The following focuses on the legal pitfalls of building a home (or engaging in any construction project) associated with the hiring of engineers, general contractors and subcontractors. Although building a home or doing construction involves many types of legal pitfalls, the following will only discuss the specific problems with hiring an engineer, general contractor or subcontractors and the potential of assuming liability for their actions in tort as a result of being the property owner.

A property owner can be liable for negligent or intentional actions that its construction professionals take whether or not the property owner had knowledge of the contractor’s actions. The most common case of a property owner assuming liability for its contractor’s actions is when the owner’s engineer is negligent in design, such that the construction of the design ultimately causes harm to a third party’s property. For example, a negligent design of a stormwater system that alters the normal course of water and ultimately damages a third party’s building. Or, when a contractor is negligent in building and trespasses on a third party’s property or harms the third party’s property in other ways. A property owner can take steps to prevent this from happening. The following information will assist the property owner in understanding what it needs to do to avoid liability for its engineer’s or contractor’s actions.

A. If an engineer or contractor is an employee of the property owner, liability can attach. If the contractor is an independent contractor, the general rule is that the property owner is not liable for the engineer’s or contractor’s actions.

The law will impose liability on a property owner for its engineer’s or contractor’s actions if that person acts negligently or intentionally in a way that damages another, if the engineer or contractor is deemed an “employee” of the property owner. Conversely, if the engineer or contractor is deemed an “independent contractor,” the property owner will not be liable for the torts committed by its contractor, unless an exception applies to the general rule.

There is much law in Washington State enunciating the “test” that is used to determine if a construction professional is an “employee” or an “independent contractor” of the property owner. The law defines an independent contractor as “a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other’s right to control with respect to his physical conduct in the performance of the undertaking.” Kamla v. Space Needle, Corp., 147 Wn. 2d 114, 119, 52 P. 3d 472 (2001) citing Restatement (Second) of Agency § 2(3). To boil this definition down to the most relevant point; a person is most likely an independent contractor where he is not controlled by the property owner. The fundamental question the property owner should ask is “am I contracting and acting in away where I can and will tell the worker how to do his or her job?”

In addition to this definition, the courts apply a “test” or factors to determine the independent contractor status. All are centered on the primary issue of “control.” (1) what does the agreement say about how much control the owner can exercise over the work of the contractor? (2) is the property owner in an entirely different and distinct profession or occupation than the contractor? (3) is the work the contractor is doing normally done under the direction of another or without supervision? (4) what is the skill that is required of the contractor’s occupation? (5) did the property owner supply tools and a place of work to the contractor? (6) how long was the contractor employed? (7) how was the contractor paid? By job or by time? (8) did the parties believe that the contractor was being employed by the property owner? (9) is the property owner in the same business as the contractor?

The courts don’t have to find all of the factors present but all of the questions do affect the determination of whether the contractor is an independent contractor. What is important is that the property owner retains less control over the professional so that the property owner does not become an employer. So, if the property owner is thinking about hiring an engineer and/or general contractor but retaining duties with regard to the project and/or directing the professional, the property owner should be aware that it could become liable for mistakes and acts that a contractor takes that may harm a third party.

B. Can a property owner inspect and supervise the professional without exerting control which may cause the professional to be an employee of the property owner?

The simple answer is yes. The property owner can retain the right to inspect the progress of the project and even supervise the contractor to make sure that the contractor is doing a good job without the professional falling into the category of “employee.” However, this is merely a general rule and practical application would serve the property owner well. Because the determination of whether a professional is an independent contractor or not is subject to the test above and analysis of various factors, it is plausible that too much inspection or supervision could alter the professional’s status from independent contractor to employee. In practical application, if the property owner is merely going to the site to take a look at the professional’s work, they are likely not exerting sufficient “control” over the professional to invoke potential liability. Yet, if the property owner is inspecting , supervising and telling the professional to modify things or to take specific action, the property owner may no longer be shielded by the general rule. A property owner should use common sense.

C. There are specific exceptions to the independent contractor rule. A property owner will assume liability for their construction professional under the following circumstances.

i. Retention of Control
A logical exception to the general rule that a property owner is not liable for torts committed by its independent contractor is if the property owner retains sufficient control over the project. This is not really an exception to the general rule but rather the fundamental basis of the determination of independent contractor.

ii. Inherently Dangerous Activities – Non-Delegable Duty
If a property owner retains the services of a construction professional to carry out activities that are “inherently dangerous,” and the professional acts in a way that is negligent and harms another person or a third party’s property, the property owner will be liable regardless of whether the professional would otherwise satisfy the test as an independent contractor. Property owners are always liable for their contractors when they are retained to carry out inherently dangerous activities.

What are inherently dangerous activities? Instances are as follows: Where an electrical company is hired by a property owner to work in the vicinity of high voltage lines. This work was deemed an “inherently dangerous activity” by our Washington State Supreme Court. Our Supreme Court also found that the work done by a contractor to haul and dispose of fruit pomace and earth, which can create a hazard when not hauled and disposed of properly, is an inherently dangerous activity. In that particular case, it was notable that the activity was governed by Washington State laws and regulations. The waste pit which the substance was being dumped into (in contravention of the regulations) eventually caught fire and injured a bystander. An age old inherently dangerous activity is the operation of fireworks.

iii. Permitting – Non Delegable DutiesI believe the most relevant exception for property owners is the “permitting exception.” Many property owners will apply for relevant City or County permits to expedite the process or to save money. However, this act itself will give rise to liability for an engineer or contractor’s actions.

In my practice, I have come across County permits which require a property owner to sign them, even where it is obvious that only an engineer can actually do the work contemplated by the permit. In fact, the property owner, not being an engineer, would be prohibited from doing the work by law. However, the law will hold a property owner liable for its engineer or contractor’s actions where the property owner applies for and secures the permit, regardless of this fact.

Interestingly enough, our law has enunciated the rule that a property owner must apply for and secure the permit for liability to arise. However, in application, the mere act of applying fora permit can be treated as “securing” the permit. Permits often involve the application for permit and the granting of the permit. The application must be signed by the applicant, yet the mere act of applying for a permit does not grant (or secure) the permit. When the permit is granted, it may or may not be required to be signed. Therefore, it is very difficult to differentiate the application and securing of a permit. The best rule is to avoid applying for and securing any permit under which another person will perform the work contemplated by the permit.

Our Courts hold that where a property owner secures a permit, the property owner agrees to perform the duties therein and by doing so, cannot delegate those duties to another person. The property owner will be liable for any work by its contractors which violates the duties in the permit, regardless of whether the property owner did any of the work under the permit him or herself.

What are the duties under a permit? Often they are not listed (at least in full) on the permit itself, but in application the duties will be long and possibly difficult to even understand because they are derived from City and County Codes and Washington State statutes that may or may not be even referenced in the permit. By signing a permit, the property owner may in essence be signing up for numerous duties it could be entirely unaware of. If a City or County insists that the property owner signs the permit, it would be in the owner’s best interests to work with the City or County to avoid this. The logical explanation above should be proffered.

It is more logical, practical and fair if the construction professional, who will be doing the particular work contemplated by a permit, applies for and signs the permit because they themselves are better to know what professional and statutory standards are required of them and their work product.

In summation, a property owner should think carefully about the role they will play in the construction process. They should review their contract with their professional carefully, looking for particular provisions which could alter the independent contractor status. A practical suggestion is to include provisions in the construction contract that clearly define the relationship between property owner and contractor. A property owner should avoid applying for and securing permits, under which they will not be doing any of the work and should act cautiously when inspecting and supervising their contractor.

DISCLAIMER: This Article is not intended as legal advice. It is merely purposed to provide an overview of a particular legal issue. This information should not be relied upon nor serve as a substitute for legal advice. You should seek competent legal counsel for advisement for any of the issues raised herein.

A. The Washington State legal requirements for adverse possession are:

(1) Open and Notorious Possession

Is the possessor using the property in a way that the usual owner would make use of the land?
Is the adverse possessor’s occupation sufficiently apparent so that it puts the usual owner on notice of his use of the land?

(2) Actual and Exclusive Possession
Is the adverse possessor sharing the land with the true owner or the public at large?

(3) Continuous Possession
Is the adverse possessor’s use and possession continuous for 10 years or more?
Did the adverse possessor’s predecessor in interest likewise use and possess the same land? (If so, you may be able to “tack on” the years that the predecessor used/possessed the land with your own time).

(4) Hostile Claim of Right
Is the adverse possessor using the land with the owner’s permission? (If so, there is no hostility, and the land cannot be adversely possessed).

(5) Statutory Period — Continuous Possession for 10 years

B. How Does the Law Treat Fences?

Often land is acquired via adverse possession because a fence was installed on or near a boundary line. The courts will often allow the fence to designate the “new” boundary line, even if it does not reflect the actual surveyed boundary line if: (a) there was uncertainty at the time the fence was installed as to the true line; (b) the fence/line was established with agreement between the neighboring property owners; and (c) there has been lengthy acquiescence to the fence and agreed line by the original owners and/or their successors in interest.

However, the existence of a fence will not alone establish title to property by adverse possession. The courts will consider whether the fence was an assertion of ownership or whether it existed merely for convenience.

C. What If I Am Attempting to Establish Title to Land Via the Doctrine of Adverse Possession or Am Opposing the Claim?

You should seek competent legal counsel. The appropriate action at law is to initiate a complaint to quiet title. This asks the Court to make a determination of title to the land by considering whether the elements of adverse possession were or were not established.

If you are defending a claim of title by adverse possession, your claims may be ejectment, trespass and/or injunctive relief. Both injunctive relief and damages may be available as a remedy.

If you are a claimant, a lis pendens may be recorded at the same time to protect adverse possessor’s claims against bona fide purchasers.

Adverse possession cases are mixed cases of fact and law, involving a case-by-case determination based on the unique facts of the case.

DISCLAIMER: This Article is not intended as legal advice. It is merely purposed to provide an overview of a particular legal issue. This information should not be relied upon nor serve as a substitute for legal advice. You should seek competent legal counsel for advisement for any of the issues raised herein.

A. Operating Agreements should be specific and set forth contributions

The Operating Agreement controls the respective obligations of the LLC’s members. It is an important document. Among the various provisions that should be set forth in the Operating Agreement, are the manner and amount of contributions made by each member, which establishes their interest in the LLC.

B. Case in Point “Bishop of Victoria Corp. Sole v. Corporate Business Park LLC (Unpublished 2007 WACA 33579-4″ 050807)

In 2007, the Court of Appeals, Division II, examined the question of whether a manager-member of an LLC who failed to make a mortgage payment on behalf of the LLC, which was owed by the LLC, causing the LLC to default and contributing to its business failure, was a breach of fiduciary duties owed to the other members of the LLC.

The Court looked at the Operating Agreement to determine whether the members had provided for contributions to the LLC. The Operating Agreement stated “Except as provided in a Contribution Agreement, the Company has no right to require any Member to make additional contributions.” Unfortunately, a “Contribution Agreement” did not exist. The members had failed to specify what contributions they were obligated to make to the LLC.

The Court found that a member’s obligation to contribute to the LLC arises from the parties contractual agreements. The Court refused to allow parole evidence (terms or evidence outside the contract) to alter any of the terms of the Operating Agreement and therefore, the Operating Agreement controlled. Therefore, the Court found that the manager-member did not have an obligation to make payments on behalf of the LLC.

C. Fiduciary Duties are Owed to other Members but Will not Fully Satisfy Absence of Contribution Terms in Operating Agreement

The Court also examined the issue of whether the manager-member’s failure to make a mortgage payment on behalf of the LLC, which caused the LLC to default, constituted a breach of fiduciary duties.

LLC members owe each other fiduciary duties, which do not arise out of the Operating Agreement but rather out of the parties relationship. Members must deal with each other with candor and good faith and owe each other duties of loyalty, and due care. A member must not self-deal and avoid conflicts of interests.

The Court found that the manager-member did not breach a fiduciary duty. Although the manager-member owed a duty of loyalty to the other members, his obligation to contribute arose from the Operating Agreement and without more evidence, there was no showing of a breach of fiduciary duty.

D. Lessons Learned

Operating Agreements should specifically set forth the method and amount of contribution each member is obligated to contribute to the LLC, which adequately reflects their interest in the LLC. Failure to do so may be catastrophic to the LLC in the future.

Regardless of the terms of the Operating Agreement, members owe each other strict and serious fiduciary duties of loyalty, due care, good faith and candor and should always be reminded to avoid conflicts of interest and self-dealing.

The Revised Code of Washington 25.15 sets forth the statutes governing Limited Liability Companies in Washington State.

DISCLAIMER: This Article is not intended as legal advice. It is merely purposed to provide an overview of a particular legal issue. This information should not be relied upon nor serve as a substitute for legal advice. You should seek competent legal counsel for advisement for any of the issues raised herein.

Do you Maintain NonProbate Assets?
Nonprobate assets are generally effectuated according to their own terms. RCW 11.11.010 and RCW 11.02.005 define nonprobate assets. RCW 11.11.010 governs the testamentary disposition of the following nonprobate assets:

note or other contract the payment/performance of which is affected by death of the person

You may provide for the disposition of a nonprobate asset in your will but you must specifically refer to the nonprobate asset in your Will and specifically name a beneficiary to receive it. If you do this, the beneficiary named in your Will is entitled to the nonprobate asset as against any person previously designated as a beneficiary before the date of the will.

If you make a general residuary gift to a beneficiary in your Will, that beneficiary cannot take a nonprobate asset unless the nonprobate asset is referred to specifically and the beneficiary who is to take the nonprobate asset.

Furthermore, if you name a beneficiary for a nonprobate asset after the date of the Will, the specific provisions in the Will that attempt to control the nonprobate asset do not govern, even if you later revoke the beneficiary designation.

If you do not provide for a beneficiary designation of a nonprobate asset in your Will, the nonprobate asset will be distributed according to its own terms.

DISCLAIMER: This Article is not intended as legal advice. It is merely purposed to provide an overview of a particular legal issue. This information should not be relied upon nor serve as a substitute for legal advice. You should seek competent legal counsel for advisement for any of the issues raised herein.

The economic loss rule applies to contractual relationships to bar tort claims flowing from the contractual relationship, but which are economic in nature. Economic losses are those which are distinguishable from personal injuries.

In this case, the Court found that a defective septic system is purely an economic loss, and therefore one which is precluded from recovery on the basis of a negligent misrepresentation claim flowing from the contractual relationship between Buyer and Seller in a purchase and sale transaction.

However, the economic loss rule will not bar a claim of fraudulent concealment of defects. The Plaintiff must prove that fraud existed by clear and convincing evidence, a very high standard and by proving the following elements of fraud (1) residential dwelling has a concealed defect; (2) the vendor has knowledge of the defect; (3) the defect presents a danger to the property, health, or life of the purchaser; (4) the defect is unknown to the purchaser; (5) the defect would not be disclosed by a careful, reasonable inspection by the purchaser.

You can access the full case opinion at the Washington State Courts website.

DISCLAIMER: This Article is not intended as legal advice. It is merely purposed to provide an overview of a particular legal issue. This information should not be relied upon nor serve as a substitute for legal advice. You should seek competent legal counsel for advisement for any of the issues raised herein.

The importance of a strong contract cannot be overestimated. Individuals or businesses that recognize this well-established principle in the beginning may very likely avoid costly or even catastrophic consequences.

While anyone can write down basic terms of a contract and sign, not anyone can draft a contract which is written in conformity with the applicable state law to protect the validity of the document, to draft it with terms and operative language that avoids disputes or mitigates damages and with the unique experience derived from handling contract disputes. A contract dispute can be very costly and foreseeing the problems that could arise between the parties is key to avoiding future costly disputes.

A. Washington State Courts Disfavor Implied Terms to a Contract

In Washington State, the courts disfavor implied terms to a contract. If a term is not expressly provided for, it is likely not recognized. Negotiations prior to the execution of the contract or other documents, unless incorporated into the contract with triggering language, are not part of the contract. Therefore, it is important that you provide every term in writing in the operative contract. Future disputes concerning the subject matter should be deterred by including terms to address foreseeable problems.

i. Case in Point, Oliver v. Flow International Corporation

For example, in a recent unpublished opinion, Oliver v. Flow International Corporation, No. 57382-9-I, the Court of Appeals Division I considered whether a contract contained an implied “best efforts” term.

In that case, an inventor and developer of a robot entered into a contract for the sale, transfer and assignment of all rights to the robot in favor of Flow International Corporation. The Parties entered into negotiations prior to the execution of the contract and thereafter, wrote a “Term Sheet” stating that Flow International would make a $150,000 up-front payment, but would have to pay nothing else unless it sold Robots. Thereafter, the Parties entered into the written agreement which allowed for various benchmark payments to the inventor and royalties on the sale of Robots and associated gear for 17 years after the date of the final contract. However, if Flow decided to cease manufacturing or marketing the Robot, the contract would terminate, including the inventor’s rights to royalties.

After executing the contract, Flow conducted some marketing but did not attempt to patent the Robot and never sold a Robot.

The inventor sued Flow for breach of contract and for promissory estoppel because he claimed that the contract contemplated and the Parties intended that Flow use its best efforts or reasonable efforts to patent, manufacture and market the Robot.

The “best efforts” or “reasonable efforts”was not an express term provided for in the contract. Therefore, the inventor requested that the Court interpret the term by looking at evidence outside the contract and deducing the intent of the Parties.

The Court rejected the implied term, stating that in Washington State “We do not interpret what was intended to be written but what was written.” There are few instances where an implied term can be interpreted into the contract, for one if it is a legal necessity to uphold a contract which would otherwise be invalid; for example, if the Parties entered into a contract unsupported by consideration. Moreover, the court would not consider the extrinsic evidence, or evidence outside the contract, like the negotiations and Term Sheet entered into by the Parties because the courts will not use extrinsic evidence to show an intention independent of the contract or to vary, contradict or modify the written terms.

Therefore, the inventor’s claim of breach of contract was denied and dismissed.

B. Lesson Learned: If you want a term added into the contract, add it in writing

The ultimate lesson from this case is quite simply, do not assume understandings between you and another party are presumed or included in a contract unless they are expressly written in the contract. Such oral understandings may likely not be upheld. Moreover, negotiations do not represent a binding, valid contract and may not be inserted into a written contract without expressly adding them in.

There are many nuances to contract drafting, particularly when conforming to the applicable state law. This discussion of implied terms is merely one consideration.

DISCLAIMER: This Article is not intended as legal advice. It is merely purposed to provide an overview of a particular legal issue. This information should not be relied upon nor serve as a substitute for legal advice. You should seek competent legal counsel for advisement for any of the issues raised herein.

In Davis v. Baugh Industrial Contractors, Inc., et. al. (Docket No. 76696-7), the Supreme Court considered whether the Doctrine of Completion and Acceptance should bar a claim for negligent work of a contractor for work that was completed and accepted by the property owner, thereby barring claims of injuries to third parties resulting from the contractor’s work.

The Court ruled that the Doctrine was abandoned because it was outdated and harmful and based upon antiquated principles of exclusive privity between builder and the purchaser, among other outdated principles.

The Court recognized that contractors benefit from the applicable statute of repose, which bars negligence claims against contractors after 6 years after substantial completion of the construction.

Thus, the Court adopted the modern Restatement (Second) of Torts approach to liability of contractors for negligent work, which provides that a contractor is liable for injury or damage to a third person as a result of negligent work, even after completion and acceptance of that work, when it is reasonably foreseeable that a third person would be injured due to the negligence. Davis v. Baugh Industrial Contractors, Inc. 76696-7 citing Restatement (Second) of Torts 385, 394, 396 (1965).

You can access the full case opinion at Washington State Courts website.

DISCLAIMER: This Article is not intended as legal advice. It is merely purposed to provide an overview of a particular legal issue. This information should not be relied upon nor serve as a substitute for legal advice. You should seek competent legal counsel for advisement for any of the issues raised herein.

Our Supreme Court explicated factors which help establish whether a meretricious relationship exists or not. They include (a) continuous cohabitation; (b) duration of the relationship; (c) purpose of relationship; (d) pooling of resources; and (e) services for joint projects. In re Marriage of Pennington (2000).

In Olver v. Fowler (Docket No. 78321-7 2007), the Supreme Court addressed whether this Doctrine could be applied when two committed intimate partners die, leaving joint property as part of their intestate. (Persons dying without a Will are deemed to have died intestate.)

The Court held that the Doctrine can be applied in this instance. Thus, like the concept of community property, property acquired during the course of the intimate relationship can be equitably divided equally between the couple’s estates, regardless of whether the property was titled in one person’s name alone.

DISCLAIMER: This Article is not intended as legal advice. It is merely purposed to provide an overview of a particular legal issue. This information should not be relied upon nor serve as a substitute for legal advice. You should seek competent legal counsel for advisement for any of the issues raised herein.

In Atchison v. Great W. Malting Co., Docket No. 80034-1 (2007), at the time of the decedent’s death in 2000, the decedent’s immediate next of kin and child was 15. In 2003, the child turned 18 and in 2005, the child was appointed personal representative of the estate. She then filed a wrongful death action against Great Western Malting Co., claiming negligence caused her father’s death.

The Court examined the question of whether the statute of limitations, which bars claims for wrongful death after three years from the date they accrue, was tolled because the personal representative was a minor when the claim accrued.

I. A personal representative is the only person who may maintain an action for wrongful death of a decedent.

In Washington State, our courts have held that the wrongful death statute codified at RCW 4.20.010 allowing a personal representative to maintain an action for damages based on the wrongful act, neglect or default of another causing the death of the decedent, may be pursued only by the personal representative and no other individual.

II. A wrongful death action of a decedent may only be maintained for the benefit of a spouse or children.

However, while the personal representative is the only person who may bring an action for the wrongful death of a decedent, the suit may only be maintained for the benefit of the wife, husband, child or children, including stepchildren, of the person whose death was caused. RCW 4.20.020. Therefore, the personal representative cannot bring suit for wrongful death for the benefit of any other individual except those named in the statute above.

III. Minors may not serve as personal representatives.

The Court discussed the statutory limitations on persons who may serve as personal representative, noting that statute bars minors from becoming personal representatives. Therefore, in this case, the child could not have served as personal representative when her father died because she was a minor.

IV. Wrongful death actions accrue at the time a decedent dies, not when a personal representative is appointed.

The Court further discussed precedent case law which has held that a wrongful death action accrues at the time of the decedent’s death even though a wrongful death action is not possible until a personal representative is appointed. Therefore, in this case, the child’s wrongful death action accrued in 2000, but she was not appointed until 2005.

Further application of the statute of limitations, which is 3 years, would therefore bar the child’s wrongful death claim because it was filed more than 3 years after the date of the decedent’s death.

V. The tolling of the statute of limitations for wrongful death actions is only applies to the personal representative.

There is a tolling statute (RCW 4.16.190), which may toll the statute of limitations on the basis of minority or disability. However, the court has limited its application to the wrongful death statute to only operate if the personal representative is disabled. Therefore, the statute is not tolled if the beneficiaries are minorities at the time the action accrues.

VI. Tolling statute will not apply to personal representative who is of minority when the wrongful death action accrues.

In this case, the Court reasoned that because the child was a minor when the wrongful death action accrued, she could not have been appointed personal representative. Therefore, because she could not have been appointed personal representative, the tolling statute could not apply, because it only applies to those persons who are entitled to bring the action, i.e. personal representatives. Therefore, the minority of a personal representative cannot toll the statute of limitations.

VII. Reasoning for Decision

The Court recognized that the wrongful death action is a “creature of statute” and thus, it deferred to the legislature and its intent, stating that “the legislature could amend the statutory scheme to give minor beneficiaries a right of action, thereby making them eligible for tolling.” However, the Court refused to ignore the legislature’s scheme.

The Court discussed reasons why the harsh result produced by this case may be beneficial, recognizing that in the event that the tolling statute applied to minors who would/could later become personal representative, “clever litigants” could merely choose a personal representative who was a minor when the action accrued, thereby avoiding the three year statute of limitations. This would undermine the finality intended by the statute of limitations, affording employers, businesses and other individuals some certainty with regard to how long a potential claim could be open as against them.

DISCLAIMER: This Article is not intended as legal advice. It is merely purposed to provide an overview of a particular legal issue. This information should not be relied upon nor serve as a substitute for legal advice. You should seek competent legal counsel for advisement for any of the issues raised herein.