Texas Supreme Court lets building owner sue subcontractor for negligence

In an important case, the Court says that a property owner can sue a subcontractor for faulty work in some situations.

The Texas Supreme Court clarified a gray area of Texas construction law by holding that a property owner may bring a legal claim for negligence against a subcontractor for property damage from shoddy work - despite that no direct contract existed between the two parties, each of which contracted only with the general contractor ­- when the subcontractor breaches the implied duty to perform every contract with skill and care.

The August 2014 decision of Chapman Custom Homes, Inc. v. Dallas Plumbing Co. helped to clarify an area of confusion concerning application of the economic loss rule to the property owner-subcontractor relationship. The economic loss rule says basically that a plaintiff cannot sue outside the subject contract in tort, such as for negligence, when the losses are only financial and those that would be expected if the contract were breached.

Traditionally in the construction setting, owners have often been barred from suing subcontractors for property damage from faulty work under the subcontracts because the owners are not parties to the subcontracts, and barred in tort by the economic loss rule. However, in Chapman the court clarified that there can still be tort claims "arising out of a contractual setting," including by harmed "contractual and commercial strangers" if the defendant breaches a duty "independent of the contractual undertaking" resulting in harm beyond the financial losses expected for breach of the contract.

In Chapman, a plumbing subcontractor performed negligent work that allegedly caused major water damage to a new home. Reversing the lower courts, the Texas Supreme Court said that the negligent performance of a contract that injures a third party gives rise to a negligence claim, even if the third party is not party to the contract, where the party to the contract did not perform it with care and skill, resulting in damage beyond the financial scope of the contract.

This area of law is quite complicated and any Texas subcontractor facing a lawsuit for defective work or any property owner seeking a legal remedy for shoddy work by a subcontractor should seek the legal advice of an experienced construction law attorney. Such a lawyer will understand the complex nuances of the economic loss rule and its application in this setting.

From their office in Dallas, the attorneys at Stanton Serbousek Law Firm, represent clients in construction law issues, including construction defect litigation, as well as in other commercial matters like transactions, collections, liens, employment law, energy law, environmental claims, personal injury defense, professional liability and transportation law.