This article was published in the May 2018 issue of AGC Law in Brief (Volume 4, Issue 3), Practical Construction Law & Risk Issues. It is reprinted here with permission.
The “Completed and Accepted Rule,” or the “Completed and Accepted Doctrine,” is a judicially created doctrine that is said to have originated in the United States with the 1919 Connecticut case Howard v. Redden, in which a contractor was held to be not liable to a third-party passerby who was struck by a faulty cornice after completion and acceptance of the work by the owner.1 The stated reasoning for this rule is a lack of proximate cause due to “a break in the causal connection between the contractor's negligence and the injury.”2
Although the Completed and Accepted Doctrine was adopted by the majority of jurisdictions as late as the 1950s, it is now the minority rule.3 Currently, 21 states still permit the application of some form of the doctrine, including Arizona, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Louisiana, Mississippi, Missouri, Nebraska, Nevada, New Mexico, New York, North Carolina, Oklahoma, Rhode Island, Virginia and Wisconsin.
The Completed and Accepted Doctrine provides that a building or construction contractor is not liable for injury to a third-party person as a result of the condition of the work after completion of the work and acceptance by the owner, even though the injury or damage was due to the contractor’s negligence in performing the work or the contractor’s failure to properly carry out the contract.4
The doctrine relieves a contractor of liability to injured third parties caused by a patent defect after control of the completed premises has been turned over to the owner. Generally, the doctrine is limited to those situations where the defect is so obvious, open or “patent” that the owner could have discovered and remedied it.5 The doctrine does not extend to latent or concealed defects.6 Furthermore, under this doctrine, the work of the contractor must be fully completed and accepted before the owner becomes liable and the contractor is exonerated for injuries to third parties caused by the defective work.7 As a result, the doctrine does not apply when there is, in fact, no acceptance of the work.
Rationale for Completed and Accepted Doctrine
The rationale for the Completed and Accepted Doctrine is that, by occupying and taking possession of the work, the owner deprives the contractor of the opportunity to rectify its wrong, and therefore there is a lack of causal connection between the contractor’s conduct and the third person’s injury.8 Before accepting the work as being in full compliance with the terms of the contract, the project owner is presumed to have made a reasonably careful inspection thereof and to know of its defects.9 Therefore, if the owner takes the project in a defective condition, he accepts the defects and the negligence that caused them as his own and, thereafter, “stands forth as their author.”10 Not only does this doctrine provide an affirmative defense for contractors as to patent construction defects, but it has been applied to design professionals as well for patent defects in their designs.11
Additionally, the doctrine is based on the concept that, although the contractor remains liable to the owner through privity of contract after completion and acceptance of the work, the contractor's liability does not extend to third persons because there is no similar privity of contract between the contractor and third persons.12
Exceptions to the Rule
The Completed and Accepted Doctrine is conditioned upon a number of exceptions such that the exceptions nearly swallow up the rule.13 One common exception is that the Completed and Accepted Doctrine does not apply when there is, in fact, no acceptance by the owner.14 Lack of acceptance removes the presumption that the owner made a reasonably careful inspection of the property and therefore knows of its defects. However, acceptance need not be formal, and cases will look to various factors, such as whether (1) the owner or its agent reasserted physical control over the premises or instrumentality, (2) the work was actually completed, (3) the owner expressly communicated an acceptance or release of liability, or (4) the owner's actions permit a reasonable inference that the work was accepted.15
Another exception is known as the “imminently dangerous exception,” which imposes liability on the contractor after acceptance when (1) the defect is imminently dangerous to others, (2) the defect is so hidden that a reasonably careful inspection would not reveal it, and (3) the contractor knows of the defect, but the owner does not.16 Essentially, under this exception, a hidden (or “latent” defect) is not covered by the doctrine.17
Under another limitation, the doctrine applies only when the contractor has no discretion and merely follows the plans and specifications provided by its employer.18 The Arizona Court of Appeals noted that, “If the contractor is hired to exercise its discretion, special skills, and knowledge to prepare a design, and the owner does not control the design details, the contractor cannot invoke the rule.”19 This would appear to create an exception for design-build or EPC contractors that furnish their own designs and plans. However, to the extent that an owner provides even preliminary designs or specifications that a contractor must follow, the doctrine should still apply.
The Majority Rule (Foreseeability Doctrine)
The “Foreseeability Doctrine,” or the “Modern Rule,” has replaced the Completed and Accepted Doctrine and become the majority.20 The Foreseeability Doctrine provides that a building or construction contractor is liable for injury or damage to a third person as a result of the condition of the work, even after completion of the work and its acceptance by the owner, when it was reasonably foreseeable that a third person would be injured by the work due to the contractor's negligence or failure to disclose a dangerous condition known to the contractor.21
The Foreseeability Doctrine stems from products liability law, imposing liability for negligence on manufacturers of products based on the duty of care owed to the ultimate user of the product if “the nature of a thing is such that it is reasonably certain to place life and limb in peril when negligently made.”22
In applying the Foreseeability Doctrine to hold contractors liable for injury to third parties, courts have cited to the Restatement (Second) of Torts section 385, which states “One who on behalf of the possessor of land erects a structure or creates any other condition thereon is subject to liability to others upon or outside of the land for physical harm caused to them by the dangerous character of the structure or condition after his work has been accepted by the possessor, under the same rules as those determining the liability of one who as manufacturer or independent contractor makes a chattel for the use of others.”23
For example, one Iowa court held that a contractor remains liable even after termination of the contractor’s work and even if the possessor of land is under a duty toward the person injured to discover the condition created by the contractor, as expressed in Restatement (Second) of Torts section 384.24
Doctrine Abolished in Many States
More than 30 states have abolished the Completed and Accepted Doctrine, including – ironically – Connecticut in 1977.25 In Coburn v. Lenox Homes, Inc., the state supreme court effectively reversed its landmark 1919 decision in Howard v. Redden and concluded that a contractor could be held liable to an injured third party, even though the contractor’s negligent work had been completed and accepted by the owner.26 Coburn instead adopted the reasoning of the Foreseeability Doctrine, which Connecticut now follows.27
Texas abandoned the Completed and Accepted Doctrine in 1962, noting that the exceptions “have largely emasculated the rule.”28 The Texas Supreme Court stated that the doctrine produces a harsh and unsound approach to the assessment of liability. It explained:
The rule eventually becomes enveloped by complex exceptions to cover such situations as nuisance, hidden danger, and inherently dangerous conditions. The result would be that in each case, after having first decided that there was an acceptance of the work, we would then have to decide issues involving all the various exceptions to the rule and in case any exception was found applicable, the basic issues of negligence and proximate cause would still remain for consideration. We believe that outright rejection of this oft-repudiated and emasculated doctrine would restore both logic and simplicity to the law.29
Arkansas adopted the Completed and Accepted Doctrine in 1910,30 but abolished it in 1999, stating:
[T]he accepted-work rule has been thoroughly criticized as anachronistic and has provided unwarranted exceptions to general negligence principles. It has been said to have provided harsh results and many exceptions have been adopted to ameliorate such harshness . . . . From our review of the substantial legal authority on the subject, we believe the better-reasoned view is that the accepted-work doctrine is both outmoded and often unnecessarily unfair in its application. We believe it would be a mistake to continue to apply a doctrine based upon privity of contract when the third party's injury is foreseeable.31
Finally, the Montana Supreme Court criticized the doctrine’s harsh results, stating that it
has the undesirable effect of shifting responsibility for negligent acts or omissions from the negligent party [the contractor] to an innocent person [the owner] who paid for the negligent party’s services . . . based on the legal fiction that by accepting a contractor's work, the owner of property fully appreciates the nature of any defect or dangerous condition and assumes responsibility for it.32
The court concluded that, in reality, the opposite is usually true, i.e., that contractors, whether building contractors or architects, are hired for their expertise and knowledge.
1 Howard v. Redden, 107 A. 509, 511 (Conn. 1919).
2 Id. “Before accepting the work as being in full compliance with the terms of the contract, he is presumed to have made a reasonably careful inspection thereof and to know of its defects; and if he takes it in the defective condition, he accepts the defects and the negligence that caused them as his own, and thereafter stands forth as their author. When he accepts work that is in a dangerous condition, the immediate duty devolves upon him to make it safe; and if he fails to perform this duty, and a third person is injured, it is his negligence that is the proximate cause of the injury.”
3 See Seitz v. Zac Smith & Co., 500 So. 2d 706 (Fla. Dist. Ct. App. 1987); see also W. Page Keeton, et al., Prosser and Keeton on the Law of Torts § 104A, 723 (5th ed. 1984).
4 Slavin v. Kay, 108 So.2d 462 (Fla. 1958); Roskowske v. Iron Mountain Forge Corp., 897 S.W.2d 67, 71 (Mo. Ct. App. 1995); see also Annotation, Modern status of rules regarding tort liability of building or construction contractor for injury or damage to third person occurring after completion and acceptance of work; "completed and accepted" rule, 74 A.L.R.5th 523 § 1a (2017).
5 Sanchez v. Swinerton & Walberg Co., 47 Cal.App.4th 1461, 1470-1471 (Cal. Ct. App. 1996).
7 Gonsalves v. Sears, Roebuck & Co., 859 So.2d 1207, 1209 (Fla. Dist. Ct. App. 2003).
8 74 A.L.R.5th 523 § 2a.
9 Sanchez, 47 Cal.App.4th at 1466-1467.
10 Slavin, 108 So.2d at 466. See also Par. 12.3, AIA A201 General Conditions (2017 ed.) (under which the project owner has the right to accept the contractor’s work with defects and to negotiate a reduction in the contract price for that defective condition. Presumably, such an owner would also assume the risk of those known defects).
11 See Easterday v. Masiello, 518 So.2d 260 (Fla.1988) (architects and engineers of jail containing patent defect, on which inmate committed suicide by hanging, were relieved of liability after control was turned over to jail owner). But see Pierce v. ALSC Architects, P.S., 890 P.2d 1254 (Mont. 1995) (rejecting accepted work doctrine as a defense for an architect).
12 This rationale can be traced to the English case Winterbottom v. Wright, 152 Eng. Rep. 402 (Ex. 1842), which states that a contractor for the supply of mail coaches was shielded from liability for a third party’s injuries because the contractor and the third party were not in privity of contract. In the United States, Howard v. Redden adhered to a similar rationale in holding that a contractor was not liable to a third-party passerby when struck by a faulty cornice, even though the contractor remained liable to the owner after completion and acceptance of the work. Howard, 107 A. at 511.
13 Lynch v. Norton Constr. Inc., 861 P.2d 1095, 1099 (Wyo. 1993); see also Keeton, supra note 3, at 723 (noting that the exceptions tended to swallow the rule).
14 Seitz, 500 So.2d at 710.
15 Blake v. Calumet Const. Corp., 674 N.E.2d 167 (Ind. 1996).
16 Roskowske, 897 S.W.2d at 71-72.
17 See, e.g., Easterday, 518 So.2d at 260 (contractors continue to be liable for latent defects); Bob v. Scruggs Co., 419 S.E.2d 100, 102 (Ga. Ct. App. 1992) (contractor not liable unless work constituted nuisance per se, was inherently or intrinsically dangerous, or was so negligently defective as to be imminently dangerous to others).
18 Menendez v. Paddock Pool Constr. Co., 836 P.2d 968 (Ariz. Ct. App. 1991).
19 Id. at 980.
21 74 A.L.R.5th 523 § 2a; see Foreline Sec. Corp. v. Scott, 871 So.2d 906, 909 (Fla. Dist. Ct. App. 2004).
22 MacPherson v. Buick Motor Co., 111 N.E. 1050 (N.Y. 1919).
23 Minton v. Krish, 642 A.2d 18, 21 (Conn. App. Ct. 1994).
24 Kragel v. Wal-Mart Stores, Inc., 537 N.W.2d 699 (Iowa 1995).
25 See 75 A.L.R. 5th 413 § 3 (2017).
26 Coburn v. Lenox Homes, Inc., 378 A.2d 599 (Conn. 1977).
27 The test is “would the ordinary man in the defendant's position, knowing what he knew or should have known, anticipate that harm of the general nature of that suffered was likely to result?” Coburn, 378 A.2d at 603.
28 N. M. Hubbard, Inc. v. Gehring, 360 S.W.2d 787, 790 (Tex. 1962).
29 Id. at 791.
30 Memphis Asphalt & Paving Co. v. Fleming, 132 S.W. 222 (Ark. 1910).
31 Suneson v. Holloway Const. Co., 992 S.W.2d 79, 85 (Ark. 1999).
32 Pierce, 890 P.2d at 1262.
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