Trying To Do the Right Thing: Self-Preservation by Good Faith Decision Making
March 2006
When a design professional is asked to make
a decision as to responsibility for certain item of work and decide which division
of the contract documents encompasses that work, there is a high probability
that someone is going to be unhappy with whatever decision is reached. This
cannot be avoided. However, the design professional can minimize his or her
exposure to claims by following the requirements of the contract documents.
by Kenneth
A. Slavens
Brown & James,
P.C.
An example of this recently was considered by the Massachusetts Court of
Appeals. On a public project known as the Westchester Convention Center, the
architect was asked to make a determination as to whether a particular item
was within the scope of work for the audiovisual contractor or the electrical
contractor. The architect decided that the item at issue, backboxes for the
loud speakers, were the responsibility of the audiovisual contractor to provide.
The audiovisual contractor did the work under protest, but sued the general
contractor and the surety for the cost of the work. The general contractor sued
the City of Westchester seeking indemnity for any amounts it may have had to
pay the audiovisual contractor if the work was found to be an extra to the contract.
The City, in turn, brought an action against the architect seeking indemnification
in the event it would become obligated to the general contractor. The question
was whether the architect's decision would be found to be final. If the architect
did not act arbitrarily or capriciously, a Massachusetts statute would allow
the decision to stand as final.
The Massachusetts's Court of Appeals that eventually resolved this dispute
found the architect had acted in good faith in rendering the decisions at issue,
and, as a result, further found, that the architect did not have any liability
to the City or others. In fact, the audiovisual contractor was bound by the
decision, and no further relief was due.
Factual Background
The convention center was equipped with an elaborate audiovisual system that
included numerous loudspeakers. Most of the loudspeakers had a "backbox" that
housed the loudspeaker and into which wires ran. During construction, the audiovisual
contractor and the electrical contractor came to loggerheads over the responsibility
for supplying and installing the backboxes.
Pursuant to the contract documents, the architect was designated the "interpreter
of the requirements of the Contract Documents and the judge of the performance
there under...." The dispute over responsibility for the backboxes was submitted
to the architect.
The seeds for the dispute were planted much earlier during the project. During
the bidding phase, each subcontractor was issued a set of documents relevant
to its bid. These documents included drawings, specifications, and addenda.
Prior to and during the bidding, the original documents were subject to addenda.
Each subcontractor was responsible for reviewing all addenda and making it know
exactly what was to be bid within its scope.
In the original Specifications, Division 17100 dealt with the work to be
performed by the audiovisual contractor. Under the applicable paragraphs, the
Specifications stated that the contractor was to "provide materials, labor,
equipment, and services necessary to furnish, deliver, and install all work
of this section as shown on the drawings as specified herein and/or required
by job conditions." The work was to include, but was not limited to, "the supply
and installation audiovisual [sic] systems as specified herein and shown on
the drawings." In addition, several sections of this section of the specifications,
applicable to the audiovisual contractor's work, directed that certain speakers
were to be provided "complete with [a] backbox."
Section 1600 of the specifications dealt with work to be done by the electrical
contractor. The electrical drawings contained a note stating that "the electrical
contractor shall provide ... [the] speaker boxes." The word "provide" was defined
in the General Conditions as meaning "furnish and install complete ... unless
otherwise specified."
To complicate matters even more, an addendum was issued to the electrical
contractor's work section which gave responsibility to the electrical contractor
for installing "outlet boxes." There was a dispute in the facts of this case
whether "outlet boxes" and "backboxes" are the same thing within the industry.
When the dispute was submitted to the architect, the architect determined
that the backboxes were in the scope of audiovisual contractor's contract. The
architect looked at the contractual terms for the order of priority for the
documents, and spoke to others involved in the project, including the drafter
of the specification, the construction manager, and another architect in the
same office in his effort to make the decision correctly.
The audiovisual contractor did the work under protest and brought a claim
against the architect that the architect had acted in bad faith in making the
decision. The audiovisual contractor tried to recover the cost of the work as
a backcharge against the contractor by way of a lawsuit eventually, as described
above.
The Court's Conclusions
The court reviewed the evidence of what was specified and determined that
there did appear to be a conflict between the requirements in the audiovisual
specifications and the statement on drawing E15. The court also felt that there
was a conflict by the assignment of the "outlet boxes" to the electrical contractor
in the addenda, since the audiovisual specifications assigned the "backboxes"
to the audiovisual subcontractor if, in industry jargon, the two can mean the
same thing.
The audiovisual contractor argued that the architect's decision had no rational
basis in reaching his decision and, thus, acted in an arbitrary and capricious
manner.
The architect argued that the direct reference in the electrical drawing
E15 to backboxes was superseded by the language in the specifications. The architect
relied on the order of priority of documents as specified in the contract. The
architect reasoned that audiovisual contractor's duties to provide the backboxes
was in the specifications, whereas the electrical subcontractor's duty to provide
the backboxes was noted only on a drawing. Since specifications take precedence
over drawings, the architect determined that the obligation for backboxes fell
to audiovisual contractor.
In an effort to respond to the architect's argument on priority of the documents,
the audiovisual contractor argued that the language on the drawings was put
there by addenda. As a result, since addenda take precedence over specifications,
according to the contract documents, the audiovisual contractor argued, the
architect's decision was wrong.
The architect countered that the addendum did not specifically exclude the
boxes, so there was no conflict between the requirement in Section 17100 and
the addendum. The addendum spoke of outlet boxes, and the architect disputed
that the term "backboxes" is equivalent to the generic term "outlet boxes."
While the architect does not dispute that outlet boxes can include speaker back
boxes, the architect argued that since the audiovisual specifications explicitly
included the speaker boxes, while at the same time specifically excluding responsibility
to provide "outlet boxes," the two terms cannot mean the same thing.
The court concluded that the architect's decision was plausible and cannot
be characterized as having no rational basis. The decision, therefore, was not
arbitrary and capricious.
The court further considered the argument of the audiovisual contractor that
the architect had acted in bad faith. The court concluded that the facts showed
that the architect at least made a reasonable judgment as to the relative obligations
of the electrical and audiovisual subcontractors, and determined that this cannot
form the basis of liability. The court acknowledged that there was an ambiguity,
and, in fact, the court went on, one might say a contradiction, in the contract
documents as to who was responsible for the backboxes. However, the court held
that the architect's resolution of that conflict cannot, as a matter of law,
support an inference of bad faith.
Lessons Learned
What can we learn from this? By observing the contract's terms, in particularly
with regard to the priority of the documents and investigating the issue, this
architect was able to demonstrate to the court that he made an effort to do
what was right.
We need to remember that the court does not have to find that the decision
was right. The court need only find that the architect tried to make the right
decision. This is generally true when one wants to have protection in the decision-making
process. By observing the priority of the documents, and making a reasonable
investigation by speaking to the others involved in the project, the architect
in this case was able to demonstrate a reasonable effort to make the correct
finding.
When a design professional is faced with a similar situation, he or she must
be sure to follow the terms of the contract. The design professional should
not substitute his or her idea of what is right for what the parties agreed
to under the contract terms. The design professional should make a reasonable
investigation into the issue at hand. The design professional should also be
sure to document, his or her efforts, including the investigation made. The
documentation will be invaluable if called on by the court to show what was
considered in making the decision.
Opinions expressed in Expert Commentary articles are those of the author and are
not necessarily held by the author's employer or IRMI. Expert Commentary articles
and other IRMI Online content do not purport to provide legal, accounting, or other
professional advice or opinion. If such advice is needed, consult with your attorney,
accountant, or other qualified adviser.