Ind. Ct. App. 2007) (“The law disfavors a windfall or a double recovery.”); Am.

Jur. 2d, Damages § 32 (“A plainti may not receive a double recovery for the

same injuries or losses arising from the same conduct or wrong.”); Am. Jur. 2d,

Damages § 52 (“an injured party cannot recover twice for the same breach”).

Liability for Construction Defects

suered? Generally the answer is, Yes, even though there were

contributing factors other than the defendant's own conduct . . ..

Must the plainti show the proportionate part played by the

defendant's breach of contract among all the contributing factors

causing the injury, and must the loss be segregated proportionately?

To these questions the answer is generally, No. In order to estab-

lish liability the plainti must show that the defendant's breach

was “a substantial factor” in causing the injury.

The language in Corbin suggests that once a plainti shows

that a breach of contract by a defendant was a “substantial fac-

tor” causing a structural failure, even if breaches of contract by

other defendants were also substantial factors causing the

structural failure, and proves the resulting damages, the plainti

has met its burden. If the plainti meets this burden as to sev-

eral defendants, the court could enter judgment for the total

damages against each of the several defendants.

III. Sources of Duty and the Economic Loss Rules

A thorough discussion of the “economic loss rules”

is beyond

the scope of this article, but to make sense of the potential

outcomes in a multiple causation case, and to foreshadow the ap-

portionment quandary faced by defendants, it is important to

understand that the duties owed by some defendants could arise

from contracts while the duties of others may be based on tort

principles, such as negligence, professional negligence and non-

contractual product liability. If multiple defendants are ultimately

held liable for a defect or failure, their rights among and against

one another will depend in part on whether their liability is based

on breach of contract or tort. To some extent plaintis control

whether they bring claims for breach of contract, negligence, or

other grounds. Strategic considerations aside, a plainti's claims

against multiple defendants might depend on how the jurisdic-

tion applies economic loss rules.

11 Joseph M. Perillo, Corbin on Contracts Damages § 55.9 (Rev. Ed.

2005) (referencing the Restatement (Second) of Torts § 439 regarding multiple

causation).

See Havens Steel Co. v. Randolph Engineering Co., 613 F. Supp. 514

(W.D. Mo. 1985), judgment a'd, 813 F.2d 186, 22 Fed. R. Evid. Serv. 1206 (8th

Cir. 1987) (involving multiple causation in a delay case).

See Bruner & O'Connor on Construction Law §§ 17:88 to 17:99; Leslie

O'Neal-Coble et al., Construction Damages and Remedies, Chapter 9, 267-303

(2d Ed., 2013); Oltho, If You Don't Know Where You're Going, You'll End Up

Somewhere Else: Applicability of Comparative Fault Principles In Purely

Economic Loss Cases, 49 Drake L. Rev. 589 (2001).

Journal of the ACCL

A. Physical Loss (Bodily Injury, Property Damage)

Contrasted with Economic Loss

If the harm caused by a failure consists of bodily injury or

property damage, the injured party is likely to be able to sue the

potentially responsible parties in tort for negligence or perhaps

some form of strict liability. The defendant may be held liable for

negligence that causes harm even if the defendant was acting

pursuant to a contractual obligation when the injury occurred.

The law imposes upon every person who enters upon an active

course of conduct the positive duty to exercise ordinary care to

protect others from harm and calls a violation of that duty

negligence. The duty to protect others from harm arises whenever

one person is by circumstances placed in such a position towards

another that anyone of ordinary sense who thinks will at once rec-

ognize that if he does not use ordinary care and skill in his own

conduct with regard to those circumstances, he will cause danger of

injury to the person or property of the other.

For instance, an architect, in the performance of his contract

with its employer, is required to exercise the ability, skill, and

care customarily used by architects upon such projects.

Where

breach of such a contract results in foreseeable injury to a third

party, the designer can be sued and held liable for professional

negligence in all states, unless the damages are considered to be

“economic” damages. In situations where the injured party is

seeking damages for bodily injury or property damage to prop-

erty other than the work itself, whether the plainti and

defendant are in privity of contract is not a factor. That a

defendant was acting pursuant to a contract when the injury oc-

curred does not preclude a negligence claim for the injury caused

by the defendant.

“An omission to perform a contract obligation

is never a tort, however, unless that omission is also the omission

Davidson and Jones, Inc. v. New Hanover County, 41 N.C. App. 661, 666,

255 S.E.2d 580, 584 (1979) (internal citations omitted). See also Council v.

Dickerson's, Inc., 233 N.C. 472, 474–75, 64 S.E.2d 551, 553 (1951) (quoting

Prosser on Torts, section 33). North Carolina began questioning the economic

loss rule in the context of professional liability many years ago, and there is

extensive case law on the subject.

Am. Jur. 2d, Architects § 9.

See, e. g., Council v. Dickerson's, Inc., 233 N.C. 472, 64 S.E.2d 551 (1951).

See also McKinney Drilling Co. v. Nello L. Teer Co., 38 N.C. App. 472, 248

S.E.2d 444 (1978). See generally Tort Liability of Project Architect or Engineer

for Economic Damages Suered by Contractor or Subcontractor, 61 A.L.R.6th

445.

Liability for Construction Defects

of a legal duty.”

Straightforward joint and several liability with

contribution among tortfeasors or comparative fault should ap-

ply, along with perhaps some contractual indemnity rights among

the defendants in privity of contract with one another.

The more dicult cases are those where the harm resulting

from multiple causes is not bodily injury or physical damage to

property other than the work under the contract, but instead is

purely economic in nature, such as cost overruns due to rework

or delays. Some courts even consider failure of the work that is

the subject of the contract to be in the nature of economic dam-

ages, even though a failure of the work itself can constitute phys-

ical damage of a dramatic sort. These courts reason that the fail-

ure of the work itself, as the subject matter of the contract, is

covered by the contract and the warranty provisions in the

contract, and so is economic in nature. When losses are economic

in nature and presumably have been or could have been covered

by the contract or contracts negotiated by the parties on the

construction project, the courts look exclusively to contract rights

and remedies to compensate injured parties. This “economic loss”

rule takes dierent forms, depending on privity of contract. A

plainti who is in privity of contract with the defendant or

defendants will have rights and remedies, but generally only

under the terms of the contract. A plainti who is not in privity

of contract with a defendant might or might not have a claim for

economic damages, depending on the jurisdiction.

B. Economic Loss Rule One: Privity of Contract

If the injured party in a defect case is an owner or a prime

contractor, the injured party quite likely will have claims against

defendants with whom it is in privity of contract. If the injured

party suers only economic damages, the economic loss rules can

constrain the claims and pleadings. For instance, in some jurisdic-

tions a plainti who is in privity of contract with a defendant

may not sue that defendant in tort (generally the attempted claim

is for negligence) to recover economic damages arising out of the

transactions and occurrences covered by the contract. A defendant

might contend that a plainti may not maintain a negligence ac-

tion against its contractor for the contractor's negligent failure to

properly perform the terms of the contract when the owner's

Council, 233 N.C. at 475, 64 S.E.2d at 553. See also Franceschi v. De

Tord, 71 F.2d 95, 99 (C.C.A. 1st Cir. 1934); Dustin v. Curtis, 74 N.H. 266, 67 A.

220, 222 (1907); Dice's Adm'r v. Zweigart's Adm'r, 161 Ky. 646, 171 S.W. 195,

197 (1914).

Journal of the ACCL

resulting injury is damage to the subject matter of the contract.

So, for example, an owner who suers harm because of a

structural defect might have a breach of contract claim against

the general contractor, and a breach of contract claim (a

contractual malpractice claim) against the prime architect or

engineer, but no true claim for negligence against either of them.

It is important not to confuse the source of the duty and the

standard of care. The design professional's liability might be

based on breach of contract notwithstanding the professional

negligence standard of care. The standard of care to which design

professionals are held is essentially the same regardless of

whether they have an express contract with the plainti. Absent

an agreement to meet some higher standard of care, “[a] civil

engineer is required to exercise ‘that degree of care which a . . .

civil engineer of ordinary skill and prudence would exercise under

similar circumstances, and if he fails in this respect and his

negligence causes injury, he will be liable for that injury.’ ’’

other words, even when a design professional has an express

contract, the standard of care to which the design professional is

held by law is a professional negligence standard.

The plainti's

burden of proof is to show that the defendant failed to meet this

North Carolina State Ports Authority v. Lloyd A. Fry Roong Co., 294

N.C. 73, 83, 240 S.E.2d 345, 351 (1978) (rejected on other grounds by, Trustees

of Rowan Technical College v. J. Hyatt Hammond Associates, Inc., 313 N.C.

230, 328 S.E.2d 274, 24 Ed. Law Rep. 549 (1985)). See also Anderson Elec. v.

Ledbetter Erection Corp., 115 Ill. 2d 146, 149, 104 Ill. Dec. 689, 503 N.E.2d 246,

247 (1986) (“[T]here can be no recovery in tort solely for economic losses.”);

Spillman v. American Homes of Mocksville, Inc., 108 N.C. App. 63, 65, 422

S.E.2d 740, 741–42 (1992) (“a tort action does not lie against a party to a

contract who simply fails to properly perform the terms of the contract . . .

when the injury resulting from the breach is damage to the subject matter of

the contract”); Atherton Condominium Apartment-Owners Ass'n Bd. of Direc-

tors v. Blume Development Co., 115 Wash. 2d 506, 526, 799 P.2d 250, 262

(1990) (en banc) (no recovery in negligence for economic damages caused by

faulty construction, despite privity) (citing Stuart v. Coldwell Banker

Commercial Group, Inc., 109 Wash. 2d 406, 745 P.2d 1284 (1987)).

Associated Indus. Contractors, Inc. v. Fleming Engineering, Inc., 162

N.C. App. 405, 410, 590 S.E.2d 866, 870 (2004), decision a'd, 359 N.C. 296, 608

S.E.2d 757 (2005) (quoting Davidson and Jones, Inc. v. New Hanover County,

41 N.C. App. 661, 668, 255 S.E.2d 580, 585 (1979)). See also Raburn and Associ-

ates v. Burgundy Oaks L.L.C., 875 So. 2d 119, 122 (La. Ct. App. 2d Cir. 2004),

writ denied, 883 So. 2d 993 (La. 2004) (“An engineer owes a duty to exercise the

degree of professional care and skill customarily employed by others of his

profession in the same general area.”); Department of Transp. v. Mikell, 229

Ga. App. 54, 58, 493 S.E.2d 219, 222 (1997).

Sylva Engineering Corp. v. Kaya, 2013 WL 1748754, *3 (Tex. App. Austin

2013) (“[N]egligence is, by denition, conduct that falls below the applicable

Liability for Construction Defects

professional standard, regardless of whether the defendant had

an express contract with the plainti.

Setting aside the standard of care, a prime design professional

is in privity of contract with its client and can be sued by its cli-

ent for economic damages. On one level, involving proof at trial,

the client probably is not going to be concerned about whether

the claim is denominated a breach of contract or negligence. The

characterization of the claim can have repercussions, however.

Foremost, if the jurisdiction does not permit claims for negligence

against those with whom a plainti is in privity of contract, the

claim must allege breach of contract or it will be subject to

dismissal. On the other hand, professional liability policies at-

tempt to remove or exclude contractually assumed liability from

coverage. Knowing that about professional liability insurance, a

plainti might be tempted to bring a claim for negligence. Also, if

the plainti can sue other potentially liable parties, not in privity

of contract, for negligence, it will be simpler for the several

defendants to apportion fault using tort concepts such as

contribution. This prospect might appear advantageous to the

plainti. Given that the standard of care applicable to designers

is a negligence standard, and that professional liability insurance

does not cover contractually assumed strict liabilities, and given

other possible incentives for plaintis to bring negligence rather

than breach of contract claims, it is no wonder there is confusion

in the case law about the true nature, contract or tort, of claims

against design professionals.

In some jurisdictions, as noted above, a plainti may only re-

cover economic damages from a defendant with whom the plainti

is in privity of contract. In those jurisdictions, actions by owners

for building defects will be limited to claims against prime design

professionals and prime contractors. In these jurisdictions, those

claims must allege breach of contract or risk dismissal. In other

jurisdictions and in some cases, however, it is possible to sue

one's design professional for professional negligence, notwith-

standing privity of contract. For example, the North Carolina

Supreme Court in Ports Authority created an exception to the

privity rule that would permit the owner (or “promisee”) to

maintain a negligence action against its contractor (or “promi-

sor”) where “[t]he injury, proximately caused by the promisor's

negligent, or willful, act or omission in the performance of its

contract, was loss of or damage to the promisee's property, which

standard of care, and thus ‘by averring that the licensed or registered profes-

sional's conduct is negligent, the aant is necessarily opining that the

complained-of conduct did not meet the applicable standard of care.’ ’’).

Journal of the ACCL

was the subject of the contract, the promisor being charged by

law, as a matter of public policy, with the duty to use care in the

safeguarding of the property from harm, as in the case of a com-

mon carrier, an innkeeper or other bailee.”

This “public policy”

exception might apply where an owner has a contract with a

licensed design professional, and the negligent failure to properly

perform the contract results in a loss that threatens public health,

safety or welfare. Other North Carolina decisions support this

result. For example, in Associated Indus. Contractors, Inc. v.

Fleming Engineering, Inc., the court allowed a general contractor

to maintain a negligence action against its land surveyor

subcontractor, despite there being a contract between the two.

The North Carolina Court of Appeals later relied on Fleming

Engineering, in an unpublished opinion, to conclude that “[a]n

engineer may be held liable in tort for breach of professional duty,

even if its work is pursuant to a contract with the injured party

and the injury suered is to property which is the subject matter

of the contract.”

Even in those jurisdictions that discourage negligence claims

for economic damages by a plainti in privity of contract with the

defendant, the courts might allow a claim for negligent

misrepresentation. “The tort of negligent misrepresentation oc-

curs when a party justiably relies to his detriment on informa-

tion prepared without reasonable care by one who owed the rely-

ing party a duty of care.”

Section 552 of the Restatement

(Second) of Torts, entitled “Information Negligently Supplied for

the Guidance of Others,” provides:

(1) One who, in the course of his business, profession or

employment, or in any other transaction in which he has a

pecuniary interest, supplies false information for the guidance of

others in their business transactions, is subject to liability for

pecuniary loss caused to them by their justiable reliance upon

North Carolina State Ports Authority v. Lloyd A. Fry Roong Co., 294

N.C. 73, 82, 240 S.E.2d 345, 350–51 (1978) (rejected on other grounds by, Trust-

ees of Rowan Technical College v. J. Hyatt Hammond Associates, Inc., 313 N.C.

230, 328 S.E.2d 274, 24 Ed. Law Rep. 549 (1985)) (emphasis added).

Associated Indus. Contractors, Inc. v. Fleming Engineering, Inc., 162

N.C. App. 405, 413, 590 S.E.2d 866, 872 (2004), decision a'd, 359 N.C. 296, 608

S.E.2d 757 (2005).

PVC, Inc. v. McKim & Creed, P.A., 188 N.C. App. 632, 656 S.E.2d 16

(2008) (emphasis added).

Raritan River Steel Co. v. Cherry, Bekaert & Holland, 322 N.C. 200, 206,

367 S.E.2d 609, 612 (1988) (adopting the standard set forth in the Restatement

(Second) of Torts § 552 as authority for negligent misrepresentation).

Liability for Construction Defects

the information, if he fails to exercise reasonable care or compe-

tence in obtaining or communicating the information.

(2) Except as stated in Subsection (3), the liability stated in

Subsection (1) is limited to loss suered (a) by the person or one

of a limited group of persons for whose benet and guidance he

intends to supply the information or knows that the recipient

intends to supply it; and (b) through reliance upon it in a trans-

action that he intends the information to inuence or knows that

the recipient so intends or in a substantially similar transaction.

(3) The liability of one who is under a public duty to give the

information extends to loss suered by any of the class of persons

for whose benet the duty is created, in any of the transactions

in which it is intended to protect them.

Comment f to § 552 further explains that:

The care and competence that the supplier of information for the

guidance of others is required under the rule stated in this Section

to exercise in order that the information given may be correct, must

be exercised in the following particulars. If the matter is one that

requires investigation, the supplier of the information must exercise

reasonable care and competence to ascertain the facts on which his

statement is based. He must exercise the competence reasonably

expected of one in his business or professional position in drawing

inferences from facts not stated in the information. He must

exercise reasonable care and competence in communicating the in-

formation so that it may be understood by the recipient, since the

proper performance of the other two duties would be of no value if

the information accurately obtained was so communicated as to be

misleading.

Whether a claim for negligent misrepresentation will be allowed

by parties to a contract depends upon the jurisdiction. There ap-

pear to be two predominant views on this subject. “One view is

that the contractual relationship controls, and parties are not

permitted to assert actions in tort in an attempt to circumvent

the bargain they agreed upon.”

“The second view assumes that

an action in tort is permissible, and that the parol evidence rule

See also U.S. for Use and Benet of Los Angeles Testing Laboratory v.

Rogers & Rogers, 161 F. Supp. 132 (S.D. Cal. 1958).

Snyder v. Lovercheck, 992 P.2d 1079, 1087 (Wyo. 1999). See also Rio

Grande Jewelers Supply, Inc. v. Data General Corp., 1984-NMSC-094, 101 N.M.

798, 689 P.2d 1269, 39 U.C.C. Rep. Serv. 871 (1984); Isler v. Texas Oil & Gas

Corp., 749 F.2d 22 (10th Cir. 1984); Ford Motor Credit Co., Suburban Ford, 237

Kan. 195, 699 P.2d 992 (1985), cert. denied, 474 U.S. 995, 106 S. Ct. 409, 88

L.Ed.2d 360 (1985).

Journal of the ACCL

does not apply, and, therefore, the action may be maintained.”

C. Economic Loss Rule Two: No Privity of Contract

When there is no contract between an injured party and a

potentially responsible party, in some jurisdictions the economic

loss rule can completely preclude a claim against that potentially

responsible party for economic damages.

For example, an

injured owner might not be able to maintain a direct tort claim

against a consulting engineer, subcontractor or material supplier,

even if that contractually remote party caused the harm. In those

jurisdictions, claims for economic damages in a construction

defect case are essentially all going to be claims for breach of

contract. Contract claims against the prime contractor or prime

design professional might save the owner, but woe can befall the

owner if those prime contracting parties are judgment proof or

have otherwise limited or impaired their indemnity rights against

their negligent subcontractors and sub-consultants.

In some states, the designer may be sued by a third party for

negligence if the breach of professional duties results in foresee-

able harm,

economic or otherwise, to persons so situated by

their economic relations, and community of interests as to impose

a duty of due care. Liability arises from the negligent breach of a

common law duty of care owing from the parties' working

relationship. Accordingly, in those states a design professional,

Snyder, 992 P.2d at 1087. See also Formento v. Encanto Business Park,

154 Ariz. 495, 744 P.2d 22 (Ct. App. Div. 2 1987), opinion supplemented, (Aug.

4, 1987); Keller v. A.O. Smith Harvestore Products, Inc., 819 P.2d 69, Prod.

Liab. Rep. (CCH) P 12969, 15 U.C.C. Rep. Serv. 2d 733 (Colo. 1991); Gilliland v.

Elmwood Properties, 301 S.C. 295, 391 S.E.2d 577 (1990); Stamp v. Honest Abe

Log Homes, Inc., 804 S.W.2d 455 (Tenn. Ct. App. 1990); Leslie O'Neal-Coble et

al., Construction Damages and Remedies, 290 (2d Ed., 2013).

See, e.g., Sensenbrenner v. Rust, Orling & Neale, Architects, Inc., 236 Va.

419, 374 S.E.2d 55 (1988) (homeowner's action against pool subcontractor and

architect dismissed for lack of privity); Bryant Elec. Co., Inc. v. City of Freder-

icksburg, 762 F.2d 1192 (4th Cir. 1985) (there is no cause of action for a contrac-

tor to recover against an engineer for economic loss in the absence of privity

under Virginia law). By contrast with other jurisdictions, Virginia is notably

strict in its privity requirement for all professionals.

See, e.g., Consult Urban Renewal Dev. Corp. v. T.R. Arnold & Assoc.,

Inc., 2009 WL 1969083 (D.N.J. 2009) (economic loss rule does not apply here, as

where two parties negotiated an inspection contract and were, or should have

been, aware that third parties would be relying on the services provided; the

court looked to the foreseeability of injury to others); Coburn v. Lenox Homes,

Inc., 173 Conn. 567, 575, 378 A.2d 599, 602 (1977) (“Liability will be imposed,

however, only if it is foreseeable that the contractor's work, if negligently done,

may cause damage to the property or injury to persons living on or using the

premises.”).

Liability for Construction Defects

even in the absence of privity of contract, may be sued by a gen-

eral contractor or the subcontractors working on a construction

project for economic loss foreseeably resulting from breach of an

architect's common law duty of care in the performance of its

contract with the owner.

Strictly speaking, such a cause of ac-

tion is not grounded on negligent performance of the architects'

contract with the owner, but it instead arises out of an indepen-

dent duty not to cause harm to third parties.

In those jurisdictions the injured party might assert a mix of

contract and negligence claims. The defendants would then likely

assert a mix of indemnity and contribution claims. Such a case

assures that the jury instructions will be challenging for counsel

and the judge, to say the least.

If it comes to pass once and for all that privity of contract is

not required to successfully pursue a claim for economic damages

in a construction defect case, and the border between contract

and negligence dissolves, and if it also comes to pass that

defendants severally liable for a single harm and the ensuing

economic damages can utilize comparative fault or uniform con-

tribution principles to apportion fault, what then is the remain-

ing purpose of contractual indemnity provisions, and what is the

remaining utility of other contractual risk allocation techniques,

such as limitations or caps on liability? A carefully negotiated

indemnity clause could simply be circumvented by asserting a

claim for contribution. A plainti not in privity of contract who

could nevertheless sue a consulting engineer or subcontractor

could easily argue that caps on liability are not applicable to the

plainti.

One of the leading cases that allowed a contractor to seek eco-

nomic damages against an architect absent privity of contract

Beacon Residential Community Assn. v. Skidmore, Owings & Merrill

LLP, 59 Cal. 4th 568, 173 Cal. Rptr. 3d 752, 327 P.3d 850 (2014) (claims al-

lowed by condominium homeowners against architect, where no privity exists,

because architect's work was intended to benet the homeowners living in the

residential units and it was foreseeable that the homeowners would be among

the class of persons harmed by the negligently designed units).

See, e. g., U.S. for Use and Benet of Los Angeles Testing Laboratory v.

Rogers & Rogers, 161 F. Supp. 132 (S.D. Cal. 1958); Normoyle-Berg & Associ-

ates, Inc. v. Village of Deer Creek, 39 Ill. App. 3d 744, 350 N.E.2d 559 (3d Dist.

1976); A. R. Moyer, Inc. v. Graham, 285 So. 2d 397, 65 A.L.R.3d 238 (Fla. 1973);

McKinney Drilling Co. v. Nello L. Teer Co., 38 N.C. App. 472, 248 S.E.2d 444

(1978); Detweiler Bros., Inc. v. John Graham & Co., 412 F. Supp. 416 (E.D.

Wash. 1976). See generally Tort Liability of Project Architect or Engineer for

Economic Damages Suered by Contractor or Subcontractor, 61 A.L.R.6th 445.

See also Am. Jur. 2d, Negligence § 49.

Journal of the ACCL

was United States ex rel. Los Angeles Testing Laboratory v. Rog-

ers & Rogers.

In often-quoted language, the court said:

Considerations of reason and policy impel the conclusion that the

position and authority of a supervising architect are such that he

ought to labor under a duty to the prime contractor to supervise the

project with due care under the circumstances, even though his sole

contractual relationship is with the owner, here the United States.

Altogether too much control over the contractor necessarily rests in

the hands of the supervising architect for him not to be placed

under a duty imposed by law to perform without negligence his

functions as they aect the contractor. The power of the architect to

stop the work alone is tantamount to a power of economic life or

death over the contractor. It is only just that such authority,

exercised in such a relationship, carry commensurate legal

responsibility.

North Carolina law has also long recognized claims for eco-

nomic losses due to professional negligence in the absence of

privity of contract. The “incidental fact of the existence” of a

contract between two parties does not negate a duty of care to

those not a party to the contract.

The primary basis for impos-

ing such a duty of care is whether harm from the design profes-

sional's conduct is foreseeable as judged by (1) the economic rela-

tionship between the design professional and the plainti and (2)

the community of interests between the parties.

Echoing Rog-

ers, Shoner discussed the importance of extending duties of care

among the various members of a project team:

Each of the various participants must, to some degree, rely upon

the professional performance of the other and each therefore has

the responsibility of performing the task with due care. Clearly, the

incidental fact of the existence of the contract between the architect

and the property owner should not negative the responsibility for

the architect when he enters upon a course of armative conduct

which may be expected to eect [sic] the interest of third parties.

Likewise, in Davidson & Jones, Inc. v. County of New Hanover,

the North Carolina Court of Appeals abolished privity of contract

U.S. for Use and Benet of Los Angeles Testing Laboratory v. Rogers &

Rogers, 161 F. Supp. 132 (S.D. Cal. 1958).

Rogers, 161 F. Supp. at 135-36.

Shoner Industries, Inc. v. W. B. Lloyd Const. Co., 42 N.C. App. 259, 271,

257 S.E.2d 50, 58 (1979) (quoting Prosser, Torts 4th Ed. § 93, p. 622).

Shoner Indus., 42 N.C. App. at 271, 257 S.E.2d at 58.

Shoner Indus., 42 N.C. App. at 272, 257 S.E.2d at 59.

Davidson and Jones, Inc. v. New Hanover County, 41 N.C. App. 661, 255

S.E.2d 580 (1979).

Liability for Construction Defects

as a requirement for a contractor to bring a negligence action

against a design professional. The court's reasoning was grounded

in an expansion of traditional negligence principles, basing the

duty of care on the foreseeability of harm. Applying negligence

principles to instances in which a design professional negligently

breaches a contract, the court announced the following rule:

Where breach of such contract results in foreseeable injury, eco-

nomic or otherwise, to persons so situated by their economic rela-

tions, and community of interests as to impose a duty of care, we

know of no reason why an architect cannot be held liable for such

injury. Liability arises from negligent breach of a common law duty

of care owing from the parties' working relationship.

In eliminating privity of contract as a condition of recovery, the

court further stated: “a complete binding contract between the

parties is not a prerequisite to a duty to use care in one's actions

in connection with an economic relationship, nor is it a prerequi-

site to suit by a contractor against an architect.”

As Davidson & Jones explained:

A surveyor or civil engineer is required to exercise that degree of

care which a surveyor or civil engineer of ordinary skill and

prudence would exercise under similar circumstances, and if he

fails in this respect and his negligence causes injury, he will be li-

able for that injury. Such liability is based on negligence, and lack

of privity of contract does not render Soil and Material Engineers,

Inc. immune from liability to the general contractor or the

subcontractors for damages proximately resulting from submitting

a bid or conducting work in reliance on negligently prepared soil

test reports.

Since the Davidson & Jones decision, North Carolina has

expanded the parties to whom a design professional owes a duty

of care. Most cases have imposed a duty of care on the design

professional

based solely on the factors of (1) the parties' eco-

Davidson & Jones, 41 N.C. App. at 667, 255 S.E.2d at 584.

Davidson & Jones, 41 N.C. App. at 666, 255 S.E.2d at 584.

Davidson & Jones, 41 N.C. App. at 668, 255 S.E.2d at 585.

Only one North Carolina case in the last thirty years has determined

that a design professional did not owe a duty of care to a contractor. In RCDI

Const., Inc. v. Spaceplan/Architecture, Planning & Interiors, P.A., 148 F. Supp.

2d 607 (W.D. N.C. 2001), a'd, 29 Fed. Appx. 120 (4th Cir. 2002) the contractor

led suit alleging negligence and the defendant architect moved for judgment

on the pleadings which the trial court granted. In granting judgment on the

pleadings in favor of the architect, the federal district court was primarily

persuaded by the lack of nexus between the contractor and the architect,

determining that the architect did not exercise “control or supervision over the

Journal of the ACCL

nomic relations, and (2) their community of interests.

In Brown-

ing v. Maurice B. Levien & Co., P.C.,

the court permitted limited

partners in a real estate development company to bring suit in

negligence against an architect retained by the project's lender to

supervise construction of an apartment complex. Determining

that the defendants owed a duty to the limited partners, the

court said: “when the defendants undertook to perform services

for the bank, it could be reasonably foreseen that the owners of

the property . . . might rely on the certication of the

defendants.”

Plaintis.” 148 F.Supp.2d at 621. The lack of reliance by the contractor on any

information provided by the architect was also decisive.

See Ellis-Don Const., Inc. v. HKS, Inc., 353 F. Supp. 2d 603 (M.D. N.C.

2004); Pompano Masonry Corp. v. HDR Architecture, Inc., 165 N.C. App. 401,

598 S.E.2d 608, 189 Ed. Law Rep. 913 (2004); Kaleel Builders, Inc. v. Ashby,

161 N.C. App. 34, 587 S.E.2d 470 (2003).

Browning v. Maurice B. Levien & Co., 44 N.C. App. 701, 262 S.E.2d 355

(1980).

Browning, 44 N.C. App. at 705, 262 S.E.2d at 358. See also Roland A.

Wilson and Associates v. Forty-O-Four Grand Corp., 246 N.W.2d 922, 925 (Iowa

1976); Bell v. Jones, 523 A.2d 982, 994–95 (D.C. 1986) (“[A] person who engages

the services of a professional surveyor or architect has the right to rely on the

latter's superior knowledge and skill and to expect that such professionals will

fulll the duty of reasonable diligence, skill, and ability. More specically, when

a surveyor or architect undertakes to certify that something has been done or

not done, or done in a certain way, the client has a right to rely on the profes-

sional knowledge and skill of the surveyor or architect in making that

certication. The surveyor's or architect's duty of reasonable care to the client is

breached when such a certication is negligently made, and if that breach

results in injury to the client, he or she may recover damages.”) (internal quotes

omitted); Hobbs v. Florida First Nat. Bank of Jacksonville, 406 So. 2d 63, 64

(Fla. 1st DCA 1981), dismissed, 412 So. 2d 466 (Fla. 1982) (involving a construc-

tion loan, the complaint alleged that the engineer's negligence, in performing

inspections and rendering reports on work completed, caused the mortgagee to

overpay loan proceeds to the developer-mortgagor; Florida appeals court held

that it was reasonably foreseeable that the mortgagee would rely on the

certications and that negligent certication could, therefore, injure the

mortgagee); General Trading Corp. v. Burnup & Sims, Inc., 12 V.I. 204, 523

F.2d 98 (3d Cir. 1975) (landowner may recover damages from architect when

delay in construction of building resulted from architect's negligent certication

of faulty construction work); Hutchinson v. Dubeau, 161 Ga. App. 65, 66, 289

S.E.2d 4, 5 (1982) (architect who certied the accuracy of a plat “in plain En-

glish” may be held liable to “purchasers damaged by reasonable reliance upon

the plat”); Newton Inv. Co. v. Barnard & Burk, Inc., 220 So. 2d 822, 824 (Miss.

1969) (“An engineer or architect may be held liable for negligence in the

improper issuance of cost or progress certicates.”).

Liability for Construction Defects

Similarly, in Quail Hollow East Condominium Association v.

Donald J. Scholz Co.,

the Court of Appeals permitted a hom-

eowner's association to sue an architect retained by the general

contractor as a subconsultant because “it is evident that plainti's

members fall within the range of potential plaintis contemplated

by our earlier decisions abolishing the privity requirement.”

The

court went on to state:

The primary question raised by this appeal is whether a homeow-

ner's association may sue an architect for the negligent design and

preparation of plans and specications and the negligent supervi-

sion of construction of a condominium complex where there exists

no contractual privity between the architect and the homeowner's

association. Recently becoming an area of enormous concern within

the legal community, the scope of liability of an architect for the

negligent performance of his professional duties has undergone

considerable expansion. This broadening of scope has been seen

principally in the relaxation of the traditional requisite of

contractual privity. As a general proposition of the law of torts, it is

settled that, under certain circumstances, one who undertakes to

render services to another which he should recognize as necessary

for the protection of a third person, or his property, is subject to li-

ability to the third person for injuries resulting from his failure to

exercise reasonable care in such undertaking.

North Carolina also provides an example of a claim by an owner

against a remote material manufacturer. In Olympic Products

Co. v. Roof Systems, Inc.,

the plainti was the owner of a

manufacturing plant. The owner contracted with a contractor to

install a new roof for the plant. The contractor, in turn, contracted

with the manufacturer of the roong material to direct the speci-

cations for and inspect the contractor's installation of the roof.

After a portion of the roof collapsed, the owner sued the

manufacturer for professional negligence in failing to properly

inspect the contractor's installation of the roof and sought dam-

ages for the cost of the repair to the roof and lost prots. The

trial court directed a verdict against the owner on its negligence

claim against the manufacturer. The Court of Appeals reversed,

notwithstanding the owner's lack of privity of contract with the

manufacturer.

Quail Hollow East Condominium Ass'n v. Donald J. Scholz Co., 47 N.C.

App. 518, 268 S.E.2d 12 (1980).

Quail Hollow, 47 N.C. App. at 525, 268 S.E.2d at 17.

Quail Hollow, 47 N.C. App. at 521-22, 268 S.E.2d at 15 (citing Restate-

ment Second, Torts § 324A; W. Prosser, Handbook of the Law of Torts § 93 (4th

ed. 1971)).

Olympic Products Co., A Div. of Cone Mills Corp. v. Roof Systems, Inc.,

88 N.C. App. 315, 363 S.E.2d 367 (1988).

Journal of the ACCL

In California, architect liability to third parties is not limited

to personal injury; it also extends to property damage. In Beacon

Residential Community Ass'n v. Skidmore, Owings & Merrill,

LLP,

the plainti condominium owners association brought an

action against the developer and architectural rm alleging that

defects made the homes uninhabitable for portions of the year

due to high temperatures. The architect designed a condominium

project for the developer and due to the mild Bay Area climate,

the project design did not include an air conditioning system for

the individual condominium units. The plaintis alleged that the

glazing specied by the architect caused high internal tempera-

tures that caused some units to be uninhabitable on warm days.

The issue was whether the architect could be liable for claims

from a third party with which it did not have a contract. The

court held that the allegations were sucient, if proven, to estab-

lish that the defendants owed a duty of care to the homeowners.

IV. Defendants' Burden of Proof

To summarize the foregoing digression into the economic loss

rules, depending on the jurisdiction a plainti in a structural

defect case might have claims against multiple parties, some

based on claims of breach of contract, others based on claims of

negligence, all for a single indivisible harm. Furthermore, if the

plainti can prove that some breach of duty by each defendant

was a substantial factor contributing to the harm, the plainti

can generally recover all of its damages from any of the several

defendants. Finally, the plainti need not prove how properly to

apportion fault among the several defendants.

The proposition that a plainti need not apportion fault or

damages can be unsettling for defendants, to say the least. As

discussed above, in many cases it would be impossible for the

plainti in a defect case to “apportion” fault or damages, because

of the indivisible nature of the harm caused. Another reason for

imposing the burden of apportionment on the defendants is that,

generally speaking, the plainti is not privy to the legal and

contractual relationships between the various defendants. It fol-

lows that if multiple defendants are held jointly and/or severally

liable for the same damages, the plainti can proceed to recover

all of the plainti's damages from any of the defendants. It is

then up to the defendants to work out apportionment of the dam-

ages, either by agreement, during the case-in-chief, or in a

Beacon Residential Community Assn. v. Skidmore, Owings & Merrill

LLP, 59 Cal. 4th 568, 173 Cal. Rptr. 3d 752, 327 P.3d 850 (2014).

Beacon Residential, 59 Cal. 4th at 585, 173 Cal. Rptr. 3d at 765.

Liability for Construction Defects

subsequent legal proceeding. Defendants who wish to avoid a

subsequent proceeding may be well advised to assert cross-claims

that could lay a foundation for claiming equitable contribution if

the plainti calls on them to pay a disproportionate share of the

damage award.

What, then, are the multiple defendants left to do—how can

they apportion damages and/or recover against each other? Under

current law, the answer depends to a large extent on the type of

claims brought by the plainti, such as breach of contract or

negligence, and whether dierent defendants were held liable

under dierent theories. For example, imagine the plainti is an

owner who entered into multiple separate contracts for work on a

project; an owner-contractor contract, an owner-designer contract,

and an owner-engineer contract. Further, imagine the contractor,

designer, and engineer have no contracts with each other. The

contractor, designer, and engineer all breach their respective

contracts with the owner, causing one indivisible injury to the

project. Now imagine the owner also sued a subcontractor for

negligence (in a jurisdiction allowing such a claim), and prevailed

against that defendant as well. Now imagine the owner success-

fully collects one hundred percent of its damages from the

contractor. Fairness demands that the contractor be reimbursed

in part by the other defendants, but how? The options available

to the contractor might include some sort of indemnity, contribu-

tion, or comparative fault.

A. Apportionment Based on Causation

Section 433 of the Restatement (Second) of Torts addresses ap-

portionment of harm among multiple causes in negligence cases.

Fundamentally, of course, the burden of proof is on the plainti

to show that negligent conduct of a defendant caused harm to the

plainti. The Restatement also recognizes that some injuries or

harms are divisible in nature. Those cases might involve multiple

defendants, and possibly separate breach of contract and

negligence claims, with each defendant separately liable for sepa-

rate discrete defects so that apportionment is possible. The Re-

statement (Second) of Torts summarizes the rule this way:

(1) Damages for harm are to be apportioned among two or

more causes where

(a) there are distinct harms, or

(b) there is a reasonable basis for determining the contri-

bution of each cause to a single harm.

Journal of the ACCL

(2) Damages for any other harm cannot be apportioned among

two or more causes.

In short, in some cases, it might be possible to apportion fault or

damages, based on a nding that the harms caused are divisible.

In a case where the harms are divisible, the defendants would be

entitled to introduce evidence supporting some apportionment of

liability. Even if the harm is divisible, however, the plainti

should not have the burden to apportion fault among the several

defendants.

In other cases, the harm might be so indivisible that there is

no basis for apportionment.

Certain kinds of harm, by their very nature, are normally incapable

of any logical, reasonable, or practical division . . ..By far the

greater number of personal injuries, and of harms to tangible prop-

erty, are thus normally single and indivisible. Where two or more

causes combine to produce such a single result, incapable of divi-

sion on any logical or reasonable basis, and each is a substantial

factor in bringing about the harm, the courts have refused to make

an arbitrary apportionment for its own sake, and each of the causes

is charged with responsibility for the entire harm.

Restatement (Second) of Torts goes on to describe the burden of

proof on apportionment:

(1) Except as stated in Subsections (2) and (3), the burden of

proof that the tortious conduct of the defendant has caused the

harm to the plainti is upon the plainti.

(2) Where the tortious conduct of two or more actors has

combined to bring about harm to the plainti, and one or more of

the actors seeks to limit his liability on the ground that the harm

is capable of apportionment among them, the burden of proof as

to the apportionment is upon each such actor.

(3) Where the conduct of two or more actors is tortious, and it

is proved that harm has been caused to the plainti by only one

of them, but there is uncertainty as to which one has caused it,

Restatement Second, Torts § 433A.

See, e.g., Housing Authority of City of Milwaukee v. Barrientos Designs &

Consulting, L.L.C., 2006 WI App 203, 296 Wis. 2d 744, 749, 724 N.W.2d 395,

398 (Ct. App. 2006) (Noting that where the Housing Authority entered into

contracts with the architect and the contractor and the resulting injury was roof

problems, the damages could be separated out between the two companies

because “each defendant had separate duties and responsibilities, and

consequently, a jury could determine which part of the total damages to attri-

bute to each party.”).

Restatement Second, Torts § 433A, comment i.

Liability for Construction Defects

the burden is upon each such actor to prove that he has not

caused the harm.

The Restatement (Third) of Torts: Apportionment of Liability took

these apportionment principles further, in recognition of the

impact of comparative fault laws in most states. In cases where

the plainti claims bodily injury or property damage and all

claims are in tort, these Restatements provide considerable guid-

ance for counsel regarding the burden of proof on apportionment.

As is true of negligence, the law of contracts recognizes that

multiple causation is possible. The plainti must prove that a

breach of contract by each defendant was a substantial contribut-

ing to the harm suered. As discussed earlier in the context of

the plainti's burden of proof, the plainti must prove the dam-

ages suered as a result of the harm. As with negligence,

however, the plainti does not have to apportion fault or

damages. If the plainti can prove that these breaches of contract

were a “substantial factor” in causing indivisible damage to the

structure, the plainti would be entitled to a verdict of full dam-

ages from each of the breaching parties, although it could only

receive one recovery.

B. Attribution of Fault to Other Parties-Comparative

Fault, Contributory Negligence and Avoidable Con-

sequences

The rst impulse of the defendants in a defect case might be to

cast blame on the plainti or the other defendants. Blaming the

other defendants might be a natural impulse, but it will not help

a defendant appreciably if the defendant is shown to have

contributed to the harm and the jurisdiction does not allow the

court to assess comparative fault among defendants. Blaming the

victim might be a risky trial strategy, but again it might not even

be an available strategy.

At least four states plus the District of Columbia still adhere to

the doctrine of pure contributory negligence,

meaning that no

matter what percentage plainti may be at fault, any fault on

Restatement Second, Torts § 433B.

11 Corbin on Contracts, supra note 5, at § 55.9.

Best, Impediments to Reasonable Tort Reform: Lessons From The

Adoption Of Comparative Negligence, 40 Ind. L. Rev. 1 (2007) (The following

states have not adopted comparative negligence and continue to utilize contrib-

utory negligence: Alabama, Maryland, North Carolina, Virginia, and the District

of Columbia.).

Journal of the ACCL

behalf of the plainti is a complete bar to recovery.

In one such

state, North Carolina, contributory negligence is not a defense to

a breach of contract claim; contributory negligence lies in tort.

Other jurisdictions provide similar support for the rule that con-

tributory negligence is not an appropriate defense to a breach of

contract claim.

Although a Missouri court looking to early North

Carolina case law found no support for a complete bar to recovery,

it did nd that the defense of contributory negligence in a contract

action mitigates against the alleged damages.”

See Harrison Ford Hagg, Slightly-Gross: South Dakota's Addiction to a

Bad Comparative Negligence Law and the Need for Change, 59 S.D. L. Rev.

139, 144 (2014) (“The King's Bench in England formulated the doctrine [of con-

tributory negligence] in the 1809 case of Buttereld v. Forrester. In this case,

the King's Bench denied Buttereld relief from an incident in which Buttereld

was thrown from his horse after striking a pole left by Forrester next to the

road. The court reasoned that although Forrester was negligent for leaving the

pole adjacent to the road, Buttereld was also negligent—i.e. contributorily

negligent—by riding too fast and failing to avoid the pole. In his opinion, Lord

Ellenborough held Buttereld could not and should not recover because he

failed to use ordinary care. Thus, because Buttereld failed to use ordinary

care, the court established the doctrine of contributory negligence, which acts as

a complete bar to a plainti's recovery. The rule promulgated in Buttereld

spread to the United States in the 1820s and remained the dominant rule

throughout the nineteenth century and into the twentieth century . . ..”).

See Bullock v. Bullock, 204 N.C. App. 210, 694 S.E.2d 523 (2010) (unpub-

lished opinion) (“As contributory negligence is not a defense to a breach of

contract action, the trial court did not err in not submitting the issues of

Plainti's contributory negligence to the jury.”); West Const. Co. v. Atlantic

Coast Line Ry. Co., 185 N.C. 43, 116 S.E. 3, 5 (1923) (“[I]t is held that, while in

cases of tort if the plainti is guilty of contributory negligence the law forbids

recovery, still this principle ordinarily does not apply where a breach of contract

is a factor in the production of the injury.”); Steelcase, Inc. v. Lilly Co., Inc., 93

N.C. App. 697, 701, 379 S.E.2d 40, 43 (1989) (“Where, as in this case, a plainti

is able to convince a trier of fact that it has suered damages owing from the

failure of a defendant to meet direct and express contractual obligations, the

defense of contributory negligence has no application to that claim.”).

See Fortier v. Dona Anna Plaza Partners, 747 F.2d 1324, 1337, 17 Fed. R.

Evid. Serv. 612 (10th Cir. 1984) (“contributory negligence has no place in

contract and fraud actions”); Fresno Air Service v. Wood, 232 Cal. App. 2d 801,

807, 43 Cal. Rptr. 276, 279 (5th Dist. 1965) (“Assumption of risk and contribu-

tory negligence . . . are not applicable as theories of law and defenses to actions

. . . for breach of contract.”); Rotman v. Hirsch, 199 N.W.2d 53, 56, 55 A.L.R.3d

658 (Iowa 1972) (“contributory negligence would not be available as a defense to

an action on contract.”); Haysville U.S.D. No. 261 v. GAF Corp., 233 Kan. 635,

643, 666 P.2d 192, 199, 12 Ed. Law Rep. 957 (1983).

American Mortg. Inv. Co. v. Hardin-Stockton Corp., 671 S.W.2d 283, 291

(Mo. Ct. App. W.D. 1984) (“Where the action is brought for breach of contract,

and that is established, contributory negligence is not allowed to defeat the ac-

Liability for Construction Defects

An injured plainti, whether the case is in tort or contract,

must exercise reasonable care and diligence to avoid or lessen the

consequences of the defendants' wrong. “This rule is known as

the doctrine of avoidable consequences or the duty to minimize

damages.”

Failure to minimize damages does not bar the rem-

edy; rather, it goes only to the amount of damages recoverable.

The duty placed on an injured party to mitigate its damages is

well established, and has been described this way:

In an action for tort committed or breach of contract without excuse,

it is a well settled rule of law that the party who is wronged is

required to use due care to minimize the loss . . .. The burden is on

defendant of showing mitigation of damages. Therefore, while the

duty is imposed upon the injured party to use ordinary care and

prudence to minimize his damages, nevertheless the burden is upon

the injuring party to oer evidence tending to show breach of duty

or failure to exercise the requisite degree of care and prudence to

reduce and minimize the loss complained of.

One distinction between avoidable consequences and contribu-

tory negligence is that they occur, if at all, at dierent times.

Contributory negligence occurs either before or at the time of the

wrongful act or omission of the defendant. On the other hand, the

avoidable consequences generally arise after the wrongful act of the

defendant. That is, damages may ow from the wrongful act or

omission of the defendant, and if some of these damages could rea-

tion in toto, but the negligence of the claimant contributing to the injury is to be

properly considered as to the issue of damages.”) (quoting Elam v. Smithdeal

Realty & Ins. Co., 182 N.C. 599, 109 S.E. 632, 634, 18 A.L.R. 1210 (1921)).

Miller v. Miller, 273 N.C. 228, 239, 160 S.E.2d 65, 74 (1968).

Miller, 273 N.C. at 239, 160 S.E.2d at 74.

Thermal Design, Inc. v. M&MBuilders, Inc., 207 N.C. App. 79, 89, 698

S.E.2d 516, 523–24 (2010). See also Harris & Harris Const. Co. v. Crain &

Denbo, Inc., 256 N.C. 110, 122, 123 S.E.2d 590, 599 (1962); Pompano Masonry

Corp. v. HDR Architecture, Inc., 165 N.C. App. 401, 411, 598 S.E.2d 608, 614,

189 Ed. Law Rep. 913 (2004); LeBlanc v. Stan Weber and Associates, 638 So. 2d

463, 465 (La. Ct. App. 5th Cir. 1994) (“The duty to mitigate damages exists in

both tort and contract law.”); Bass v. Equity Residential Holdings, LLC, 849

N.W.2d 87, 92 (Minn. Ct. App. 2014) (“Generally, the party alleging a loss

because of a tort or breach of contract has a duty to mitigate damages.”); Shaer

v. Debbas, 17 Cal. App. 4th 33, 41, 21 Cal. Rptr. 2d 110, 114 (4th Dist. 1993), as

modied, (July 13, 1993) (“A plainti who suers damage as a result of either a

breach of contract or a tort has a duty to take reasonable steps to mitigate those

damages and will not be able to recover for any losses which could have been

thus avoided.”); Walker v. Transamerica Title Ins. Co., Inc., 65 Wash. App. 399,

405, 828 P.2d 621, 625 n.6 (Div. 2 1992) (comparing Restatement (Second) of

Torts § 918 with Restatement (Second) of Contracts § 350, “The doctrine of mit-

igation of damages applies in both tort and contract cases.”).

Miller v. Miller, 273 N.C. 228, 239, 160 S.E.2d 65, 74 (1968).

Journal of the ACCL

sonably have been avoided by the plainti, then the doctrine of

avoidable consequences prevents the avoidable damages from being

added to the amount of damages recoverable.

“Generally, the reasonableness of mitigation eorts depends upon

the facts and circumstances of the particular case and is a jury

question except in the clearest of cases.”

Avoidance of damages should not be equated with apportion-

ment of fault. Proof that the plainti could have reasonably

avoided some damages might reduce the liability of the defen-

dants, but it does nothing to apportion fault for the recoverable

damages. In any event, the defendants' quandary, how to appor-

tion liability among one another, would remain.

In comparative fault states, the defendants can attempt to

convince the trier of fact to allocate some fault to the plainti,

and apportion fault among the defendants. Comparative fault

might well solve the defendants' quandary in a wholly negligence

case, but comparative fault is not a likely solution in a case

involving claims of breach of contract. “The use of the compara-

tive negligence theory is not proper in breach of contract

actions.”

In some jurisdictions comparative fault is not even ap-

plied in tort cases where the plainti is seeking economic

damages.

Nevertheless, some commentators, after acknowledg-

ing the prevailing rule that comparative fault does not apply in

contract actions, disagree with the rule and advocate the applica-

tion of comparative fault principles in multiple causation breach

Miller, 273 N.C. at 239, 160 S.E.2d at 74.

Smith v. Martin, 124 N.C. App. 592, 600, 478 S.E.2d 228, 233 (1996).

Haysville U.S.D. No. 261 v. GAF Corp., 233 Kan. 635, 643, 666 P.2d 192,

199, 12 Ed. Law Rep. 957 (1983). See also Broce-O'Dell Concrete Products, Inc.

v. Mel Jarvis Const. Co., Inc., 6 Kan. App. 2d 757, 759–60, 634 P.2d 1142, 1145,

32 U.C.C. Rep. Serv. 762 (1981) (“It is well settled that contributory negligence

is no defense to a breach of contract.”); Lee v. Andrews, 204 Mont. 527, 531, 667

P.2d 919, 921 (1983) (nding use of “comparative negligence principles” in a

contract case to be erroneous); Strong Const., Inc. v. City of Torrington, 2011

WY 82, 255 P.3d 903 (Wyo. 2011) (rejecting contractor's argument to adopt the

principles of comparative fault in a breach of contract claim). But see Lesmeis-

ter v. Dilly, 330 N.W.2d 95, 103 (Minn. 1983) (Noting that the court suggested

it could apportion damages to the plainti, stating “[u]nreasonable failure to

mitigate damages is ‘fault’ which can be apportioned under the comparative

fault statute.” This statement by the court in Lesmeister does not seem to be

consistent with the summary of the law in Corbin, but is somewhat consistent

with other cases on mitigation of damages discussed further below.).

See generally the discussion in Oltho, If You Don't Know Where You're

Going, You'll End Up Somewhere Else: Applicability of Comparative Fault

Principles In Purely Economic Loss Cases, 49 Drake L. Rev. 589 (2001).

Liability for Construction Defects

of contract cases.

These comparative fault advocates emphasize

the unfairness to defendants under older common law contribu-

tion rules. Advocates also argue that the prospect of comparative

fault for contract breaches would lead to more ecient and reli-

able incentives and risk allocation in contracting.

In their article advocating comparative fault in contract cases,

Fisk and Fisk present a particularly intriguing thesis. They

venture the proposition that the parties can, through their

contracts, provide for comparative fault in the event of a defect

case, and they go on to suggest the AIA contract documents do

just that:

No matter whether the owner sued the architect or whether the

owner sued the contractor, in either situation and under certain

facts, the provisions in A201 entail a comparative causation analy-

sis whereby fault should be apportioned between the architect and

the contractor, and the owner should be compensated by the

architect or the contractor in accordance with each party's percent-

age of fault.

Fisk and Fisk describe the carefully balanced allocation of re-

sponsibilities between the architect and the contractor in the AIA

documents, focusing on AIA Document B141 and AIA Document

A201.

In particular, they focus on the architect's obligation to

visit the site, observe the work, and report any observed decien-

cies to the owner, and on the contractor's obligation to study the

drawings and specications and notify the owner of any obvious

deciencies in the design. Fisk and Fisk recognize that under

these clauses, at least, it is possible for both the contractor and

the architect to have independent liability for a single defect.

They discuss the limits on the contractor's responsibility for

design, and the limits on the architect's responsibility for means

and methods. They then make this leap:

These provisions further evidence the intention of the parties to

employ a comparative causation analysis in determining contract

damages. Furthermore, neither the architect nor the contractor is

See, e.g., Oltho, supra note 62; Porat, A Comparative Fault Defense in

Contract Law, 107 Mich. L. Rev. 1397 (2009); Fisk and Fisk, Comparative

Contract Fault: Using the AIA Documents to Apportion Contract Damages,

26-SPG Construction Law. 23 (Spring 2006).

See, e.g., Oltho, supra note 62; Porat, supra note 639; Fisk, supra note

63.

Fisk, supra note 63, at 26.

Fisk, supra note 63. Given the date of their article, Fisk and Fisk focus

on the 1997 edition of the AIA documents. Their points should, however, remain

equally applicable under the AIA 2007 documents.

Journal of the ACCL

attempting to disclaim liability for its own fault. With respect to

the use of the AIA documents, total liability should be apportioned

between the parties. One should be held responsible for the respec-

tive failure to detect the defect in construction or design, and the

other should be held responsible for causing the defect to exist.

Both a judge and a jury are fully capable of making such an

apportionment.

It is not necessarily true, however, that the AIA documents

require the court to apply comparative fault principles to appor-

tion fault between an architect and a contractor. Admittedly the

AIA documents strive to “apportion” responsibilities and duties,

as described by Fisk and Fisk, but that is not necessarily the

same thing as apportioning fault or damages. A court could

believe itself constrained to follow the rules disallowing ap-

portionment in contract cases, and hold the architect and the

contractor severally liable of the same indivisible harm. The care-

ful delineation of responsibilities in the contracts would enable

and facilitate the application of comparative fault, however, and

that seems to be real point in the article by Fisk and Fisk.

The intriguing question is whether the parties on a construc-

tion project even may, by contract, require apportionment of fault

in a defect case. Theoretically that approach might have some

appeal. It would certainly be a challenge, however, to negotiate

and execute a series of contracts between multiple parties that

assure consistent application of comparative fault principles.

Such a scheme would address the two main concerns about

comparative fault in contract cases, however: rst, that a

defendant should not be held jointly liable with another defendant

for breach of that other defendant's contract, unless the rst

defendant is a co-obligor on the contract, and second, that it

would be almost impossible to insinuate comparative fault into

contract cases without conicting with “the very essence of the

contractual arrangement, which is to enable the parties to rely

on the contract and plan for the future accordingly.”

To some

extent, these concerns could be addressed in a “Collaborative

Fisk, supra note 63, at 28.

Fisk, supra note 63, at 25, citing CTTI Priesmeyer, Inc. v.K&OLtd.

Partnership, 164 S.W.3d 675, 685 (Tex. App. Austin 2005); Field v. Boyer Co.,

L.C., 952 P.2d 1078, 1087 (Utah 1998). See also Ariel Porat, Contributory

Negligence in Contract Law: Toward a Principled Approach, 28 U. Brit. Colum.

L. Rev. 141, 143 (1994).

Liability for Construction Defects

Project Delivery”

or “Integrated Project Delivery”

contract. The

risk sharing contemplated by these multi-party contracts implies,

at least, shared liability for defects and rework. Unless everyone

with some responsibility for the integrity of the work is a party to

the contract, however, including sub-consultants, subcontractors

and material suppliers, a multi-party contract will be an

imperfect tool for apportioning fault for a defect caused in part by

those non-parties to the agreement.

C. Joint, Several, and Joint and Several Liability

All is not lost if the liable defendants are unable to apportion

fault based on causation principles or comparative fault. They

might still have recourse against one another for reimbursement

of any sums paid to the plainti to satisfy a judgment. Most of

the jurisprudence on the topic applies to the situation where the

defendants are held jointly and severally liable for negligence.

“[A] concurrent tortfeasor is liable for the whole of an indivisible

injury whenever his negligence is a proximate cause of that

injury.”

Joint and several liability permits an injured party “to

obtain full recovery for his injuries even when one or more of the

responsible parties do not have the nancial resources to cover

their liability.”

In that situation, the law allows the joint tortfea-

sors to seek contribution from one another as a matter of law.

There is a distinction between ‘joint liability’ and ‘joint and

severally liable’ which has been described as follows:

“Joint liability” exists when two or more parties together are liable

to a third party. Its special feature is that a joint obligor who is

This nomenclature is used in Consensus Docs 300-Collaborative Agree-

ment (2007).

This nomenclature is used in AIA Document C191-2009, and related

documents.

American Motorcycle Assn. v. Superior Court, 20 Cal. 3d 578, 588, 146

Cal. Rptr. 182, 578 P.2d 899, 905 (1978).

American Motorcycle Ass'n, 20 Cal. 3d at 590, 578 P.2d at 906. The rule

in American Motorcycle has been altered by statute in cases involving “non-

economic” damages, which includes damages such as pain and suering and

emotional distress. The rule still appears to apply to “economic” damages,

including most direct costs. See Henry v. Superior Court, 160 Cal. App. 4th 440,

72 Cal. Rptr. 3d 808 (2d Dist. 2008) discussing Cal. Civ. Code § 1431.2.

Kottler v. State, 136 Wash. 2d 437, 442, 963 P.2d 834, 837 (1998) (“Con-

tribution is conditioned on the existence of joint and several liability because

absent such common joint and several liability one party will have no duty to

pay another's liability for damages and, thus, no cause for subsequent

reimbursement.”). See also Minnesota Pipe and Equipment Co. v. Ameron

Intern. Corp., 938 F. Supp. 2d 862 (D. Minn. 2013).

Journal of the ACCL

sued has the right to insist that the plainti join all co-obligors. If

parties are “jointly and severally liable,” each is fully responsible

for the liability or obligation at issue, but a plainti may sue any or

all of them in one suit at his or her option. But all parties who are

jointly and severally liable need not be joined in a lawsuit.

When a claim against multiple defendants arises out of one

contract, warranty, bond or guaranty, their liability will also

likely be joint and several. “[W]here two or more parties to a

contract promise the same performance to the same promisee,

each is bound for the full performance thereof, whether his duty

is joint, several, or joint and several.”

The liability arises out of

the same contract, and so they are co-obligors on the contract.

However, the liability of several dierent defendants for the

same injury is not necessarily joint liability. “A contract is sev-

eral where two or more parties to a contract promise separate

performances, to be rendered respectively by each of them, or

where each of them makes only a separate promise that the same

performance will be rendered, the contract is several.”

If claims

against multiple defendants are based on breaches of separate,

multiple contracts, it is not technically correct to characterize

their liability as joint liability. Nevertheless, if a court nds

multiple defendants liable on separate contracts for an indivisi-

ble harm, the plainti can seek to recover the amount of the

judgment from any of the defendants, and the burden shifts to

the defendants to apportion fault among themselves. In the law

of torts, where liability is considered joint liability and contribu-

tion is available, ample guidance exists as to how to apportion

damages. In the law of contracts, however, guidance is often

lacking.

Hartford Acc. and Indem. Co. v. Scarlett Harbor Associates Ltd. Partner-

ship, 109 Md. App. 217, 267, 674 A.2d 106, 130 (1996), judgment a'd, 346 Md.

122, 695 A.2d 153 (1997) (internal citations omitted). See also Staab v. Diocese

of St. Cloud, 853 N.W.2d 713 (Minn. 2014).

Converse v. James, 89 Haw. 461, 470, 974 P.2d 1051, 1060 (Ct. App.

1997), as amended, (Jan. 28, 1998) and as amended, (Apr. 13, 1999) (emphasis

in original).

Co-obligors on the same contract can be held jointly and severally liable,

as can guarantors and sureties on a single contract. For a general discussion see

Restatement (Second) of Contracts § 289(2) (“Where two or more parties to a

contract promise the same performance to the same promisee, they incur only a

joint duty unless an intention is manifested to create several duties or joint and

several duties.”).

C.J.S. Contracts § 468.

Liability for Construction Defects

1. Torts

In the law of torts, the possibility of concurring negligence has

long been recognized.

For example, in Darroch v. Johnson,

the

court explained:

There may be one or more proximate causes of an injury. These

may originate from separate and distinct sources or agencies operat-

ing independently of each other, yet if they join and concur in pro-

ducing the result complained of, the author of each cause would be

liable for the damages inicted, and action may be brought against

any one or all as joint tort-feasors.

Other jurisdictions have recognized the same rule. “Concurring

negligence consists of the negligence of two or more persons

concurring, not necessarily in point of time, but in point of conse-

quence in producing a single indivisible injury.”

“[W]hen an

injury is caused by the concurring negligence of two or more par-

ties, each is liable to the injured to the same extent as though it

had been caused by any one of the several alone. Such acts of

concurring negligence give rise to joint and several liability, and

there need be no common duty, common design or concerted

action.”

Tilley v. Broward Hosp. Dist., 458 So. 2d 817, 818 (Fla. 4th DCA 1984)

(‘‘ ‘Concurring’ refers to negligence occurring ‘at the same time’ as another pos-

sible cause[.]”); Bell v. Campbell, 434 S.W.2d 117, 122 (Tex. 1968) (“concurrent

negligence or a concurrent act . . . co-operates with the still persisting original

act in bringing about the injury”); Skipper v. Hartley, 242 S.C. 221, 224, 130

S.E.2d 486, 488, 13 A.L.R.3d 426 (1963) (“Negligence need not be the sole cause

of injury in order to impose liability, but need only be a ‘proximate concurring

cause,’ which is a cause so ecient in causation that but for it the injury would

not have occurred, even though one of several concurring causes may not have

been reasonably anticipated.”).

Darroch v. Johnson, 250 N.C. 307, 108 S.E.2d 589 (1959).

Darroch, 250 N.C. at 313, 108 S.E.2d at 593. See also Kodym v. Frazier,

186 W. Va. 221, 224, 412 S.E.2d 219, 222 (1991) (“We have long recognized a

rule of joint and several liability for plaintis. This means that where the

plainti is injured by the concurrent negligence of several defendants, the

plainti may elect to sue one or more of them.”).

Garbe v. Halloran, 150 Ohio St. 476, 481, 38 Ohio Op. 325, 83 N.E.2d

217, 221 (1948). See also Missouri Motor Distributing Co. v. Barker, 1935 OK 9,

170 Okla. 183, 39 P.2d 544, 545 (1935) (“[W]here original negligence continues

and exists up to time of injury, concurrent negligence of third person causing

injury is not independent act of negligence, but two concurring acts of negligence

will be held to be proximate cause of injury.”).

De La Concha v. Pinero, 104 So. 2d 25, 28 (Fla. 1958). This article does

not address intentional torts in detail, and the rules governing apportionment

generally and contribution in particular can vary from jurisdiction to

Journal of the ACCL

2. Breach of Contract

In large part because of the economic loss rules, one can easily

imagine a case where the plainti's claims against multiple

defendants are all based on breaches of contract. For instance, an

owner might sue its general contractor and also sue the prime

design professional. If an economic loss rule prevents economic

damage claims against subcontractors and subconsultants not in

privity with the owner, the prime contractor and prime design

professional could be the only defendants (although those

defendants might opt to implead their subcontractors on

indemnity claims).

When the claims against the prime design professional and

prime contractor are based on breach of contract, the liability of

the general contractor and the designer is not truly joint liability:

In the law of torts, if the wrongful acts of others were also contribut-

ing factors, they and the defendant are sometimes regarded as

‘joint tortfeasors,” each one is liable for the whole loss or harm. In

the contract eld, however, if the acts of others who are not joint

obligors (whether wrongful or not) are contributing factors, those

others are not thereby joined with the defendant as having commit-

ted the breach of contract.

The doctrine of joint and several liability, though typically

jurisdiction. There are parallels, however. In Moses v. Town of Morganton, 192

N.C. 102, 133 S.E. 421 (1926), plainti-landowners sued three defendants, a

shoe company that had polluted a creek above the landowners' premises, the

Town of Morganton that had discharged sewage into the creek, and a power

company that had erected a structure in a river below the landowners' property

causing the water in the creek to back up into the property, alleging that “[t]he

unlawful and wrongful acts of the three aforesaid defendants, singly and jointly,

contribut[ed] to and form[ed] a dangerous and destructive nuisance in said

stream, to the great impairment of the value of the property of plaintis and to

the destruction of the peace and safety in the use of said property by plaintis

for human habitation.” 133 S.E. at 423. In upholding the landowners' damages

claim for joint and several liability against all three defendants, the Court said:

“If parties, although acting independently know, or have reasonable ground to

believe, that their independent acts, combining with the independent acts of

others, will create a result that will become a nuisance, and they do so causing

damage, they become as it were joint wrongdoers ab initio, and are liable as

joint tort-feasors. Where all have knowledge of the independent acts that create

the result and continue the independent acts with knowledge, this ipso facto

creates a concert of action and makes a common design or purpose. Any other

position, from the facts and circumstances of the case would make plaintis

practically remediless, although there is a nuisance which all jointly concurred

in and contributed to, that is alleged made the plaintis' land valueless, and

but for such joinder the injury would not have occurred.” Moses, 133 S.E. at 423

(emphasis added).

11 Corbin on Contracts, supra note 5, at § 55.9.

Liability for Construction Defects

discussed and applied in negligence cases, arguably need not be

limited to negligence claims or be dependent for its operation on

any particular type of cause of action or mixture of dierent

causes of action brought against multiple defendants. Whether a

claim is cast as a tort or a breach of contract, a substantially sim-

ilar proximate cause concept, the “substantial factor” test, must

be met to establish liability for damage. Also, the plainti's

principal remedy for the alleged wrongdoing of each of the

defendants is the same regardless of whether the plainti's claims

are in breach of contract or negligence, i.e., the cost of repair of

the structure.

Generally speaking, however, as summarized in

Corbin, if claims are based on multiple separate contracts, or a

mixture of tort and contract, or even claims for indivisible harm,

it is inappropriate to impose joint and several liability on the

defendants as a group.

This general rule is contradicted by a few cases. For example,

in Lesmeister v. Dilly,

the Minnesota Supreme Court heard an

appeal from a decision in a case involving defective construction

of a building. In the course of reviewing a judgment on a jury

verdict, the Supreme Court held that:

Where A and B owe contract duties to C under separate contracts,

and each breaches independently, and it is not reasonably possible

to make a division of the damage caused by the separate breaches

closely related in point of time, the breaching parties, even though

they acted independently, are jointly and severally liable.

In Mayor and City Council of Columbus, Mississippi. v. Clark-

Dietz and Associates-Engineers, Inc.,

a levee failed in part

because the design of a slurry wall was changed during

construction. The owner sued its contractor and engineer for

breach of contract. The contractor counterclaimed for costs

incurred to deal with design errors by the engineer, and led a

cross claim against the engineer alleging negligent design and

inspection of the work. The court found in favor of the owner on

part of its claim against the contractor. The court also found that

See, e.g., City of Charlotte v. Skidmore, Owings and Merrill, 103 N.C.

App. 667, 407 S.E.2d 571 (1991).

11 Corbin on Contracts, supra note 5, at § 55.9.

Lesmeister v. Dilly, 330 N.W.2d 95 (Minn. 1983).

Lesmeister, 330 N.W.2d at 102 (clarifying the court's holding in Northern

Petrochemical Co. v. Thorsen & Thorshov, Inc., 297 Minn. 118, 211 N.W.2d 159

(1973)).

Mayor and City Council of City of Columbus, Miss. v. Clark-Dietz and

Associates-Engineers, Inc., 550 F. Supp. 610 (N.D. Miss. 1982).

Journal of the ACCL

the engineer had breached its professional standard of care, and

held the owner and the engineer jointly and severally liable to

the contractor for the contractor's extra costs. In other words, the

court held that an owner, liable for breach of contract, and an

engineer, liable for professional negligence, could be held jointly

and severally liable to a contractor.

It was the owner's burden

to seek indemnication from the engineer, which the owner suc-

cessfully recovered.

In Fulk v. Piedmont Music Center,

a salesman sued three dif-

ferent business entities for commissions allegedly earned under a

verbal employment contract with the three companies. The trial

court entered a judgment against all three defendants without

dividing or apportioning liability among the defendants. The

defendants appealed. Among other issues, they argued that

“because North Carolina law does not allow for contribution from

other defendants held jointly liable in contract, they are

prejudiced by the trial court's applying joint and several liability

to this case.”

The North Carolina Court of Appeals disagreed,

and held that where the claims arose out of the same transac-

tion, occurrence, or series of transactions or occurrences, and the

claims contain questions of law and fact common to all of the

defendants, it was within the trial court's discretion to hold the

defendants jointly and severally liable, even where the claims

were based on breaches of contract.

The Restatements of Torts do not address contract disputes,

but they do provide useful policy discussions and phraseology.

The Restatement (Third) of Torts: Apportionment of Liability

acknowledges the potential that it could apply to contract cases:

The policy considerations for apportioning liability reected in this

Restatement are possibly applicable to cases involving injuries

other than personal injury or physical damage to tangible property.

On the other hand, those cases may also involve special policy

considerations. In light of these competing considerations, this Re-

statement sometimes may be referred to by analogy in suits for

purely nontangible economic loss caused by breach of contract or

Mayor & City Council of Columbus, Mississippi, 550 F. Supp. at 627.

Fulk v. Piedmont Music Center, 138 N.C. App. 425, 531 S.E.2d 476 (2000).

Fulk, 138 N.C. App. at 428, 531 S.E.2d at 478.

Fulk, 138 N.C. App. at 429, 531 S.E.2d at 478-79. In Fulk, the three

employers had interlocking ownership, which could have been one factor

inuencing the Court's decision to impose joint and several liability.

Liability for Construction Defects

warranty, fraud, misrepresentation, nonmedical professional mal-

practice, or, where recognized, negligence . . ..

To the extent the Restatements of Torts deal with burden of

proof on the plainti, they seem to apply by analogy to breach of

contract cases. It is not so clear, however, that those Restate-

ments provide any comfort to defendants trying to apportion li-

ability for breach of separate contracts among themselves.

Certainly, defendants have recourse against other judgment debt-

ors in a tort case. To the extent the claims by the plainti for eco-

nomic damages are based on negligence and liability is joint and

several, contribution among the tortfeasors should be available,

not to mention comparative fault in comparative fault states. The

predicament of the defendants is more troubling if their liability

is based on breach of separate contracts. Their liability might not

be joint and several as in classic negligence law. Furthermore,

other tort concepts might not provide a mechanism to apportion

liability.

D. Uniform Contribution Among Joint Tortfeasors

If multiple defendants are held jointly and severally liable for

negligence and there is no verdict establishing comparative fault,

most states provide for uniform contribution among tortfeasors,

with the result that apportionment of damages is automatic. As-

suming all of the claims by the plainti were negligence claims,

defendants held jointly and severally liable can resort to these

contribution laws to apportion fault.

In some states, the uniform

contribution statutes provide that damages are shared pro rata

or according to some xed ratio.

In some comparative fault

Restatement Third, Torts: Apportionment of Liability § 1, comment e.

See, e.g., PAM Transport v. Freightliner Corp., 182 Ariz. 132, 133, 893

P.2d 1295, 1296 (1995) (“A.R.S. § 12-2501 permits contribution to joint tortfea-

sors who have paid more than their pro rata shares of liability for an injury.”);

Kottler v. State, 136 Wash. 2d 437, 448, 963 P.2d 834, 840 (1998) (“Contribution

still exists, but only to the extent there is joint and several liability.”).

Truszewski v. Outboard Motor Marine Corp., 292 Ill. App. 3d 558, 561,

226 Ill. Dec. 537, 685 N.E.2d 992, 994 (1st Dist. 1997) (“[T]he Contribution Act

. . . provides a remedy for an entity that has paid more than its pro rata share

of the common liability by allowing it to seek contribution from a fellow joint

tortfeasor who has not paid his pro rata share of the common liability.”); Dunn

v. Praiss, 139 N.J. 564, 575, 656 A.2d 413, 419, 51 A.L.R.5th 799 (1995) (“The

[Joint Tortfeasors Contribution Law] provides that if any one of the joint tortfea-

sors pays a judgment to an injured person, that tortfeasor is entitled to recover

contribution from the other joint tortfeasors ‘for the excess so paid over his pro

rata share.’ ’’); Zeller v. Cantu, 395 Mass. 76, 86, 478 N.E.2d 930, 935, Prod.

Liab. Rep. (CCH) P 10604 (1985) (“While recognizing that strong policy

Journal of the ACCL

states, the liability of the defendants can be apportioned accord-

ing to prevailing comparative fault principles.

If, however, the defendants are found liable for breach of

contract, or a mixture of breach of contract and negligence, con-

tribution might not provide relief.

For instance, in North Caro-

lina, the Uniform Contribution Among Tortfeasors Act

governs

the statutory right of contribution.

This statute has been

adopted in other jurisdictions.

100

Contribution under the statute

is limited to contribution among tortfeasors, so no right of action

of contribution will lie among multiple defendants to a breach of

contract claim. “By the clear language of the statute, a defendant

is not entitled to contribution for a claim against him in

contract.”

101

“Under this statute, there is no right to contribution

from one who is not a joint tort-feasor.”

102

The right of contribu-

considerations favor apportionment on the basis of comparative fault, we are

not empowered to enact such a change in our laws. We therefore arm the

judgment below ordering Cantu to pay a pro rata contribution . . ..”).

Dumas v. State ex rel. Dept. of Culture, Recreation & Tourism, 828 So.

2d 530, 537 (La. 2002) (“Each tortfeasor shall not be liable for more than his

degree of fault and shall not be solidarily liable with any other person for dam-

ages attributable to the fault of that other person.”); Brown v. Keill, 224 Kan.

195, 203, 580 P.2d 867, 873–74 (1978) (“The legislature intended to equate

recovery and duty to pay to degree of fault.”). See generally Comment Note.--

Contribution or Indemnity Between Joint Tortfeasors on Basis of Relative

Fault, 53 A.L.R.3d 184.

See generally Bruner & O'Connor on Construction Law § 19:34 (2014).

N.C. Gen. Stat. Ann. § 1B-1.

Kaleel Builders, Inc. v. Ashby, 161 N.C. App. 34, 587 S.E.2d 470 (2003).

100

See, e.g., Spence v. Julian, 201 Md. App. 562, 30 A.3d 220 (2011), cert.

granted, 424 Md. 628, 37 A.3d 317 (2012) and cert. granted, 424 Md. 628, 37

A.3d 317 (2012) and a'd, 429 Md. 348, 56 A.3d 147 (2012); Scalf v. Payne, 266

Ark. 231, 583 S.W.2d 51 (1979); Hawkins v. Gadoury, 713 A.2d 799 (R.I. 1998);

Liberty Mut. Ins. Co. v. General Motors Corp., 65 Haw. 428, 653 P.2d 96 (1982);

Paoli v. Shor, 345 So. 2d 789 (Fla. 4th DCA 1977), decision approved, 353 So. 2d

825 (Fla. 1977); Verni ex rel. Burstein v. Harry M. Stevens, Inc., 387 N.J.

Super. 160, 903 A.2d 475 (App. Div. 2006); Robertson v. McCarte, 13 Mass. App.

Ct. 441, 433 N.E.2d 1262 (1982); State, ex rel., Deere & Co. v. District Court of

Fifth Judicial Dist. of State, In and For Beaverhead County, 224 Mont. 384,

396, 730 P.2d 396, 404 (1986) (“Among states covered by the Pacic Reporter,

New Mexico, Nevada, Hawaii, Alaska, Wyoming, Colorado, and Arizona have

adopted the Uniform Contribution Among Joint Tortfeasors Act . . ..”).

101

Holland v. Edgerton, 85 N.C. App. 567, 571, 355 S.E.2d 514, 517 (1987).

102

Land v. Tall House Bldg. Co., 165 N.C. App. 880, 883, 602 S.E.2d 1, 3

(2004).

Liability for Construction Defects

tion is applicable only between joint tortfeasors.

103

A joint tortfea-

sor, as dened by the North Carolina Supreme Court, is when

parties whose negligent or wrongful acts are united in time or

circumstance such that the two separate acts concur to cause a

single injury to a third party.

104

The Uniform Contribution Among

Tortfeasors Act permits contribution among joint tortfeasors

where two or more persons become jointly or severally liable in

tort.

105

The Uniform Contribution Among Tortfeasors Act

prohibits any consideration of degree of fault among the joint tort

feasors.

106

In Kaleel Builders, Inc. v. Ashby the general contractor brought

a breach of contract action against its subcontractors and the

architect to recover contribution if found liable to homeowners in

the construction of a house.

107

The general contractor and the

architect were each directly in contract with the owner. The Kaleel

court, applying North Carolina's prohibition on negligence claims

for economic damages against a defendant with whom the

plainti is in privity of contract, set forth in Ports Authority v.

Fry Roong Co.,

108

stated “[o]rdinarily, a breach of contract does

not give rise to a tort action by the promisee against the

promisor.”

109

In Kaleel, the architect and the general contractor

were each in privity with the owner; therefore, the court held

103

Roseboro Ford, Inc. v. Bass, 77 N.C. App. 363, 335 S.E.2d 214 (1985). See

also Wampanoag Group, LLC v. Iacoi, 68 A.3d 519, 522 (R.I. 2013) (“The

UCAJTA recognizes a right of contribution between joint tortfeasors if they are

both liable in tort to the original plainti and their respective wrongful conduct

caused the ‘same injury’ to the original plainti.”).

104

State Farm Mut. Auto. Ins. Co. v. Holland, 324 N.C. 466, 470, 380 S.E.2d

100, 103 (1989). See also Eckels v. Klieger, 205 Pa. Super. 526, 531, 210 A.2d

899, 901 (1965) (“That Act applies only to joint tortfeasors and denes the term

‘joint tortfeasors’ as ‘two or more persons jointly or severally liable in tort for

the same injury.’ ’’).

105

N.C. Gen. Stat. Ann. § 1B-1. See also Com., Dept. of Transp. v. Popovich

to Use of Aetna Cas. and Sur. Co., 117 Pa. Commw. 14, 17, 542 A.2d 1056, 1057

(1988), order a'd, 522 Pa. 508, 564 A.2d 159 (1989) (“The Uniform Act provides

that a joint tortfeasor who has discharged the common liability or more than

his pro rata share, may seek contribution from any other tortfeasor.”).

106

N.C. Gen. Stat. Ann. § 1B-2.

107

Kaleel Builders, Inc. v. Ashby, 161 N.C. App. 34, 587 S.E.2d 470 (2003).

108

See North Carolina State Ports Authority v. Lloyd A. Fry Roong Co.,

294 N.C. 73, 240 S.E.2d 345 (1978) (rejected on other grounds by, Trustees of

Rowan Technical College v. J. Hyatt Hammond Associates, Inc., 313 N.C. 230,

328 S.E.2d 274, 24 Ed. Law Rep. 549 (1985)).

109

Kaleel, 161 N.C. App. at 42, 587 S.E.2d at 476. See also Skouras v. Brut

Productions, Inc., 45 A.D.2d 646, 647, 360 N.Y.S.2d 811, 813 (1st Dep't 1974)

Journal of the ACCL

that performance under the contract governs and there was no

injury sounding in tort from either the architect or the general

contractor to the owner. The court found that the general contrac-

tor and the architect were not joint tortfeasors and consequently

the general contractor had no statutory right of contribution from

the architect.

110

The court went on:

Therefore, by clear language of the statute, plainti [general

contractor] is not entitled to contribution for a claim [against him]

sounding only in contract. Without a tort, there can be no tort-

feasor; and without a tort-feasor, there can be no right to contribu-

tion under the UCATA. Thus, as a matter of law, plainti states no

claim that could entitle it to any future right to contribution from

defendant subcontractors and the trial court's dismissal was

proper.

111

Recall in this connection, however, the earlier discussion about

professional negligence, and whether professional negligence is

true negligence or a standard of care whenever a contract rela-

tionship exists between the professional and the plainti. In

PVC, Inc. v. McKim & Creed, P.A.,

112

the developer of a hotel had

separate contracts with an architect and a post-tensioning

engineer (as engineer for a “post-tensioning system” for the

structure). The architect in turn contracted with a consulting

structural engineer as the engineer of record. The consulting

structural engineer, apparently recognizing that it had responsi-

bilities in connection with the post-tensioning system, further

subcontracted the post-tensioning part of its work to yet another

rm. The post-tensioning system failed, and the developer sued

its post-tensioning engineer (for breach of contract and negli-

gence) and the architect's consulting engineer (for negligence).

The post-tensioning engineer led a third-party claim against the

consulting engineer's subcontractor for contribution. The post-

tensioning engineer and the architect's consulting engineer

settled with the developer, after which the post-tensioning

engineer proceeded with its claim against the consulting

engineer's subcontractor for contribution. The subcontractor

(“As a general rule, a breach of contract does not give rise to a tort action.”);

ServiceMaster Co., L.P. v. Martin, 252 Ga. App. 751, 757, 556 S.E.2d 517, 523

(2001) (“Any breach of contract must arise from the contract, and does not give

rise to an action for tort, whether or not such breach was negligent or willful.”).

110

Kaleel, 161 N.C. App. at 46, 587 S.E.2d at 478.

111

Kaleel, 161 N.C. App. at 43, 587 S.E.2d at 477 (internal citations omit-

ted).

112

PVC, Inc. v. McKim & Creed, P.A., 188 N.C. App. 632, 656 S.E.2d 16

(2008).

Liability for Construction Defects

argued that the post-tensioning engineer was not entitled to con-

tribution, because contribution is only available to joint tortfea-

sors, and the post-tensioning engineer could not be a joint tortfea-

sor because it had a contract with the developer.

113

The court

disagreed, holding that the post-tensioning engineer, as a profes-

sional engineer, could be liable to the developer in both contract

and tort. Although the PVC court did not expressly state that

professional engineers qualify for the “public policy” exception to

the economic loss rule, it recognized that the enumeration of

exceptions in Ports Authority

114

is “not all inclusive.”

115

Other jurisdictions are similar to North Carolina in that they

do not recognize a right to contribution in a breach of contract

case.

116

In contrast with the foregoing jurisdictions, West Virginia

jurisprudence favors bringing together all claims regarding li-

113

PVC, Inc. v. McKim & Creed, P.A., 188 N.C. App. 632, 656 S.E.2d 16

(2008).

114

North Carolina State Ports Authority v. Lloyd A. Fry Roong Co., 294

N.C. 73, 240 S.E.2d 345 (1978) (rejected on other grounds by, Trustees of Rowan

Technical College v. J. Hyatt Hammond Associates, Inc., 313 N.C. 230, 328

S.E.2d 274, 24 Ed. Law Rep. 549 (1985)).

115

PVC, Inc. v. McKim & Creed, P.A., 188 N.C. App. 632, 656 S.E.2d 16

(2008) (quoting Ports Authority, 294 N.C. at 82-83, 240 S.E.2d at 351).

116

See Kemper NationalP&CCompanies v. Smith, 419 Pa. Super. 295,

309, 615 A.2d 372, 380 (1992) (“Pennsylvania only authorizes contribution

among joint tortfeasors.”); N.Y. Civ. Prac. Law and Rules § 1401 (noting that

the wording of the statute itself limits contribution to tort liability, not contract);

Board of Educ. of Hudson City School Dist. v. Sargent, Webster, Crenshaw &

Folley, 71 N.Y.2d 21, 28, 523 N.Y.S.2d 475, 517 N.E.2d 1360, 1364, 44 Ed. Law

Rep. 552 (1987) (“We nd nothing in the legislative history or the common-law

evolution of the statute on which to base a conclusion that CPLR 1401 [New

York's Contribution Statute] was intended to apply in respect to a pure breach

of contract action such as would permit contribution between two contracting

parties whose only potential liability to the plainti is for the contractual bene-

t of the bargain.”); Republic Nat. Bank of New York v. Zimmcor U.S.A. Corp.,

181 A.D.2d 533, 534, 581 N.Y.S.2d 40, 41 (1st Dep't 1992) (“In particular,

[Defendant] was not deprived of any statutory or common-law right to contribu-

tion, since the only cognizable claims here relate to breach of contract and thus

no right to contribution could be established under these circumstances.”);

Giordano v. Morgan, 197 Ill. App. 3d 543, 548, 143 Ill. Dec. 875, 554 N.E.2d

810, 813 (2d Dist. 1990) (“If the parties are not subject to liability in tort for the

plainti's injuries at issue in the underlying action, there is no right of contri-

bution between those parties.”); Tin Motorhomes, Inc. v. Superior Court, 202

Cal. App. 4th 24, 33, 136 Cal. Rptr. 3d 693, 700 (4th Dist. 2011) (“Where

defendants are not obligors on the same contract, their obligations to the

plaintis may dier; they will not necessarily (and in fact will rarely) have

caused the same harm to the plaintis. Each will, however, be liable for the

contract damages stemming from the breach of the contract into which that

defendant entered. These obligations are neither ‘joint’ nor ‘joint and several’

Journal of the ACCL

ability and damages into one trial on any theory of liability that

could have been brought by the injured plainti.

117

[T]he right of inchoate contribution is not conned only to cases of

joint negligence. Instead, it arises under any theory of liability

which results in a common obligation to the plainti. Where, as

here, the plainti seeks damages for a breach of contractual obliga-

tions, the named defendant is entitled to assert claims for contribu-

tion against other parties liable to the plainti for the same injury

even though the defendant was not a party to the contract between

the plainti and the other parties.

118

A right of contribution may exist in Wisconsin if it is not reason-

ably possible to make a division of the damages caused by

multiple contract breaches.

119

Minnesota will apply joint and sev-

eral liability to multiple breaches of contract that cause an indi-

visible injury.

120

and, therefore, do not give rise to any right of contribution (Civ. Code, § 1432)

because no defendant can be ordered to pay more than the amount of damages

attributable to his own breach.”); Richardson Associates v. Lincoln-Devore, Inc.,

806 P.2d 790, 810 (Wyo. 1991) (“What this court clearly indicated in application

of the statutory contribution among the joint tort-feasors process only applies to

tort based liabilities and not, as in this case, divergent contractual responsibili-

ties in a building construction.”); CBI NA-CON, Inc. v. UOP Inc., 961 S.W.2d

336, 341 (Tex. App. Houston 1st Dist. 1997) (“Every breach of contract should

not become a tort action, particularly where no consumers are involved and

there is no fraud or personal injury, but only economic injury arising out of the

very duties imposed by the contract. A breach of contract claim is not a basis for

contribution under chapter 33 of the Texas Civil Practice and Remedies Code.”);

J-McDaniel Const. Co., Inc. v. Dale E. Peters Plumbing Ltd., 2014 Ark. 282, 436

S.W.3d 458, 464 (2014) (“Under the Uniform Contribution Among Tortfeasors

Act (‘UCATA’), . . . which was adopted in 1941, a right to contribution exists

among joint tortfeasors . . .. ‘Joint tortfeasors’ are dened as two or more

persons who are jointly or severally liable in tort for the same injury.”).

117

See Board of Educ. of McDowell County v. Zando, Martin & Milstead,

Inc., 182 W. Va. 597, 602, 390 S.E.2d 796, 801, 59 Ed. Law Rep. 1179 (1990)

(“The right to contribution arises when persons having a common obligation, ei-

ther in contract or tort, are sued on that obligation and one party is forced to

pay more than his pro tanto share of the obligation.”) (quoting Sydenstricker v.

Unipunch Products, Inc., 169 W. Va. 440, 288 S.E.2d 511 (1982)).

118

Bd. of Ed. of McDowell County, 182 W.Va. at 603, 390 S.E.2d at 802.

119

See Housing Authority of City of Milwaukee v. Barrientos Designs &

Consulting, L.L.C., 2006 WI App 203, 296 Wis. 2d 744, 749, 724 N.W.2d 395,

398 (Ct. App. 2006) (“As the trial court observed, each defendant had separate

duties and responsibilities, and consequently, a jury could determine which part

of the total damages to attribute to each party.”).

120

See Lesmeister v. Dilly, 330 N.W.2d 95, 102 (Minn. 1983) (clarifying the

court's holding in Northern Petrochemical Co. v. Thorsen & Thorshov, Inc., 297

Minn. 118, 211 N.W.2d 159 (1973)).

Liability for Construction Defects

E. Common Law Contribution and Indemnity

Contribution and indemnity are remedies generally based on

restitution and, although having a common basis in equity, they

dier in the way they provide relief to defendants. “Contribution

is the remedy securing the right of one who has discharged more

than his fair share of a common liability or burden to recover

from another who is also liable the proportionate share which the

other should pay or bear.”

121

“Contribution rests upon principles

of equity.”

122

On the other hand, indemnity is “the remedy secur-

ing the right of a person to recover reimbursement from another

for the discharge of a liability which, as between himself and the

other, should have been discharged by the other.”

123

“Indemnity is

generally said to rest upon contract, either express or implied.”

124

In other words, contribution distributes liability according to

each tortfeasor's percentage of relative fault; whereas indemnity

allows one tortfeasor to shift the entire loss to another

tortfeasor.

125

Indemnity is tied to the principle of fairness.

Learned Hand once described indemnity as “an extreme form of

contribution.”

126

In some states, the defendants might be able as-

sert equitable, or common law, contribution rights.

127

1. Contribution

The general rule of common law contribution is that “one who

is compelled to satisfy, or pay more than his just share of such

common burden or obligation, is entitled to contribution from the

others to obtain from them payment of their respective shares.”

128

“Contribution was generally allowed at common law except that

no contribution could be had between tort-feasors and

121

Hendrickson v. Minnesota Power & Light Co., 258 Minn. 368, 370, 104

N.W.2d 843, 846 (1960) (overruled in part on other grounds by, Tolbert v. Gerber

Industries, Inc., 255 N.W.2d 362 (Minn. 1977)).

122

Hendrickson, 258 Minn. at 370, 104 N.W.2d at 846.

123

Hendrickson, 258 Minn. at 370, 104 N.W.2d at 846.

124

Hendrickson, 258 Minn. at 370, 104 N.W.2d at 846.

125

Dixon v. Chicago and North Western Transp. Co., 151 Ill. 2d 108, 118,

176 Ill. Dec. 6, 601 N.E.2d 704, 708–09, Prod. Liab. Rep. (CCH) P 13318 (1992).

126

Slattery v. Marra Bros., 186 F.2d 134, 138, 1951 A.M.C. 183 (2d Cir.

1951).

127

See, e.g., Holcomb v. Holcomb, 70 N.C. App. 471, 320 S.E.2d 12 (1984);

Celotex Corp. v. Campbell Roong and Metal Works, Inc., 352 So. 2d 1316

(Miss. 1977); Hammons v. Ehney, 924 S.W.2d 843 (Mo. 1996).

128

Celotex Corp., 352 So.2d at 1318.

Journal of the ACCL

wrongdoers.”

129

It was considered against public policy for a

defendant in a tort case to either implead a third party whom he

alleged to be liable with himself, or to bring an action against a

joint tortfeasor after judgment to recover a proportionate amount

paid to the injured party based on a theory of contribution.

130

However, where a claim for common law contribution is based

purely on economic loss, it is generally not available.

131

When the

Uniform Contribution Among Joint Tortfeasors Act was enacted,

it created a right that did not previously exist, the right among

joint tortfeasors to contribution.

132

In a few states, the Uniform Contribution Among Joint Tortfea-

sors Act did not abolish common law contribution. In Holcomb v.

Holcomb,

133

the court stated that:

The provisions [of the general statutes] that concern joint tortfea-

sors, then, were added to create a right of contribution not conferred

by the common law, and not to destroy by implication common law

rights already in existence. At no point did any prior version of the

contribution statute, nor does the modern version, expressly or

impliedly eliminate the equitable contribution action. Rather, equi-

table contribution has continued as an independent action, sepa-

rate from the summary proceedings set out in statute preserving

the judgment.

We are unconvinced that anything on the face of G.S. 1B-7, or in its

129

Celotex Corp., 352 So.2d at 1318 (“This exception to the general rule al-

lowing contribution was rst enunciated in 1799 in the case of Merryweather v.

Nixan, 1799 WL 743 (K.B. 1799). However, in England the exception to the rule

was abolished in 1935 by the Law Reform Act which provides that a tort-feasor

may recover contribution from any other tort-feasor who is, or would, if sued,

have been liable in respect of the same damage, whether as a joint tort-feasor or

otherwise.”).

130

Green Bus Lines, Inc. v. Consolidated Mut. Ins. Co., 74 A.D.2d 136, 148,

426 N.Y.S.2d 981, 989–90 (2d Dep't 1980). See also Hammons v. Ehney, 924

S.W.2d 843, 847 (Mo. 1996) (“Historically, Missouri enforced contribution be-

tween co-debtors, but not between joint tort-feasors, assuming that by relieving

a person committing a tortious act from full responsibility courts would encour-

age these acts.”); Fidelity & Cas. Co. of New York v. Chapman, 167 Or. 661,

664-65, 120 P.2d 223, 225 (1941) (absent statute, there can be no contribution

among joint tortfeasors because “no man can make his own misconduct the

ground for action in his favor”).

131

Children's Corner Learning Center v. A. Miranda Contracting Corp., 64

A.D.3d 318, 323, 879 N.Y.S.2d 418, 421 (1st Dep't 2009).

132

Holcomb v. Holcomb, 70 N.C. App. 471, 473, 320 S.E.2d 12, 14 (1984). See

also 18 Am. Jur. 2d, Contribution § 40 Retroactive Application of Statutes (for

discussion of how various states handle the application of the Uniform Contri-

bution Among Joint Tortfeasors Act as it relates to the timing of both liability

and judgment).

133

Holcomb, 70 N.C. App. at 473, 320 S.E.2d at 14.

Liability for Construction Defects

history, indicates that the General Assembly intended to eliminate

the plainti's right to seek equitable contribution.

134

In Mississippi, “[c]ontribution is allowable by the common law if

the action is considered contractual and by statute if considered

tort.”

135

Arguably in states that have retained common law contri-

bution, it might provide some relief to multiple defendants in a

contract action. However, with the enactment of the Uniform

Contribution Among Joint Tortfeasors Act, contribution may not

lie if the parties are not tortfeasors as dened by the statute.

136

2. Indemnity

So, can indemnity help the general contractor, the designer

and the engineer when the owner obtains a judgment against

one, or all, for indivisible injury? Some states still hold that the

contribution act did not abolish common law implied indemnity.

137

“A party's right to indemnity may be based on one of the

following: 1) an express contract; 2) a contract implied-in-fact; or

3) equitable concepts arising from the tort theory of indemnity,

often referred to as a contract implied-in-law.”

138

a. Express Contractual Indemnity

Indemnity clauses written so that they benet third parties

could conceivably provide a co-defendant with legal recourse

against another co-defendant. “An indemnity agreement is to be

interpreted according to the language and contents of the contract

as well as the intention of the parties as indicated by the

contract.”

139

“A party's right to indemnity based on an express

contract arises out of an indemnity clause specically set out in a

134

Holcomb, 70 N.C. App. at 473-74, 320 S.E.2d at 14.

135

Celotex Corp. v. Campbell Roong and Metal Works, Inc., 352 So. 2d

1316, 1318 (Miss. 1977).

136

1 Comparative Negligence Manual § 9:2 (3d ed) (2014).

137

See, e.g., American Nat. Bank and Trust Co. v. Columbus-Cuneo- Cabrini

Medical Center, 154 Ill. 2d 347, 353, 181 Ill. Dec. 917, 609 N.E.2d 285, 288

(1992) (“This court has before indicated its disagreement with the conclusion

that the Contribution Act abolished all forms of common law implied

indemnity.”).

138

Terry's Floor Fashions, Inc. v. Georgia-Pacic Corp., 36 U.C.C. Rep. Serv.

2d 680 (E.D. N.C. 1998). See also Pulte Home Corp. v. Parex, Inc., 403 Md. 367,

942 A.2d 722, 65 U.C.C. Rep. Serv. 2d 430 (2008).

139

Myers Building Industries, Ltd. v. Interface Technology, Inc., 13 Cal.

App. 4th 949, 968, 17 Cal. Rptr. 2d 242, 253–54 (2d Dist. 1993), as modied on

denial of reh'g, (Mar. 26, 1993). See also Grubb & Ellis Management Services,

Inc. v. 407417 B.C., L.L.C., 213 Ariz. 83, 86, 138 P.3d 1210, 1213 (Ct. App. Div.

1 2006) (“Furthermore, indemnity provisions ‘are strictly construed and gener-

Journal of the ACCL

contract as part of the bargained-for exchange.”

140

“An indemnitee

can recover contractual indemnity for his or her own legally

culpable conduct only if the contract is clear on that point. If the

contract is otherwise clear, it need not contain specic words,

such as ‘negligence’ or ‘fault.’ ’’

141

The indemnity provision in the standard American Institute of

Architects General Conditions of the Contract for Construction il-

lustrates this point:

§ 3.18 INDEMNIFICATION

§ 3.18.1 To the fullest extent permitted by law the Contractor shall

indemnify and hold harmless the Owner, Architect, Architect's

consultants, and agents and employees of any of them from and

against claims, damages, losses and expenses, including but not

limited to attorneys' fees, arising out of or resulting from perfor-

mance of the Work, provided that such claim, damage, loss or

expense is attributable to bodily injury, sickness, disease or death,

or to injury to or destruction of tangible property (other than the

Work itself), but only to the extent caused by the negligent acts or

omissions of the Contractor, a Subcontractor, anyone directly or

indirectly employed by them or anyone for whose acts they may be

liable, regardless of whether or not such claim, damage, loss or

expense is caused in part by a party indemnied hereunder.

142

A California court analyzing the AIA contract provision held: “A

clause which contains the words “indemnify” and “hold harmless”

is an indemnity clause which generally obligates the indemnitor

to reimburse the indemnitee for any damages the indemnitee

becomes obligated to pay third persons. Indemnication agree-

ments ordinarily relate to third-party claims.”

143

In a situation where the owner sues the contractor and the

architect for a building defect, the architect might well invoke

ally will not protect an indemnitee against its own negligence unless the

indemnitor's obligation to do so is expressed in clear and unequivocal ‘terms.’ ’’).

140

Carl v. State, 192 N.C. App. 544, 557, 665 S.E.2d 787, 797–98 (2008).

141

Restatement (Third) of Torts: Apportionment of Liability § 22, comment f

(2012).

142

AIA Document A201-2007, General Conditions of the Contract for

Construction. See also Fisk, R. Fisk, Comparative Contract Fault: Using the

AIA Documents to Apportion Contract Damages, 26-SPG Construction Law. 23

(Spring 2006) (for a discussion on apportioning liability using the AIA

documents).

143

Myers Building Industries, Ltd. v. Interface Technology, Inc., 13 Cal.

App. 4th 949, 969, 17 Cal. Rptr. 2d 242, 254 (2d Dist. 1993), as modied on

denial of reh'g, (Mar. 26, 1993) (internal citations omitted). See also Jalapenos,

LLC v. GRC General Contractor, Inc., 2007 PA Super 391, 939 A.2d 925, 932

(2007).

Liability for Construction Defects

the foregoing clause and argue that if a breach by the contractor

is a substantial contributing factor in the owner's loss, the

contractor should pay all of the damages. If the owner's claim is

for breach of contract, and seeks economic damages, the AIA

clause quoted above probably would not provide the architect

with recourse against the contractor, insofar as the AIA clause is

limited to claims for “bodily injury, sickness, disease or death, or

. . . injury to or destruction of tangible property (other than the

work itself).” Nevertheless, one can conceive of an indemnity

clause that protects other potential defendants against claims for

economic damages. In an increasing number of jurisdictions,

however, indemnity clauses that require an indemnitor to

indemnify an indemnitee against the indemnitee's own negligence

have been declared unenforceable as a matter of public policy.

144

b. Indemnity Implied-in-Fact

Indemnity may be implied-in-fact based on an implied contract

theory, where there is no express contract provision.

145

“Contrac-

tual indemnity that is implied-in-fact suggests the existence of a

binding contract between two parties that fairly implies the right

to indemnity.”

146

A right of indemnity implied-in-fact stems from the existence of a

binding contract between two parties that necessarily implies the

right. The implication is derived from the relationship between the

parties, circumstances of the parties' conduct, and that the creation

of the indemnitor/indemnitee relationship is derivative of the

contracting parties' intended agreement.

147

“As to a contract implied-in-fact, to determine if a right to

indemnity exists, ‘we look to the parties' relationship and its sur-

rounding circumstances.’ ’’

148

“In the context of independent

contractor relationships, a right of indemnity under a contract

implied-in-fact is inappropriate where, as here, both parties are

144

See Gwyn and Davis, Fifty-State Survey of Anti-Indemnity Statutes and

Related Case Law, 23-SUM Construction Law. 26 (Summer 2003).

145

Quadrangle Development Corp. v. Otis Elevator Co., 748 A.2d 432, 435

(D.C. 2000).

146

Terry's Floor Fashions, Inc. v. Georgia-Pacic Corp., 36 U.C.C. Rep. Serv.

2d 680 (E.D. N.C. 1998).

147

Carl v. State, 192 N.C. App. 544, 558, 665 S.E.2d 787, 798 (2008).

148

Schenkel & Shultz, Inc. v. Hermon F. Fox & Associates, P.C., 180 N.C.

App. 257, 267, 636 S.E.2d 835, 842 (2006), a'd, 362 N.C. 269, 658 S.E.2d 918

(2008).

Journal of the ACCL

well equipped to negotiate and bargain for such provisions.”

149

Many states hold that implied contractual indemnity cannot be

created where there is no express or implied contractual

relationship.

150

In order to nd indemnity implied-in-fact, courts

will generally look to the relationship of the parties to determine

if there is some special relationship; and “the mere relationship

between vendor and vendee does not, of itself, suce to produce

an implied contractual right of indemnication . . ..”

151

c. Indemnity Implied-in-Law

“In ‘implied-in-law,’ or ‘equitable indemnity,’ the obligation is

based on variations in the relative degrees of fault of joint tort-

feasors, and the assumption that when the parties are not in pari

delicto, the traditional view that no wrongdoer may recover from

another may compel inequitable and harsh results.”

152

[A] right of indemnity exists whenever the relation between the

parties is such that either in law or in equity there is an obligation

on one party to indemnify the other, as where one person is exposed

149

Schenkel & Shultz, 180 N.C. App. at 267, 636 S.E.2d at 842.

150

See Richardson Associates v. Lincoln-Devore, Inc., 806 P.2d 790, 812

(Wyo. 1991) (“implied indemnity cannot be created where there is no express or

implied contractual relationship”); Hanscome v. Perry, 75 Md. App. 605, 615,

542 A.2d 421, 426, 7 U.C.C. Rep. Serv. 2d 1516 (1988) (“a contractual right to

indemnication will only be implied when there are unique special factors dem-

onstrating that the parties intended that the would-be indemnitor bear the

ultimate responsibility . . . or when there is a generally recognized special rela-

tionship between the parties.”); McClish v. Niagara Mach. and Tool Works, 266

F. Supp. 987, 989 (S.D. Ind. 1967) (“The right to indemnity and the correspond-

ing obligation to indemnify generally spring from contract, express or implied,

and in the absence of an express or implied contract a right to indemnity gener-

ally does not exist.”).

151

Hanscome v. Perry, 75 Md. App. 605, 616, 542 A.2d 421, 426, 7 U.C.C.

Rep. Serv. 2d 1516 (1988). See also Parks v. U.S., 784 F.2d 20, 25, 1987 A.M.C.

83, 4 Fed. R. Serv. 3d 568 (1st Cir. 1986) (“A contractual right to indemnity may

be implied when there are ‘unique special factors demonstrating that the par-

ties intended that the would-be indemnitor bear the ultimate responsibility for

the plainti's safety, or when there is a generally recognized special relation-

ship between the parties.”).

152

Quadrangle Development Corp. v. Otis Elevator Co., 748 A.2d 432, 435

(D.C. 2000). See also Schneider Nat., Inc. v. Holland Hitch Co., 843 P.2d 561,

578 (Wyo. 1992) (“We hold that indemnity liability is to be allocated among the

parties proportionately to their comparative degree of fault in actions for equi-

table implied indemnity premised on the negligent breach of a duty between the

indemnitor and the indemnitee.”).

Liability for Construction Defects

to liability by the wrongful act of another in which he does not

join.

153

“For indemnication implied-in-law, more an equitable remedy

than an action in and of itself, North Carolina law requires there

be an underlying injury sounding in tort.”

154

“The North Carolina

Supreme Court has held that the right to indemnity by operation

of law arises out of a tort claim against two alleged joint

tortfeasors.”

155

“Thus, to successfully assert a right to indemnity

based on a contract implied-in-law, a party must be able to prove

each of the elements of an underlying tort such as negligence,

i.e., one that arises from a contract implied-in-law.”

156

“A claim of

defense arising out of tort concepts, such as indemnity, is not

available where the claim of the plainti is premised upon

contract.”

157

“It must be remembered that indemnity is an all or nothing

proposition damage-wise, and hence should be an all or nothing

proposition fault-wise. Apportionment of damages is not contem-

plated by it. That is the function of contribution.”

158

F. An Argument Against Apportionment

The foregoing discussion assumes, mainly in the cause of fair-

ness, that in multiple causation cases some mechanism for ap-

portioning liability is desirable. A provocative alternative was

detailed in a law review article by Professor Daniel Bussel in

1995.

159

Professor Bussel coined what he called the “one-party

rule.” In short, this rule would require the court to identify the

153

Rock Hill Telephone Co., Inc. v. Globe Communications, Inc., 363 S.C.

385, 389, 611 S.E.2d 235, 237 (2005).

154

Kaleel Builders, Inc. v. Ashby, 161 N.C. App. 34, 41, 587 S.E.2d 470, 475

(2003).

155

Terry's Floor Fashions, Inc. v. Georgia-Pacic Corp., 36 U.C.C. Rep. Serv.

2d 680 (E.D. N.C. 1998). See also Franklin v. Morrison, 350 Md. 144, 154, 711

A.2d 177, 182 (1998) (“Indemnity between persons liable for a tort falls within

this type of case . . ..We shall call this form of indemnity ‘tort’ indemnity.”).

156

Schenkel & Shultz, Inc. v. Hermon F. Fox & Associates, P.C., 180 N.C.

App. 257, 268, 636 S.E.2d 835, 843 (2006), a'd, 362 N.C. 269, 658 S.E.2d 918

(2008).

157

Richardson Associates v. Lincoln-Devore, Inc., 806 P.2d 790, 814 (Wyo.

1991).

158

J.B. Hunt Transport, Inc. v. Forrest General Hosp., 34 So. 3d 1171, 1175

(Miss. 2010).

159

Bussel, Liability for Concurrent Breach of Contract, 73 Wash. U. L.Q. 97

(1995). A vote of support for Bussel's alternative can be found in Steven J.

Jager and Coreen R. Ferencz, Construction Defects—Apportionment of Liability,

44 No. 12 DRI for Def. 44 (2002).

Journal of the ACCL

defendant most responsible for the greatest damages to the

plainti, and hold that defendant solely liable, excusing all

others.

Bussel suggested there are four “plausible solutions to allocat-

ing losses occasioned by concurrent breaches of contract.”

160

Paraphrasing, his solutions are:

E Excuse all of the defendants

E “Import” and apply tort notions of joint and several liability

E Impose apportioned, several liability, similar to comparative

fault or

E Apply the “one-party rule.”

161

In a clear and thoughtful discussion, Bussel explains how one

might justify excusing all of the defendants, but he then rejects

that option as unfair. He then identies many of the problems

inherent in any scheme intended to apportion fault in a contract

case. One problem is the sheer complexity of apportionment in

contract cases based on tort principles, much of which is described

above. Bussel also argues that apportionment introduces incen-

tives in the dispute resolution process that can lead to inecient

and unfair results, in particular favoring plaintis and more

culpable defendants over less-culpable defendants. More gener-

ally, Bussel argues that tort principles are inherently inconsis-

tent with contract principles, particularly in regard to damages

and traditional limits on damages. Those include both common

law damage limits, such as limits on consequential damages, and

limits stipulated by the parties, such as liquidated damages. Bus-

sel resists the trend towards application of joint and several li-

ability and any type of apportioned liability in contract cases.

Bussel does identify some of the problems with his “one-party

rule.” Fundamentally, he acknowledges that “[t]he one-party rule

does require that a court evaluate the comparative responsibility

of the defendants and judge which party ought to be held liable

and which excused.”

162

He acknowledges that this is not a “trivial

burden,” but he insists it is preferable to apportionment using

tort principles. He also acknowledges that courts applying the

160

At this point we should note that in his article Bussel focused primarily

on concurrent liability for liquidated damages for delay, although he does cite

other examples of how the “one-party rule” might work. The tort concepts he

criticizes might make more sense in a defect case, but note his discussion of

Employers Ins. of Wausau v. Suwannee River Spa Lines, Inc., 866 F.2d 752,

1990 A.M.C. 447, 8 U.C.C. Rep. Serv. 2d 659 (5th Cir. 1989).

161

Bussel, supra note 159, at 97.

162

Bussel, supra note 159, at 135.

Liability for Construction Defects

rule would have to deal with partial settlements, and the pos-

sibility of inconsistent verdicts if plaintis are forced to litigate

with defendants in dierent jurisdictions. Notwithstanding these

concerns, all of which Bussel considers more manageable than

apportionment, he suggests that courts select one defendant to be

held liable for the compensable damages, and then excuse the

other defendants, utilizing the following criteria:

E The timing of the breaches

E The relative gravity of the breaches

E The relative size of the contracts

E The relative culpability of the breaching parties

E The relative harm avoidance costs of the parties

E The relative cost savings of the breaching parties from non-

performance

163

In the end, Bussel expresses relief that the “line between contract

and tort remains meaningful.”

164

Perhaps that is still true.

V. Conclusion

The following scenario is possible and plausible in a multi-

party construction defect case. A plainti may contend that

breaches of duty by more than one party were substantial factors

contributing to the defect. Confronted with various economic loss

rules, the plainti may elect to sue some defendants for breach of

contract, while suing others (e.g., those not in privity of contract)

for negligence. A court or arbitrator may hold multiple defendants

liable to the plainti. If the plainti has no obligation to appor-

tion fault (as it often the case), the defendants are left to nd

some fair way to share responsibility for the harm caused to the

plainti. Such allocation may occur in a subsequent legal action

or by way of cross-claims in plainti's action.

Comparative fault rules may not apply to the extent the

plainti recovers for breach of contract. Similarly, statutory con-

tribution rules may not apply to the contract-based claims. It is

likely that some of the defendants will not be in privity of contract

with each other, in which case economic loss rules may deprive

those defendants of rights against each other under indemnity

agreements. Some authority suggests that equitable remedies

such as common law contribution or indemnity implied by law

might be available to settle the liabilities among the defendants,

but those authorities are few and far between and somewhat

antiquated.

163

Bussel, supra note 159, at 139, and discussion at 126–130.

164

Bussel, supra note 159, at 143.

Journal of the ACCL

The purpose of this article was to frame a problem, not to

advocate a rule. Unfortunately, the limited case law does not

even allow one to identify any clear trends in the law governing

apportionment in contract cases. If ongoing weakening of eco-

nomic loss rules is a trend, however, and the distinction between

negligence and breach of contract in defect cases is blurring, that

could change the shape of the problem. As noted earlier, some

commentators have advocated some form of comparative fault in

contract cases. If the law ultimately allows contribution or

comparative fault in breach of contract cases, apportionment of

fault both at trial and after judgment will be greatly enabled. If

that is the trend, however, one might ask what it means for vari-

ous techniques used to allocate risk in express contracts, such as

indemnity agreements and limitations on liability. For example,

a limitation of liability in a design professional's contract with an

owner might not provide much protection if the owner success-

fully sues the general contractor for a defect and the general

contractor in turn successfully sues the design professional for

contribution. One might also ask, as have several commentators,

how dierent apportionment rules would aect litigation strategy

and settlement negotiations. It is probably true that perfectly

fair, commercially ecient outcomes cannot be guaranteed by the

civil justice system, but if we aspire to those goals, the rules

governing apportionment in defect cases should receive some

attention.

Liability for Construction Defects