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Volume 8 - Number 5 | February 1, 2010

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Recent Issues

  EDITOR'S NOTES | Issue 8-5
The legal principle of "negligent misrepresentation" enables one party on a construction project to sue another party even though there is no contractual relationship between the two. If, in the course of business, a party generates information upon which it knows other parties will reasonably rely, that party can be held liable for purely economic loss caused by misinformation. The most common example on construction projects is the ability of constructors to sue design professionals for faulty contract documents.

In a recent case in Pennsylvania, an excavator sued a utility company for failing to accurately mark the location of the utility's subsurface lines in the job site area, thus delaying the excavator's work. The Pennsylvania Supreme Court previously allowed a contractor to recover from an architect for defective design documents. However, the court did not extend liability to the utility. The court reasoned that unlike the architect, the utility was not in the business of selling its information (the location of utility lines) for a profit. The contractor could not recover its delay damages.

Other cases this week involved the lack of an original signature on an e-mail transmission and a cost-plus contractor's failure to adequately document its costs. A low bid was spoiled because the bid bond, sent as an e-mail attachment from the bonding agent to the bidder, lacked an original signature of the agent. And the cost-plus contractor was denied any further payment from the owner. The documentation of costs was incomplete, duplicative and devoid of credibility.
  UTILITY NOT LIABLE TO CONTRACTOR FOR INACCURATE MARKING OF SUBSURFACE LINES
A utility company that mismarked the location of subsurface lines could not be held liable to a construction contractor for delay damages under a theory of negligent misrepresentation.
  E-MAIL TRANSMISSION OF BID BOND SPOILS LOW BID
A printout of an electronically transmitted bid bond was not valid bid security because it did not contain an original signature of the bonding agent. The Federal Acquisition Regulation requires an original signature and the E-SIGN Act does not apply to federal contracting.
  COST-PLUS CONTRACTOR FAILED TO DOCUMENT COSTS
A cost-plus contractor failed to itemize the costs incurred and the contractor’s actual payment of those costs, so the owner was justified in refusing to make further payment. A portion of the overhead and profit mark-up the contractor received was refunded to the owner as compensation for the contractor’s delay in completion.
 
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