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Dust off those old law school books and turn of the century
cases: privity of contract is making a comeback in Michigan!
Privity of contract, historically was a bar to certain tort law suits,
such as product liability and professional liability cases filed by
injured persons against other parties with whom they had no
direct contractual relationship.
In 1916, the Seminal New York case of McPherson v Buick
Motor Co. (1), triggered a major retreat in the country from
privity of contract in product liability and professional liability
cases, among others. In Michigan, privity disappeared as a
viable defense for product liability and professional liability suits
between the late 1950's and mid-1970's (2). While privity of
contract still lived on in certain situations such as for claims of
innocent misrepresentation (3), or malicious prosecution against
an attorney (4), modern litigators by and large considered it an
out dated and rarely viable way to contest claims.
This began to change in 2004 when the Michigan Supreme
Court issued a surprisingly broad ruling in a simple slip and fall
on ice case, resurrecting the privity of contract defense in
ordinary tort cases. Fultz v Union-Commercial Associates (5).
The Court held that a snow removal contractor hired by the
parking lot owner could not be sued by the injured plaintiff who
had no contractual relationship with the contractor in the
absence of proof that the contractor assumed a duty separate
and distinct from the duties it assumed under its contract with
the owner.
Finding that there was no separate and distinct duty, the court
held that the snow removal contractor owed no duty of care to
the injured plaintiff.
Several cases since Fultz have followed its holding in ordinary
negligence and injury cases. However, some panels of the
Michigan Court of Appeals have also applied Fultz to
professionals and construction managers in unpublished
opinions (6).
In 2006, in Matrix Construction, LLC v Barton Malow, et al (7),
the Court of Appeals, applying the Fultz ruling limited the prior
rulings of Bacco and National Sand (2), which had allowed suits
against professionals without privity of contract. The Matrix court
held that privity of contract was not required only if a design
deficiency was at issue and privity did apply to claims involving
construction management services.
Later that year the Court of Appeals again applied the Fultz
case rationale and held that a consulting engineer could not be
sued by a third party without proof of privity of contract or the
assumption of a duty independent from the contractual duties
owed by the engineer to the owner. See Wallington v City of
Mason, et al(8).
In 2005 another Court of Appeals panel had held in favor of the
professional hired by the township against a claim by a
contractor for failure to discover defects in a sewer system
during inspections. The court, in New Dimension Development
Inc v Orchard Hiltz & McClinet Inc (9), found no duty owed by the
professional in claims sounding in negligence, fraud, or
negligent and innocent misrepresentation.
In December, 2007, another panel of the Michigan Court of
Appeals in Burton v Suretitle, et. al.(10), followed Fultz again in
holding that a Title Company acting as a real estate closing
agent could not be sued by the purchaser in tort, because there
was no privity of contract.
Will privity of contract regain its lofty stature in Michigan from
over a half century ago to become a dominant defense and
barrier to product liability, construction defect and professional
liability claims? The trend suggests it will. Until published Court
of Appeals or Michigan Supreme Court decisions confirm the
application of the Fultz doctrine in those areas we will not be
sure, but privity seems to have been resuscitated and is alive,
breathing and kicking.
1. MacPherson v Buick Motor Co, 217 N.Y. 382, 111 N.E. 1050
(1916).
2. Bacco Construction Co v American Colloid Co, 148 Mich App
397; 384 NW2d 427 (1986) revsd on other grounds, 204 Mich
App 445 (1994); National Sand Inc v Nagel Construction Co,
182 Mich App 327; 451 NW2d 618 (1990);Piercefield v
Remington Arms Co, 375 Mich 85; 133 NW2d 129 (1965);
Spence v Three Rivers Builders & Masonry Supply Inc, 353 Mich
120, 90 NW2d 873 (Mich, 1958).
3. Forge v Smith, 458 Mich 198, 580 NW2d 876 (1998) privity
required for innocent misrepresentation claim; U S F&G Co v
Black, 412 Mich 99, 118-119, 313 NW2d 77 (1981); Chimko v
Shermeta, 2006 WL 2060417 (Mich App, 2006).
4. Mich AFSCME Council 25 v Livingston County Road
Commission, 2007 WL 3357398 (Mich App, 2007) privity
required to sue attorney except for fraud or malicious
prosecution.
5. Fultz v Union Commerce Associates, 470 Mich 460 (2004).
6. Unpublished opinions of the Court of Appeals do not have
precedential authority in Michigan, but their reasoning may be
adopted and applied by other courts.
7. 2006 WL 399762 (Mich App, 2006). Also see the trial court
ruling in Llangs Group v Barton Malow Co, 2006 WL 3950939
(Oak Ct Cir Ctm 1/12/06). However, a federal court continued to
apply the Bacco and National Sand line of cases in RMF Nooter,
Inc v Gleeson Constructors, LLC, 2006 WL 3290126 (W.D. Mi,
2006). It does not appear that the Fultz case was considered by
the Court.
Randall Phillips is the Principal of Provizer&Phillips, P.C.,located
in Bingham Farms, Michigan; http://www.provizer-phillips.com;
Contact:(248) 642-0444;rphillips@p-ppc.com. He handles
complex litigation such as professional liability, toxic
tort,construction defect, and insurance coverage litigation.
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