Oregon Supreme Court: Negligence Claim OK, Despite Contract

March 16, 2011

The Oregon Supreme Court has ruled that a claim for property damage arising from construction defects may lie in tort, in addition to contract, even when the homeowner and builder are in a contractual relationship.

According to court documents in Abraham v. T. Henry Construction Inc., Richard and Janice Abraham hired Keith Lucas as a general contractor to complete work on their house after substantial work had been done by other contractors. The Abrahams signed a contract with Lucas that required him to perform all work “in a workmanship like manner and in compliance with all building codes and other applicable laws.” The Abrahams also contracted with Kevin Mayo to frame the house. Six years after the work had been completed, the Abrahams found extensive water damage and wood rot in the sheating and framing, which they claimed resulted from defective work. Thus, the Abrahams filed a claim alleging breach of contract and negligence, seeing monetary damages for physical damage to the house, as well as compensation for the house’s diminished value.

The defendants moved for summary judgment arguing that the claim was barred by Oregon’s six-year statute of limitations. And they argued that a “special relationship,” such as one between a doctor and patient, was required to bring a tort claim, which the Abrahams had failed to demonstrate.

The lower court held that the plaintiff’s negligence claim was barred because a special relationship did not exist.

However, the Court of Appeals agreed with the plaintiffs that a statute or administrative rule could establish a standard of care independent of the contract, and that the negligence claim was sufficient as the defendants had failed to comply with the building code.

The state Supreme Court ruled that common law negligence principles apply — notwithstanding a contractual relationship — as long as the property damage that the Abraham’s sought recovery for was a “reasonably foreseeable result” of the contractors’ conduct.

The high court said if a contractual relationship did not exist, the defendants would have been subject to a common law negligence claim. Thus, it ruled that common law negligence principles are an “applicable standard of care, independent of the terms of the contract.”

The Supreme Court affirmed the Court of Appeals decision and remanded the case to the circuit court for further proceedings.

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