Question

An investor brought suit against an architect after the investor lost $600,000 in a failed project. To develop the project, a real estate empire in Chicago, an LLC, the Burnham Station, was created by JDL. The inves-tor arranged to buy shares of Burnham that totaled $600,000. JDL managed the Burnham Station. JDL hired an architectural firm called Tigerman McCurry Architects (TMA) to develop the real estate. After the investor filed suit to recover the money he had lost in the project, TMA claimed that the investor could not file that suit because the contract at issue was between TMA and JDL. TMA claimed that Burnham was never envisioned as a third party or beneficiary of the contract. If Burnham was not included in the written contract but was involved with JDL and Burnham’s money was lost in the project, does this mean the investor is automatically a third party to the contract? How did the court decide? [ F. H. Paschen/ S. N. Nielsen, Inc. v. Burnham Station, L.L.C. (2007 WL 837240; 2007 Ill. App. LEXIS 245).]

Answer 1

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The investor cannot sue Tiggemann Architects nor recover any money for breach of contract or negligence from Tigerman Architects. Because, the investor bought shares in Burnham. However, the contract for provision of architectural services existed between JDL and Tigerman. JDL did not in any way state Burnham which by virtue of being an LLC is a separate legal entity is party or a third beneficiary to the contract.

Since the contract existed between JDL and Tigermian, Tigerman can get the case dismissed by showing there was no written contract between it and Burnham and all the invoices for the services provided were sent to JDL not Burnham

The investor cannot sue Tigerman for negligence due to the precedent set by the Supreme Court in Lincoln Park West Condominium Ass'n v. Mann, Gin, Ebel & Frazier, Ltd. which stated plaintiffs cannot recover financial losses against architectural firms on basis of negligence