March 03, 2012 BY Jason Prine
When Less Is More: Newell Recycling Of Atlanta, Inc. V. Jordan Jones & Goulding, Inc.
Professional services agreements generally contain descriptions of the work to be performed regardless of whether these agreements are with engineers, architects, accountants, or attorneys. Such agreements purport to define the boundaries of the client relationship. The specificity of the scope of work or representation can vary based on the nature of the professional relationship, the extent of work, and the relative interests of the parties in expressly defining their relationship. It is not uncommon for professional service agreements to leave significant decisions about the nature and scope of the work to later negotiations and to be purposely vague. As counselors and litigators, attorneys can find such vague agreements to be either frustrating or welcome depending on what side of a negotiation or dispute they find themselves.
A relatively recent case by the Georgia Supreme Court, Newell Recycling of Atlanta, Inc. v. Jordan Jones & Goulding, Inc., 288 Ga. 236 (2010), highlighted why less detail concerning the scope of professional services to be provided under a particular agreement may sometimes be desirable.
Implied v. Written Contracts
Under Georgia law, contracts may be written, oral, or implied by law. In most cases, oral or implied contracts are governed by a four-year statute of limitations. O.C.G.A. § 9-3-25. Most claims based on written contracts must be brought within six years after the obligations under the contract come due. O.C.G.A. § 9-3-24. The Newell court addressed whether the four-year or six-year statute of limitations applied to a breach of contract claim brought by a recycling company against the professional engineering firm that designed portions of its recycling facilities.
Newell Recycling of Atlanta, Inc. v. Jordan Jones & Goulding, Inc.
Jordan Jones and Goulding, Inc. ("JJ&G"), a professional engineering firm, designed an automobile shredding facility for Newell Recycling of Atlanta, Inc. (Newell). Newell Recycling of Atlanta, Inc. v. Jordan Jones & Goulding, Inc., 288 Ga. 236. 236 (2010). JJ&G's work took place pursuant to a "Draft Scope of Work" document and letters that it sent to Newell in August 1997, and pursuant to an agreement to prepare a concrete work platform around the shredding facility. Id.
The Draft Scope of Work outlined six different project phases on which JJ&G proposed to work and attached thereto was a detailed, five-page task list related to the first project phase, environmental site assessment. Jordan Jones & Goulding, Inc. v. Newell Recycling of Atlanta, Inc., 299 Ga. App. 294, 294 (2009). On August 22, 1997, JJ&G sent Newell a letter, providing it with a cost estimate for the first three project phases outlined in the Draft Scope of Work. Id. at 295. The letter stated: “The [cost of the] remaining 3 [phases] can not be accurately estimated until some definition of your proposed facilities can be developed and a site visit of the existing buildings and features can be arranged. We would propose to perform this work on an hourly bases [sic] and would only bill you for completed task.” Id.
Representatives of Newell and JJ&G thereafter met several times to discuss and plan the details of the new facility and the engineering services that JJ&G would provide in connection with the project. Id. By the spring of 1998, the parties verbally agreed that there would be concrete pavement around the shredding machine to act as a work platform and to control drainage. JJ&G, therefore, developed a design for these pavements, which specified sub-grade preparation, concrete mix, and concrete thickness, and added this design to the site plans and specifications. Id. at 296. Site construction began in the fall of 1998, with a firm other than JJ&G acting as the construction manager. Id. During the course of construction, JJ&G made several revisions to the plans and specifications, including changes to the concrete pavement design. Id. All engineering and construction work on the project was completed by the end of September 1999. Id. After completion of the project and and after the shredding facility became operational, in or around May 2000, the concrete platform around the facility began to fail. Newell, 288 Ga. at 236.
Over four years later, in August 2004, Newell sued JJ&G for breach of contract and professional malpractice blaming the failure of the concrete on the alleged inadequacies of JJ&G’s design. Jordan Jones & Goulding, 299 Ga. App. at 296. JJ&G moved for summary judgment, arguing that Newell's complaint asserted a claim for either professional malpractice, breach of an oral contract, or breach of a contract that was partly in writing and partly in parol, and that each of these claims was subject to a four-year statute of limitation. Id. JJ&G argued that any contractual breach occurred either at the time of design of the concrete paving (June 1999) or the time of completion of the engineering work on such paving (July 1999), and that Newell was aware of the problems with the concrete paving no later than May 2000. Id. at 297. Thus, Newell's failure to file suit until August 2004 meant that its claim was time-barred. Id.
The trial court denied the motion, holding that, at the very least, an issue of fact existed as to the existence of a written contract, and that, therefore, the six-year statute of limitation of O.C.G.A. § 9-3-24 applicable to written contracts applied. See O.C.G.A. § 9-3-23 (“All actions upon simple contracts in writing shall be brought within six years after the same become due and payable”).
The court of appeals reversed, holding that, even if one assumed that JJ&G's August 1997 letters to Newell, together with the Draft Scope of Work, were sufficient to constitute an enforceable, written contract between the parties, Newell's claim was nevertheless barred by the applicable four-year statute of limitation contained in O.C.G.A. § 9-3-25. Jordan Jones & Goulding, Inc., 299 Ga. App. at 297. In reaching this conclusion, the court of appeals reasoned that “O.C.G.A. § 9-3-25 applies even to those professional malpractice claims premised on the breach of a written contract for professional services”, and, “[b]ecause Newell's breach of contract claim [was] premised on a written contract for professional services and calls into question the conduct of professionals in their area of expertise, it [was] a claim for professional malpractice, and the four-year statute of limitation applie[d].” Id. at 298-99 (citations and punctuation omitted).
Georgia Supreme Court Reverses: All Written Contracts Are Subject to Six-Year Statute of Limitations
The Georgia Supreme Court granted certiorari to address whether the court of appeals erred in holding that a professional malpractice claim premised on a written contract is governed by the four-year statute of limitation in O.C.G.A. § 9-3-25, rather than the six-year statute of limitation in O.C.G.A. § 9-3-24. The court began its analysis with the proposition that the statute of limitations on all simple contracts in writing is six years; “and this is true whether the promise sued on is expressed in the writing or implied and written into it by the law.” Newell, 288 Ga. at 237 (citing Seaboard Air-Line R. Co. v. Averett, 159 Ga. 876, 881 (1925); emphasis in original). Further, because an implied promise to perform professionally pursuant to a written agreement for professional services would be “written into [the contract for professional services] by the law,” an alleged breach of this implied obligation would necessarily be governed by the six-year statute of limitation of O.C.G.A. § 9-3-24. Id. For this reason, the court of appeals was incorrect when it concluded that the four-year statute of limitation of “O.C.G.A. § 9-3-25 applies even to those professional malpractice claims premised on the breach of a written contract for professional services.” Id.
In determining which limitations period applies, the court explained that the threshold inquiry is to determine whether a written agreement actually exists between the parties such that any implied duties sued upon would have grown directly out of the existence of the written contract itself. Id. at 238. “Where a complete written contract exists and an action for breach of contract is pursued, … the six-year statute of limitation of O.C.G.A. § 9-3-24 applies, regardless of whether the alleged breach stems from the express terms of the agreement or duties that are implied in the agreement as a matter of law.” Id. However, “[w]here the agreement is incomplete, such that the writing does not form a contract or the promise allegedly broken stems from a purely oral agreement, the four-year statute of limitation of O.C.G.A. § 9-3-25 applies.” Id.
Sometime Less is More
Although there are certainly other considerations involved in determining the specificity of the scope of work or representation described in a contract for professional services, the Newell decision makes clear that the decision to leave additional terms to later agreement or negotiation will not limit the time period in which a party may bring an action for breach of the agreement. It also underscores the importance of paying close attention to the nature and scope of an agreement before bringing or defending an action on a contract that may be subject to a statute of limitations.
The Journal is a publication for the clients of Drew Eckl & Farnham, LLP. It is written in a general format and is not intended to be legal advice to any specific circumstance. Legal Opinions may vary when based upon subtle factual differences. All rights reserved.
H. Michael Bagley