A Kentucky Court of Appeals recently allowed a general trades contractor to sue a construction manager for improperly coordinating and supervising a construction project and for providing incorrect information to the contractor. The Court allowed the suit to continue even though the general trades contractor did not have a contract with the construction manager. The Court held that a contractor may make a claim against a construction manager based upon misrepresentation despite lack of a contract.
The owner, Delor Design Group, Inc. began renovating a building in Louisville, Kentucky to be used as office space. It contracted with Presnell Construction Managers, Inc. to oversee the project. EH Construction held a contract for the general trades bid package. Numerous disputes arose related to EH’s work.
EH eventually filed suit against Presnell claiming that it improperly managed the project. The trial court dismissed that action against Presnell holding that because EH and Presnell did not have a contract, Presnell could not be liable for any damages suffered by EH.
The Court of Appeals disagreed. It determined that liability can be imposed upon a person who, in the course of business, negligently gathers and distributes information that he intends to have others rely upon. The Court specifically held that EH could prevail if it proved that:
- Presnell was acting in the course of its business, profession, or employment, or in a transaction in which it had a monetary interest;
- Presnell supplied faulty information intended to guide others in their business transactions;
- Presnell failed to exercise reasonable care in obtaining or communicating the information; and
- EH justifiably relied upon the information and thereby incurred pecuniary loss.
EH Construction, LLC. v. Delor Design Group, Inc. (2000), Court of Appeals of Kentucky.
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