Liability to Parties with Whom You Had No Contact

One issue in construction law is whether a subcontractor or contractor can bring suit against an owner or architect even if no contract existed between them. The answer depends on whether the suit involves a claim for Breach of Contract or for Negligence.

1. Breach of Contract

   The law in Alabama regarding construction contracts is that one not a party to a contract generally cannot sue for its breach. E. C. Ernst, Inc. v. Manhattan Const. Co. of Texas, 551 F.2d 1026, 1030 (5th Cir. 1977) (applying Alabama law). However, “[t]hird parties may sue on the contract if the provision is intended for their direct, as opposed to incidental, benefit. Id. At least one court applying Alabama law has held that

   [i]n a large construction project each of the individual contracts is inevitably intertwined with many others, all devoted to the general goal of finishing all phases of the project according to the plans and specifications drawn up by the architect and within the time period established under the prime contract. But this interrelationship by itself does not justify imposing third party beneficiary duties, which flow not from the inevitable consequences of a breach but rather from the intent of the contracting parties.

   Id. at 1030 (disallowing a subcontractor to bring a claim against the owner for breach of contract). Additionally, if the contract “specifically states that a third party shall have no legally enforceable rights in the agreement, a court must effectuate the expressed intent by denying the third party any direct remedy.” Federal Mogul Corp. v. Universal Const. Co., 376 So.2d 716, 724 (Ala. Civ. App. 1979); see also, Sheetz, Aiken & Aiken, Inc. v. Louverdrape, Inc. 514 So.2d 797, 803 (Ala. 1987) (affirming motion to dismiss of subcontractor in claim brought by architect); Sheetz, Aiken & Aiken, Inc. v. Spann, Hall, Ritchie, Inc., 512 So.2d 99, 102 (Ala. 1987) (affirming summary judgment and finding that developer had no breach of contract claim against architect with whom it had no contract).

2. Negligence

   A contractor or subcontractor may have a claim against an owner or architect for negligence even though they had no contract with them. See Berkel and Co. Contractors, Inc. v. Providence Hosp., 454 So.2d 496, 501 (Ala. 1984) (claim by subcontractor against architect and court noted that “Alabama courts have rejected the absence of privity of contract as a defense to a negligence action”); see also, Federal Mogul Corp. v. Universal Constr. Co., 376 So.2d 716 (Ala. Civ. App.1979); E.C. Ernst, Inc. v. Manhattan Constr. Co. of Tex., 551 F.2d 1026 (5th Cir.1977), cert. denied, 434 U.S. 1067, 98 S. Ct. 1246, 55 L.Ed.2d 769 (1978) (under Alabama law, an electrical subcontractor on a construction project may proceed on a negligence theory in an action against an architect absent contractual privity between them); Zeigler v. Blount Bros. Constr. Co., 364 So.2d 1163 (Ala. 1978). In deciding whether to impose a duty in a construction context, the trial court should analyze six factors:

   (1) The extent to which the transaction was intended to affect the other person; (2) the foreseeability of harm to him; (3) the degree of certainty that he suffered injury; (4) the closeness of the connection between the defendant’s conduct and the injury; (5) the moral blame attached to such conduct; and (6) the policy of preventing future harm.

   Howe v. Bishop, 446 So.2d 11 (Ala. 1984) (Torbert, C.J., concurring in the result)