Business Law Case Study: McCarthy v. ABC Construction Analysis

This case study analyzes a business law scenario involving ABC Construction and a plaintiff, McCarthy, focusing on issues of negligence and damages. The analysis references key legal precedents, including United States v. Spearin, J'Aire Corp. v. Gregory, and Dominion Natural Gas v Collins and Perkins, to determine the liability of ABC Construction. The application of these legal principles to the provided facts leads to the conclusion that ABC Construction may be sued by McCarthy based on negligence. The study examines the implied warranties and potential economic damages, emphasizing the importance of foreseeable risks and reasonable precautions in construction projects. The conclusion highlights the potential for ABC Construction to be held accountable for the leakage defect, unless they can prove third-party tampering was the direct cause.

Running head: BUSINESS LAW
BUSINESS LAW
Name of the Student
Name of the University
Author Note

1BUSINESS LAW
Issue
The issue in the given scenario is what shall be the grounds upon which McCarthy may
sue ABC Construction.
Rule
The case of United States v. Spearin, 248 U.S. 132 (1918) must be regarded as an
important case in this regard. In this case, the ‘Spearin doctrine’ was established. It was stated
that when the owner impliedly warrants the plans, information and specifications in respect of
the general contractor, then in such a case the contractor shall not be held accountable in relation
to any kind of damage that may result specifically from the defects or the insufficiencies
regarding the plans, information and specifications.
In the case of J'Aire Corp. v. Gregory, 24 Cal.3d 799, it had been said that where the risk
or danger in relation to harm can be foreseen, then an injury in connection to the economic
interests of the plaintiff should not be uncompensated simply because there was no injury or
damage to his person or to his property.
In the case of Dominion Natural Gas v Collins and Perkins [1909] AC 640, it was said
that that in case of preliminary negligence by the accused, against which an easy, practical,
reasonable and rational precaution could have been taken, the accused shall be held accountable
unless the accused is able to demonstrate that the right reason in connection to the accident was
the tampering in relation to the machinery by the third parties.

2BUSINESS LAW
Application
Applying United States v. Spearin, 248 U.S. 132 (1918) in the given scenario, it may be
said that James never impliedly provided the plans, information and specifications to ABC
Construction, and therefore, ABC Construction can be held accountable in relation to any kind of
damage that may result from the defects or the insufficiencies.
Applying J'Aire Corp. v. Gregory, 24 Cal.3d 799 in the given scenario, it may be said
that where the risk or danger in relation to harm can be foreseen, then an injury in connection to
the economic interests of the plaintiff should not be uncompensated simply because there was no
injury or damage to his person or to his property. Therefore, ABC would be accountable to pay
compensation to James in relation to the leakage defect of the house.
Applying Dominion Natural Gas v Collins and Perkins [1909] AC 640 in the give
scenario, it may be said that in case of preliminary negligence by ABC, an easy and practical
precaution could have been taken. The failure of ABC would render ABC to be accountable,
unless ABC is able to demonstrate that the right reason in connection to the accident was the
tampering in relation to the machinery by the third parties.
Conclusion
To conclude, it may be said that McCarthy may sue ABC Construction on the ground of
negligence and damages.

3BUSINESS LAW
References
Dominion Natural Gas v Collins and Perkins [1909] AC 640.
J'Aire Corp. v. Gregory, 24 Cal.3d 799.
United States v. Spearin, 248 U.S. 132 (1918).