Q: Are there any publications or good text books on construction or design contracts that our firm can use or purchase for use in our practice?

A: That is a frequently asked question. Without identifying specific books, my suggestion would be to use the guidelines published in your jurisdiction—the state where you practice. The focus should be information that addresses technical contract issues involving your practice. As a typical rule, most textbooks are written very generally because each state law is slightly different and the authors of these textbooks are neither equipped nor trained specifically in each law’s jurisdiction. A better book would be one that teaches how to analyze terms. Like this column, the textbooks will address general, not specific questions, only applying generally recognized legal rules and common law principals to assist the practicing engineer. The absence of some legal training by the reader to review and interpret the cases and laws reported therein can oftentimes do more harm than good, because in the law it seems there are almost exceptions to every rule; and not knowing the proper analysis could lead to trouble. As the saying goes, "He who has himself for a lawyer has a fool for a client." When looking for books on construction or design contracts, good advice is to use the books and other resources your professional organizations publish and recommend.


Q: We are a small corporation engaged in designing and selling steel structures. As a corporation, we feel our liability for a given lawsuit would be limited to the assets of the corporation. We also believe we are not personally responsible as a professional engineer in case of a problem with one of our designs. Are we correct in our assumptions?

A: This question can only be answered hypothetically, since laws vary from state to state. Generally speaking, two issues are presented by this question: the extent of the liability of a corporation, and the personal liability of the engineer.

In regards to the first issue, if this business is properly incorporated and a professional engineer can incorporate in your state, then you are likely correct in your assumption that any satisfaction of a potential judgment for liability of the corporation would be limited to the corporation’s assets. However, there are exceptions to this rule. The primary exception is whether the corporation is legitimate or merely formed to avoid liability. Also, in order to maintain the protection of a corporation which is considered a separate entity under the law, you must run your business as a separate entity and not commingle personal matters with corporate; handle the corporation as a business. Corporate formalities must be maintained. You need to consult a lawyer should your corporation be sued and an allegation is made that your corporation is merely a shell to avoid personal liability.

In regards to the second part of the question, whether a professional engineer would personally be responsible for an error or omission which caused the problem or loss to the client depends upon a number of factors. As noted above, for purposes of responding to or paying damages, assuming correct corporation formation and adherence to corporate formalities, the corporation’s assets would only be available to satisfy the judgment. However, many states will hold a professional engineer liable for purposes of competency and license evaluation if the engineer is found to have made a "mistake." While the corporation may pay for any damages, the engineer may pay by way of license penalty or discipline for the alleged error and omission.

Personal liability and ability to pay a judgment with assets of the corporation are two different things. A lot depends upon how the corporation was run and whether corporate formalities were adhered. The individual engineer, regardless of business form or structure, can usually be held personally responsible to the extent the engineer violated a rule and regulation of practice.

Michael J. Baker, Esq., is a partner in the Cerritos, Calif.-based law firm of Atkinson, Andelson, Loya, Ruud & Romo. He is an expert in design and construction contracts, mediation, and litigation. Please send him your legal questions via e-mail at mbaker@gostructural.com.