Contractor Liable if Owner Defaults on Payment to Architect

Nov 9, 2016

An Ohio Federal Court holds contractor and subcontractor liable for unauthorized use of architect’s plans.

Normally, except in design-build contracts, an owner hires an architect and then provides the contractor and its subcontractors with the plans and specifications for construction.

The question before the court in Eberhard Architects LLC v. Bogard Architecture Inc. et al., 314 F.R.D. 567 (N.D. Ohio 2016) was whether an architect has a cause of action against a contractor and subcontractor when the owner breaches its contract with the architect by failing to pay the architect  as stipulated in their contract.

Katherine E. Kohm, in an article in The Dispute Resolver, explains why the Ohio Federal Court held the contractor and it subcontractor liable even though there was, arguably, no privity of contract between the parties.

The contract between the architect and the owner for the construction of a hospital “granted the Owner a ‘nonexclusive license’ to use its plans and drawings…unless the Owner failed to make payments.” If this occurred, the owner’s right to use the plans was voided.

After the owner failed to make the agreed upon payments, the contractor and subcontractor “who did not have a contractual relationship with the Architect” continued work on the project. The architect notified all three “project participants” that they were violating Copyright Law by continuing to use the plans.

When this correspondence was ignored, the architect filed suit against the owner, the contractor and subcontractor.

The builders filed a motion to dismiss them from the case. “The Court denied the motion.”

According to Ms. Kohm, the lesson to be derived from this case is that “contractors and subcontractors who use plans and drawings that are unlicensed, whether they know so or not, may expose themselves to liability.”

 

Source—

Contractors Exposed to Copyright Liability Where Owner Breaches Agreement with Architect, Katherine Kohm, The Dispute Resolver, Oct. 16, 2016.