Plans and specifications are the key to every successful construction project. They constitute the bid documents on which all contractors and subcontractors competing for the work must rely. And they provide the information essential to actual construction of the project. Misleading and inaccurate plans and specifications result in erroneous bids and increased construction costs. Despite the critical nature of these documents, and their effect upon cost, contractors in Massachusetts have not often been successful in recovering damages against architects or engineers responsible for faulty plans and specifications. That track record may soon change in light of a recent decision of the Massachusetts’ Appeals Court permitting a subcontractor to pursue the project engineer for losses it incurred arising from misleading plans and specifications prepared by the engineer.
In allowing the subcontractor to proceed to trial on its claim, the Appeals Court rejected the engineer’s legal contention that it could not be held liable for the subcontractor’s economic loss even if it were negligent. Architects and engineers have long sought to avoid liability to contractors in these circumstances by invoking a legal rule of damages known as the economic loss doctrine. That doctrine bars recovery of economic losses caused by one party’s negligence to another with whom it has no contract, where there is no accompanying physical injury or property damage. Were that doctrine applied to contractors’ claims arising from faulty plans and specifications, contractors could never recover their losses from the architect or engineer responsible because they have no contract with the project architect or engineer, and their damages, consisting of increased costs, are exclusively economic losses.
The Appeals Court ruled the economic loss doctrine did not apply to protect an engineer who negligently prepared plans and specifications which misrepresented job conditions and requirements. That decision applies with equal force to a project architect. Even though project architects or engineers contract only with the owner, and not with contractors bidding and building the project, they still owe a duty of care to those contractors who the architect/engineer knows, or should know, will rely on plans and specifications they prepare.
Where an architect or engineer fails to exercise reasonable care in the preparation of plans and specifications, and thereby communicates false or erroneous information to contractors who justifiably rely on that information, then that architect or engineer may be liable for the economic losses caused to those contractors.
Recoverable losses include all pecuniary losses a contractor (or subcontractor) suffers as a consequence of its reliance upon the architect’s or engineer’s negligent misrepresentations in the plans and specifications.
The right to seek damages from designers for negligently prepared bid documents does not excuse contractors and subcontractors from their obligation to study bid documents carefully. They can only recover where their reliance on misrepresentations contained in plans and specifications is reasonable. If errors in bid documents are apparent, contractors and subcontractors cannot ignore them, and later use those errors as a basis to seek extra compensation. Any errors that are apparent must be brought to the architect’s or engineer’s attention before submitting a bid.
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