Vol. 4 No. 1		January 1985

There is a concept in the law that could prove to be important to you. It is known as unjust enrichment. What it means, simply stated, is this: The courts are generally unwilling to allow one who is damaged as the result of another's mistake to walk away from the experience better off than if the mistake had never been made in the firstplace.

The concept is also known as "betterment." An understanding of how it works and an ability to explain it with clarity in a situation fraught with tension could make the difference between a successful outcome on one of your projects and an unnecessary lawsuit.

Picture this: It was a hectic effort from the very outset. The design schedule was tight going in, and the changes needed to bring costs into line with the owner's budget were still being made at the eleventh hour. The last of the drawings was finished just in time to rush the bid set to the printer.

To your credit and good fortune, work at the site has gone forward without a hitch. The contractor has proven to be competent; the project is on schedule and within budget; and, in spite of a certain amount of frustration with change orders, the owner is generally pleased with results thus far.

The telephone rings. Your field representative is on the line. It seems there is a coordination problem between the mechanical and the electrical divisions of the specifications. The former provides that all wiring in connection with the automatic temperature control system be furnished and installed under another division. The latter specifically excludes temperature control wiring. As a result, neither the HVAC, nor the electrical subcontractor has included the cost of the wiring in its bid.

Your field representative informs you that he directed the contractor's attention to the General Conditions: "The Contractor shall coordinate all drawings and specifications and provide a complete working system." The contractor, annoyed but unimpressed, responded that a change order request for $12,000 would be hand delivered no later than the following morning.

To compound the problem, closing up is scheduled to begin in ten days. The contractor has made it clear that this work cannot be delayed. If the change order request is not approved and work on the wiring initiated within five days, additional costs can be expected for the subsequent cutting and patching which will be required to complete the installation. Disrupting the continuity of the job can be costly, and the contractor knows it.

At times like these you wonder if you shouldn't have gone into plastics after all. The feeling passes. You call your Job Captain and your electrical consultant and ask them to check it out. Your Job Captain is first to respond: "I hate to tell you this," he says, "but it looks like we've got a problem. There is no provision for temperature control wiring in the specifications, and it is not included in any of the bids." As it turns out, $12,000 to do the work is not an unreasonable amount.

Your electrical consultant confirms the omission. He immediately offers to pay half the $12,000 if you can come up with the balance. His eagerness to put the matter to rest, you discover, is rooted in a deep fear of litigation. That he carries no insurance comes as yet another unwelcome surprise.

How much of the cost of all of this do you think you should be prepared to pay? How much should your electrical consultant pay? Clearly a mistake has been made, either in the preparation of the specifications in the first place or in their coordination once all the pieces were assembled. In all probability, it is a negligent mistake. It would be difficult to argue that the omission of temperature control wiring from a set of plans and specifications for an office building in Minneapolis somehow meets a standard of usual and customary professional care.

The fact that a mistake has been made, even a negligent mistake, may not be relevant, however. Under the foregoing circumstances, the more important question is, "Did it result in damages?" If the cost of installing the temperature control wiring now is the same as it would have been had the wiring been included in the bid price, the answer is, "Probably not." In the absence of damages, most courts will agree that it is the owner who reasonably ought to pay the added costs.

Confronting your client with this reality is something else again. You were not retained on the basis of an assumption that your errors were going to contribute unanticipated costs to the project. You face a difficult explanation about performance you know falls short of your client's expectations. and it will take most of the tact and candor you can muster to walk away from it whole. You will want to be well prepared going in.

What if intervening increases in the cost of labor or materials have added $2,000 to the original cost? There may well be damages for which the owner has every right to look to you for recovery. They are, however, likely to be limited to the $2,000 difference. Anything more would probably be viewed as leaving the owner unjustly enriched at your expense.

What if your contract includes an agreement to indemnify the owner, "against all costs, damages, and losses arising out of your negligent acts, errors, or omissions?" It is still not likely to matter. The courts will generally refuse to put your client in a position to transfer to you costs he or she would have had to pay in any event.

As always, there is a counterargument. It goes like this: Had the owner known the true costs in advance, the project would never have gone forward in the first place. The damages, so this line of reasoning goes, are not the costs of the temperature control wiring, but loss of an anticipated economic gain--a loss caused by your negligence.

Under most circumstances, this argument is unlikely to prevail. There are exceptions. Where an error is discovered prior to construction, and where the consequences are, in fact, severe enough to cause the project to be abandoned, you may well be faced with a serious liability problem.

The more common situation is less dramatic. The error is discovered on the job-site, and the cost of rectifying it is relatively minor compared with the overall costs of construction. It is here that prompt attention to the problem can head off far greater problems later on. It may fall to you to explain the concept of unjust enrichment to your client--lest your client's misimpressions become yet another chink in the armor of trust and confidence so vital to a successful outcome.

	Professional Practice Insurance Brokers, Inc.
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