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Arlington Ridge Condominium Association v. De Cavalcante

A-1130-07T2 (N.J. Super. App. Div. 2008) (Unpublished)

CONTRACTS; THIRD PARTIES — Just because a settlement agreement names one party’s consultant to prepare specifications for use by both parties to the agreement does not mean that that consultant, not itself a party to the settlement agreement, has any duties, including a duty loyalty to any party other than its own client.

A condominium association sued the builder of the complex, alleging construction deficiencies. The builder filed a counterclaim, seeking further payment for work it had performed. The lawsuit was settled with the settlement calling for the builder to perform certain remediation work and for the association to make a final payment. The association’s consultant had to prepare specifications for the remedial work and confirm its completion. The builder took the position that the work had to be performed during the summer, but the consultant didn’t submit the specifications or make meaningful contact with the builder until early September. The builder then advised that it could not perform the work because it was involved with other projects. The association filed a motion to enforce the agreement. The builder, in its opposition, claimed its failure to perform was due to the consultant’s failure to act timely. The motion was granted and judgment was entered against the builder. The builder did not appeal.

When the association realized the builder had become defunct with no assets it sued the builder’s owners, alleging that they knew when they executed the settlement agreement that their company had no assets or workforce to complete its obligations under the settlement. The officers filed an answer and filed a claim against the association’s consultant, alleging reliance on the consultant’s representations as cause for any breach. The consultant moved for summary judgment, stating that it was not a party to the settlement agreement and owed no legally enforceable obligations to the builder or its principals. The lower court granted the motion, finding the consultant only owed a duty to the association under the settlement agreement, and not to the builder, and that the consultant had been paid for his services prior to the execution of the settlement agreement. The principals of the builder appealed.

The Appellate Division affirmed, finding there was no contract, either written or oral, between the builder and the consultant. Additionally, it found no facts to support any consideration for any such contract, as the consultant was to be paid by the association, and not by the builder. The Court held that the consultant’s duty of loyalty under the settlement agreement was only to the association. It also observed that any alleged time constraints under the settlement agreement were not communicated to the consultant, and that issue-preclusion principles weighed against finding a duty owed to the builder by the consultant.

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