Oregon Construction Law : Oregon Construction Lawyer & Attorney : Davis Wright Tremaine Law Firm : Serving Portland, Salem, Eugene, Beaverton

As originally published in the Daily Journal of Commerce

Authored by: Marcus Eyth

Lots of people in the construction industry have been talking about public-private partnerships recently. But many folks aren’t really sure what a PPP is, don’t understand the players and their roles, and may not recognize the risks and potential benefits.

PPPs have been used in the U.S. for more than 225 years in various forms, and include wildly successful and famous projects such as the Erie Canal, the Holland Tunnel, Grand Central Terminal, the Brooklyn Bridge, the New York subway and the Boston subway.

Fundamentally, PPPs consist of a contractual relationship between a public agency and a private entity (usually referred to as a “concessionaire”) with a purpose of delivering a service or facility for the use of the general public. Stated differently, the agency and the private entity jointly supply money to build, operate and maintain a public project, with both sides sharing the risks and rewards of project delivery.

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Last month's Oregon Appellate Court decision clarifies that parties in privity with one another MAY sue in tort for construction defects.

Previously, the law seemed relatively straight forward:

Unless parties are in a "special relationship" (eg, physician-client; engineer-client), parties in contract with one another generally may not bring a separate cause of action in tort for construction defects.  Jones v. Emerald Pacific Homes, Inc., 188 Or App 471, 71 P.3d 882 (2003). Instead, parties were limited to the remedies agreed to via contract.

That's no longer the case.

In Abraham v. T. Henry Construction, Inc. et al, Case No. A136228, plaintiff home owners sued their contractors and subcontractors over construction defects (resulting in water damage) based on contract and tort.  While Defendants successfully dismissed the contract claim (based on statute of limitations), Defendants were unable to dismiss the tort claims on summary judgment.

Although the court found that there was no "special relationship" between the parties, the court held that the tort claim survives because violations of building code constitute a breach of duty of care independent of contractual duties.  The court found that plaintiffs had pled the requisite elements (essentially negligence per se) and allowed the claim.

Much to every contractor's chagrin, virtually every alleged construction defect can be categorized as a building code violation.  Ergo, tort claims in this context  will survive summary judgment....unless the Supreme Court overturns the Abraham decision....

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Are No Damages for Delay Provisions enforceable in Oregon?  That depends (favorite lawyer's response, but true)...

In summary, these provisions are:

• enforceable on private projects
• unenforceable in public procurement prime contracts
• probably enforceable (but TBD) in public procurement subcontracts

In essence, these provisions limit a contractor's remedy in the event of a delay to a time extension, but no dollars.

For almost 100 years, no damages for delay provisions were enforceable in Oregon in all construction contracts.  See Manerud v. City of Eugene, 62 Or 196, 205, 124 P 662 (1912).

Then, in 2005, the Oregon legislature enacted ORS 279C.315 (previously ORS 279.063), making these provisions void as against public policy and unenforceable in public prime contracts. 

But what about subcontracts on public procurment projects? 

The law there is unsettled since the legislature was silent on subcontracts.  Since general contractors typically include such provisions in their subcontracts, I'm sure it's just a matter of time before that case makes its way through the courts...

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