Legal Blog

Tender Breach

     In the Design Services case, the question was not “who was responsible for what.” The aggrieved party had never started the work because the owner had wrongfully awarded the contract to a non-compliant tenderer. The general sued and ultimately settled with the owner. However, the rest of the design-build team also sued the owner for their damages. Should they be able to claim their damages directly against the owner when the tender came from the general?

Process 

In this case, the design-build process took design-build to its logical extreme. Approximately 13 designers, suppliers, and subs, along with the general, were part of the design team. The owner required the general to supply full details about all of the team members. This included details about the role each of the team members would play, the relationship of each of the team members to the others, team members’ experience with other projects and their history of working with each other, and the principals of the team members. This information is usually only requested from the general and the main designer. All team members had to declare that they had been involved in the preparation of the drawings and specs and certify the deliverables, work plan, and quality control program. Further, the successful bidder had to ensure that all team members would attend a “partnering session” with the owner. All this evidence was tendered to persuade the judge that a contract with the general was equivalent to a contract with all of them.

Breach of Contract 

The judge held that the owner had not entered into Contract A with any team players other than the general. The tender was clear that only the general made the proposal. It allowed the design team to enter into a written joint venture agreement and for the joint venture to submit the proposal, but the design team and general did not do this. Accordingly, just as the owner would have been unable to claim against the design-build team members, other than the general, for breach of contract A, the team members were not able to claim against the owner for its breach.

Tort

The team members were not entirely out of luck. The judge held that the owner owed a duty of care to the team members to treat them fairly. It was not a case of indeterminate liability to an indeterminate class of people because the owner knew exactly who the team members were and therefore knew to whom it would owe its duty of care. Further, the harm to the team members was foreseeable. The judge stated, “This is a case that cries out for a remedy.”

The parties had not addressed the quantum of damages and that issue was left for another day. We suspect that the damages would be the cost of providing the design and bid and not the profit that the team members expected to gain from the contract.