Question

A project owner issues a Design-Bid-Build contract to construct a shopping center. The contractor makes several sub-contract agreements with different specialty contractors. The contractor fails to pay several subcontractors for their work. The subcontractors sue the owner because they have not been paid. a. Is the owner liable to the subcontractors for breach of contract? Why or why not? b. If the owner is not liable do the subcontractor's have any ability to recover their claims against the owner?

Answer 1

answer-

a- No the owner is no liable to the sub contractors for the breach of the contract because owner has contract with general contract only he can can be responsible for general contractor not for sub contractors.this is based on The doctrine of privity of contract is a common law principle which provides that a contract cannot confer rights or impose obligations upon any person who is not a party to the contract. The premise is that only parties to contracts should be able to sue to enforce their rights or claim damages as such .

in this contract, general contractor and sub contractor has the contract so they are the parties on owner.

b- they can recover if they can file mechanic's lien A subcontractor who has done work, with the knowledge and consent of the client, may file a mechanic's lien, the same way that a general contractor can. The presence of subcontractors on the work site should not be a secret. Owners should be aware that subcontractors have been hired to perform some of the work.

otherwise, there is no way that sub contractors can recover claim against the owner like if owner does not know about sub contractor or has no contact then general contractor will pay.