Economic Loss Rule Generally Bars Recovery Absent Privity of Contract

Kegler Brown Construction Newsletter

Since the Floorcraft decision in 1990, Ohio law generally requires "privity of contract" before one party on a construction project can successfully sue another for economic loss. For example, as one prime contractor would not have a contract with another prime, they could not sue the other for economic loss, like delay damages. Similarly, a contractor could not sue an architect or engineer directly for defective plans.

There is a narrow Clevecon exception to this general rule where there is a "sufficient nexus" to substitute for privity of contract, such as when an architect directs and controls the work.

In the case of Mosser Construction, Inc. v. Western Waterproofing Co., Inc., 2006 WL 1944934 (Ohio App. 6th Dist. July 14, 2006), the Court of Appeals ruled that the contractor's claim against the architect, for negligent design of a trench drain he had to rebuild, failed without privity. While the architect's representative was present several days a week to inspect the work and answer questions, he was primarily to act as an intermediary between the contractor and the state, and therefore did possess not the same degree of power and oversight necessary to satisfy the Clevecon exception.

This case shows how difficult it is to assert claims for economic loss against one with whom one does not have a contract.