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Acceptance Doctrine Revisited

A recent construction case addressed the Acceptance Doctrine and a potentially broad exception that prevented its application to a negligent-construction claim.

The case involved structural damage to a newly constructed Holiday Inn Express resulting from settlement of rear parking lot, pool areas, and one side of the building. Owner hired Contractor to perform grading work, and Contractor hired Subcontractor to perform certain aspects of the grading work. After the grading work was complete, Owner separately hired another contractor to construct the building.

Soon after the hotel opened, problems with settling began. Thereafter, Owner sued Contractor, Subcontractor, and other individuals. The trial court ruled in favor of the defendants on various bases, including the acceptance doctrine.

 The Acceptance Doctrine

 As discussed in a prior AutryCole newsletter (see page 2):

 The Acceptance Doctrine has a long and tortuous history, and has even been abandoned in several states. According to the Georgia Supreme Court, the Acceptance Doctrine insulates a contractor from liability to third parties resulting from the defective design of the work where it performs the work without negligence, and the work is approved and accepted by the owner. Notwithstanding the owner’s acceptance, however, several exceptions might apply to render a contractor liable where the contractor negligently performs the work. For example, the contractor may still be held liable for inherently or intrinsically dangerous activities or where the contractor holds itself out as an expert in the design.

This case concerns a different twist on the Acceptance Doctrine, as well as a different exception. Instead of applying the Acceptance Doctrine to third parties who were injured by a contractor’s negligence, Contractor argued it should apply to Owner’s direct claim. In addition, the court focused on the exception from the Acceptance Doctrine related to defects that are hidden and not readily observable on reasonable inspection.

Application of the Acceptance Doctrine

First, the Court of Appeals recognized the uncertainty of applying the Acceptance Doctrine to an owner’s negligent-construction claim against a contractor. It began by stating, “[e]ven if we are to assume that the acceptance doctrine applies both to owners and to third parties . . . .” The court did not provide any citation to prior Georgia law applying the Acceptance Doctrine to an owner’s negligent-construction claim. Thus, it remains uncertain whether the Acceptance Doctrine would apply in the context of such a claim.

Second, even assuming that the doctrine applied to such a claim, an exception prevented it from carrying the day in this case. The exception is for defects that are hidden or not readily observable. In this case, the grading Subcontractor’s failure to properly compact the fill material was concealed from view and below the surface. In addition, the defect required testing by a specialist. Because the defects were not “readily observable on a reasonable inspection,” the Acceptance Doctrine did not bar Owner’s claim for negligent construction.

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