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Third-party Suit Against Construction Manager by Architect Dismissed

Greece Central School District v Tetra Tech Engineers, et al
2010 WL 4704324 (4th Dep’t, Nov 19, 2010)

The Greece CSD sued Tetra Tech for malpractice, and Tetra Tech third-partied a number of contractors and subcontractors on the large project, including Christa, the construction manager (CM).

Christa filed a motion to dismiss the third-party complaint against it. Supreme Court’s denial of Christa’s motion on appeal was reversed on three grounds, two of which are note-worthy:

1 – The contract between Christa and School District provided that nothing contained in the contract “shall create a contractual relationship with or a cause of action in favor of a third-party against either the [School District] or [Christa].”

According to the court “That unambiguous language is sufficient to negate any intent to permit the contract’s enforcement by third parties, and thus it cannot be said that [Tetra Tech] was a third-party beneficiary of that contract.”

The operative language barring third-party claims is that found in para 10.7 of the AIA B-801/CMa (1992 ed.). This same language now appears in para 10.5 the new AIA C-132 (2009 ed.) In short the court said that the non-third party provison means what it says, and the courts will enforce it.

2 – The court also said that “based on the unambiguous language of the contract between Christa and [the school district], we agree with Christa that [Tetra Tech] was not in the ‘functiional equivalent of privity’ to that contract’.”

Thus a clear non-third-party provision takes away, as a matter of law, the argument by someone who does not have a contract with the CM, that the “functional equivalent of privity” existed between them under the facts of that case. This is a pretty big deal. It means that a CM can get out of the case by filing a motion, and not have to go through expensive discovery and trial.

So CMs – make sure that your contracts have a clear non-third party provision.

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