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Third-Party Breach of Contract Liability, Privity of Contract

If you are a third-party to a contractual relationship, and a breach of contract occurs, can you sue the breaching party for damages if you are harmed? The answer to this question is usually “no.” A defendant who has contracted with another generally owes no duty to a plaintiff who is not a party to that agreement, nor can a party sue for negligent performance of the contract. Fleischer v. Hellmuth, Obata & Kassabaum, Inc., 870 S.W.2d 832, 823 (Mo. Ct. App. 1993). This rule is designed to protect contractual parties from exposure to unlimited liability and to prevent burdening parties with obligations they have not voluntarily assumed. Captiva Lake Investments v. Ameristructure, 436 S.W.3d 619, 626 (Mo. Ct. App. 2014).

While this rule has general applicability, it often comes into play with construction contracts and litigation. In Fleischer, for instance, the appellate court specifically held that an architect does not owe a tort duty of care and is not liable to a general contractor for damages or economic losses arising as a result of the architect’s negligent performance of its contract with the owner. Flesicher, 870 S.W.2d at 834. In other words, the sub-contractor/architect was not liable to the owner for errors the general contractor made. The reason for this is that generally there is no privity of contractor between the sub-contractor and owner. 

Every rule has exceptions. Exceptions to the rule include: (1) where an act of negligence is immediately dangerous to the lives or safety of others or the thing dealt with is inherently dangerous, (2) fraud or collusion, (3) express warranties, and implied warranties. Id. at 835-36. The Missouri Supreme Court has observed, however, that extension of the limits of liability is done on a case-by-case basis, with a careful definition of the limits of liability, depending upon the differing conditions and circumstances to be found in the individual cases. Westerhold v. Carroll, 419 S.W.2d 73, 77 (Mo. 1967). 

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