A California Court of Appeal decision serves as a cautionary reminder to
design professionals: Relying on privity as a defense in construction
disputes—especially in noncommercial projects—may not provide the protection they
expect. The case is Lynch v. Peter
& Associates, Engineers, Geologists, Surveyors, Inc., 104 Cal. App.
5th 1181 (2024).
This California home renovation dispute explored the limits of contractual protections for design professionals, highlighting that privity may not always shield them from liability.
Facts of the Case
The Lynches hired Grover Construction to renovate and expand their
home. During the project, Grover Construction retained Peter & Associates, a
geotechnical engineering firm, to inspect a footing trench for a $360 fee. A
licensed engineer from Peter & Associates conducted the inspection and issued a
brief handwritten report addressed to both Grover Construction and the Lynches,
concluding that the soil was "geotechnically acceptable."
After construction was completed, the foundation failed, resulting
in significant subsidence and property damage. Following her husband's death, Mrs.
Lynch sued Peter & Associates for professional negligence and nuisance and also
brought claims against other parties, including Grover Construction.
The contract for the trench inspection was between Grover Construction and Peter & Associates only; it did not reference the Lynches or any third-party beneficiaries.
After being sued, Peter & Associates sought summary judgment,
arguing that the absence of a contract—and, thus, privity—with Mrs. Lynch meant it
owed her no duty of care. The trial court agreed and granted summary judgment for
Peter & Associates; Mrs. Lynch appealed the decision.
The California Court of Appeals' Ruling
The appellate court acknowledged that, traditionally, liability for negligence in performance of a contract requires privity. However, the court noted that this rule has been liberalized in recent years, particularly in cases where certain factors suggest a duty of care exists despite the absence of privity. The court considered the following.
The extent to which the transaction was intended to affect the plaintiff
The foreseeability of harm to the plaintiff
The degree of certainty that the plaintiff suffered injury
The closeness of the connection between the defendant's conduct and the
injury
The moral blame attached to the defendant's conduct
The policy of preventing future harm
The court found that all six factors supported imposing a duty on Peter & Associates. The inspection was clearly intended to benefit the homeowners, and harm from a negligent inspection was foreseeable. The injury—foundation subsidence—was certain and closely connected to the inspection. The court also noted the lack of evidence from Peter & Associates demonstrating the adequacy of its inspection and emphasized the policy interest in preventing future harm.
Accordingly, the appellate court held that Peter & Associates owed Mrs. Lynch a duty of care to perform its geotechnical inspection with the skill expected of a professional in its field.
Takeaways
The traditional protection from liability for negligent performance of contractual obligations in the absence of privity is eroding, as shown by this case. Although this decision may not be binding in your jurisdiction, it serves as a valuable warning and provides a useful framework for assessing when negligent conduct might give rise to liability, even without a direct contractual relationship with the claimant.
Another important takeaway is the courts' willingness to protect
consumers—such as homeowners like the Lynches—more readily than commercial entities
in the construction industry.
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.
A California Court of Appeal decision serves as a cautionary reminder to design professionals: Relying on privity as a defense in construction disputes—especially in noncommercial projects—may not provide the protection they expect. The case is Lynch v. Peter & Associates, Engineers, Geologists, Surveyors, Inc., 104 Cal. App. 5th 1181 (2024).
This California home renovation dispute explored the limits of contractual protections for design professionals, highlighting that privity may not always shield them from liability.
Facts of the Case
The Lynches hired Grover Construction to renovate and expand their home. During the project, Grover Construction retained Peter & Associates, a geotechnical engineering firm, to inspect a footing trench for a $360 fee. A licensed engineer from Peter & Associates conducted the inspection and issued a brief handwritten report addressed to both Grover Construction and the Lynches, concluding that the soil was "geotechnically acceptable."
After construction was completed, the foundation failed, resulting in significant subsidence and property damage. Following her husband's death, Mrs. Lynch sued Peter & Associates for professional negligence and nuisance and also brought claims against other parties, including Grover Construction.
The contract for the trench inspection was between Grover Construction and Peter & Associates only; it did not reference the Lynches or any third-party beneficiaries.
After being sued, Peter & Associates sought summary judgment, arguing that the absence of a contract—and, thus, privity—with Mrs. Lynch meant it owed her no duty of care. The trial court agreed and granted summary judgment for Peter & Associates; Mrs. Lynch appealed the decision.
The California Court of Appeals' Ruling
The appellate court acknowledged that, traditionally, liability for negligence in performance of a contract requires privity. However, the court noted that this rule has been liberalized in recent years, particularly in cases where certain factors suggest a duty of care exists despite the absence of privity. The court considered the following.
The court found that all six factors supported imposing a duty on Peter & Associates. The inspection was clearly intended to benefit the homeowners, and harm from a negligent inspection was foreseeable. The injury—foundation subsidence—was certain and closely connected to the inspection. The court also noted the lack of evidence from Peter & Associates demonstrating the adequacy of its inspection and emphasized the policy interest in preventing future harm.
Accordingly, the appellate court held that Peter & Associates owed Mrs. Lynch a duty of care to perform its geotechnical inspection with the skill expected of a professional in its field.
Takeaways
The traditional protection from liability for negligent performance of contractual obligations in the absence of privity is eroding, as shown by this case. Although this decision may not be binding in your jurisdiction, it serves as a valuable warning and provides a useful framework for assessing when negligent conduct might give rise to liability, even without a direct contractual relationship with the claimant.
Another important takeaway is the courts' willingness to protect consumers—such as homeowners like the Lynches—more readily than commercial entities in the construction industry.
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.