A Professional's Failure to Perform As Promised Is Cause for Breach of Contract Action

S.D. Cummings & Co., PC provided accounting and business services to a construction industry client.  The client asked for a recommendation to an attorney to place a mechanic’s lien on property where he had done some framing, for which he was owed $44,000.  Cummings suggested she could provide the services, and gave the client a Representation Letter promising to communicate with all pertinent parties and to prepare all documents necessary to secure the claim, including applications for a mechanic’s lien.  She instructed the client to direct all future communications from anyone on the topic to her.  Accordingly, the client forwarded to her offers by the general contractor and the property owner to pay the sums owed if the client would finish the work.  Unfortunately, Cummings failed to provide any of the services she promised, and the time for securing the mechanic’s lien expired.  The client sued her for the balance owed, and won.

The NH Supreme Court rejected each of three arguments Cummings raised on appeal.  (1) Claimants must take reasonable measures to mitigate their damages, and Cummings protested the client could have responded to the offers, or unilaterally sued the contractor or homeowner.  No duty to mitigate arises until the defendant’s breach of the contract is clear, however, and here, the client’s failure to respond to the offers or to timely sue the general contractor or property owner came about in reliance on the professional’s promise to undertake communications and document preparation.  By the time the client learned Cummings had done nothing to secure the lien, there was little the client could do.  (2) Cummings argued there was no causation established between her inaction and the loss.  But it was clear her inaction caused the lapse of the client’s mechanic’s lien rights.  (3)  Most interestingly for professional liability practitioners, the court also rejected an argument that an expert witness was required.  The court explicitly noted that this was neither a negligence nor a legal malpractice case, but rather simply a breach of contract action.  The issue was whether the defendant failed without legal excuse to perform as promised in the Representation Letter.  Such a finding was within the realm of common knowledge and everyday experience, and the award was sustained.

At oral argument, some distinction was made between this defendant and a hypothetical case against an attorney on similar facts, but we expect to see Audette v. Cummings, No. 2012-496 (December 24, 2013) cited in the future, as plaintiffs’ counsel try to garner breach of contract damages (i.e., expectancies) in legal and other professional negligence cases, effecting an end-around to the economic loss rule.

For more information on professional liability matters, contact attorney Bill Saturley at 603-410-1500 or by email at wsaturley@preti.com or a member of Preti Flaherty's Professional Liability Practice Group.