In a recent breach of contract case involving a construction contract for the replacement of a roof, the Supreme Court of Tennessee made two holdings that are crucial to understand for those lawyers, builders, and other parties involved in construction contracts, particularly, those carried out, in whole or in part, by subcontractors. First, even if a contractor does not make an express representation that it will perform its work in a workmanlike manner, that condition will be implied, by operation of law, into its contract (unless, of course, such a warranty is expressly disclaimed). Second, the contractor cannot avoid financial responsibility when work is not performed in a workmanlike manner because the contractor hired a subcontractor to perform the work (unless there is some sort of disclaimer by the contractor).
Here are the basic facts of the case:
• The Defendant was a roofing contractor who contracted to replace the Homeowners’ roof
• The contract between the Defendant and the Homeowners was oral
• The Defendant never made any warranties about the quality of his work, nor did he make any disclaimers about the quality of his work
• After the new roof was installed, it leaked
• The Defendant Contractor hired a subcontractor to repair the roof
• The Defendant Contractor and the subcontractor entered into an agreement whereby the subcontractor agreed that any damages caused by his repairs would be his, the subcontractor’s, responsibility
• The subcontractor used a propane torch, caused a fire and over $800,000 in repair damages
• The subcontractor had no insurance coverage or ability to pay for the damages
The Homeowners’ insurance company (the “Plaintiff”) filed a lawsuit against the Defendant Contractor. The Plaintiff alleged that the Defendant was liable for (1) breach of contract; and, for (2) negligence.
The Contractor filed a motion for summary judgment on both Plaintiff’s causes of action (negligence and breach of contract). The trial court granted the summary judgment on the Plaintiff’s negligence claim on the grounds that the Contractor could not be liable for the negligent acts of the subcontractor. With respect to the Plaintiff’s breach of contract claim, the trial court held that the Contractor was not liable because the damages were not foreseeable.
The Tennessee Court of Appeals reversed the decision of the trial court, and held the Contractor liable for breach of contract for the damages caused by the subcontractor. (The trial court’s ruling on the negligence claim was not appealed). The case was then appealed to the Supreme Court of Tennessee. It affirmed the decision of the Court of Appeals.
The Supreme Court held that construction contracts impose an implied duty on a builder to perform its work in a workmanlike manner. What does “workmanlike manner” mean? The language used by the Supreme Court fairly establishes that whether a contractor’s work is “workmanlike” will hinge upon whether or not the contractor “used the degree of skill and knowledge normally possessed by those members of the trade.”
After determining that the Contractor had a contractual duty to perform the roofing contract in a workmanlike manner, the Supreme Court moved to the question of whether or not the Contractor was “let off the hook” because he had subcontracted the work which resulted in the fire damage. The Supreme Court made a distinction, which is very important to understand, between a contractor’s liability in tort (for negligence) versus a contractor’s liability for breach of contract.
Generally, a person who employs a subcontractor is not liable where the subcontractor’s negligence injures another’s person or property. The Supreme Court held, however, that, if a contractor delegates work to a subcontractor, the contractor is still liable for breach of contract for a breach of the implied duty to perform work in a workmanlike manner.
To further illustrate the difference between tort liability for the negligence of subcontractors and contractual liability for the work of subcontractors, consider this scenario: If, instead of nearly burning down the Plaintiffs’ house and causing so much damage, the subcontractor had dropped a pallet of roofing materials on a passerby’s car, the Contractor would not have been liable for the medical bills or car repair expenses of the passerby who had no contract with the Contractor (unlike the Homeowners in this case).