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Contract Privity Didn't Bar Sub's Tort Claims For An Unfulfilled Payment Promise

Wednesday, August 01, 2012 05:41 am


Promissory Estoppel -- Negligent Misrepresentation -- Fraud

Culy Construction & Excavating, Inc. v. Laney Directional Drilling Co., U.S. Dist. Lexis 79575 (S. D. Ohio, June 8, 2012)

A court ruled that a general contractor was liable to a subcontractor under a theory of negligent misrepresentation for passing on the owner's erroneous subsurface conditions data.

General contractor Culy Construction & Excavating, Inc. (Culy) hired subcontractor Laney Directional Drilling Co. (Laney) to drill nine horizontal direction drill bores as part of an underground pipe installation project. Laney's work was halted by subsurface conditions at several crossings that differed from those represented by Culy. Culy promised to pay additional compensation for change orders, with the additional amounts to be determined later, if Laney resumed its work on the crossings. However, Culy later refused to pay more than the original prices for at least one crossing. The parties took their dispute to court, where Laney filed three claims against Culy for promissory estoppel, negligent misrepresentation, and fraud. Culy was able to win dismissal of only the last of those claims.

Contract didn't bar promissory estoppel claim

First, Culy argued that the promissory estoppel claim failed because the entire relationship between the parties was governed by the subcontract. But the court reasoned that Culy's promise to Laney--return to work now in exchange for the full contract sum plus an additional negotiated amount--could be viewed as either a contract modification or a new agreement. The promise w [...]

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