Charles Dickens wrote in Tale of Two Cities: “It was the best of times, it was the worst of times.” At first blush, it may seem out of place to talk about a topic so common as claims during a worldwide pandemic, but maybe it is the “best of times” to do so. As we work to become united against the common, viral threat facing our country, and as these United States recognize that construction is an “essential” business and trade, we should think harder and consider that now, more so than ever, is the best time to talk about how we can avoid claims and disputes on construction projects.
As I write this, we in Louisiana are under a stay-at-home order as is most of the country. But my work supporting the construction industry continues as does the work of our clients in building the infrastructure that brings us power, food, medicines, and all of those components of life that we took for granted before this event.
In my thirty-five years of practice in the area of construction litigation, issues concerning the proper scope, application, interpretation or enforceability of contract provisions, under seal by the designer of record, are frequently at the center of the dispute.
The contract documents prepared by engineers or architects establish the rights and obligations of the parties, and every contract contains both express and implied terms and conditions. Both the express terms and the implied terms can be the source of disputes between the parties. Examples of implied terms include the obligation not to hinder or interfere with the other party’s performance; the obligation of good faith and fair dealing; and the implied warranty of sufficiency for design, plans, and specifications furnished to the contractor, commonly known as the Spearin Doctrine. The Spearin Doctrine is a well-established principle in construction contracting in the United States, but, in my experience, it is often overlooked by engineers and architects in the preparation of plans, specifications and contract documents.
In U.S. v. Spearin, 248 U.S. 132, 39 S.Ct. 59, 63 L.Ed. 166 (1918), the Supreme Court of the United States held that the furnishing of plans and specifications to the contractor carries with it an implied warranty that the plans and specifications will result in adequate and sufficient work, as intended. The breach of this implied warranty gives rise to liability for the extra costs incurred by the contractor.
The Spearin Doctrine is not limited to only traditional design-bid-build contracts. A recent decision from the Supreme Judicial Court of Massachusetts held the Spearin Doctrine to be applicable to alternative delivery methods including CMAR contracts. In Coghlin Electrical Contractors, Inc. v. Gilbane Building Company, 472 Mass. 549, 560, 36 N.E.3d 505, 514-15 (2015), the Court reasoned:
Although the owner's implied warranty applies in a public construction management at risk contract, the differences between the responsibilities of a general contractor in a design-bid-build project and those of a CMAR affect the scope of the implied warranty. The general contractor in a design-bid-build project may benefit from the implied warranty where it relied on the plans and specifications in good faith, but the CMAR may benefit from the implied warranty only where it has acted in good faith reliance on the design and acted reasonably in light of the CMAR's own design responsibilities. The CMAR's level of participation in the design phase of the project and the extent to which the contract delegates design responsibility to the CMAR may affect a fact finder's determination as to whether the CMAR's reliance was reasonable.
Likewise, the Spearin Doctrine is also applicable to a design-build project depending upon, inter alia, the degree of involvement of or control asserted by the owner (or its representative) in the design of a particular project and the design-builder’s good faith reliance thereon. See generally, Metcalf Const. Co., Inc. v. United States, 742 F.3d 984, 996 (Fed. Cir.2014).
It is universally accepted that contract provisions that are contrary to established public policy are null and void and, thus, unenforceable. Public policy varies from one jurisdiction to the next. For example, some states preclude shifting of the design risk by statute (see La. R.S. 9:2771; Cal.Pub.Con.Code § 10120; Cal.Pub.Con.Code § 1104), and in others, the Spearin implied warranty is not overcome by general disclaimers in the contract documents. The Court in U.S. v. Spearin, 248 U.S. 132, 137, 39 S.Ct. 59, 61, 63 L.Ed. 166 (1918) reasoned:
The risk of the existing system proving adequate might have rested upon Spearin, if the contract for the dry dock had not contained the provision for relocation of the 6-foot sewer. But the insertion of the articles prescribing the character, dimensions and location of the sewer imported a warranty that if the specifications were complied with, the sewer would be adequate. This implied warranty is not overcome by the general clauses requiring the contractor to examine the site, to check up the plans, and to assume responsibility for the work until completion and acceptance.
How are design professionals who prepare plans, specifications and contract documents essential to a successful project to know what limits they must adhere to? From interviewing engineers, architects, trade association officials, and educators, it appears clear that engineers are, at best, taught in school only the most basic principles of contract formation and preparation. As one engineer observed, we need engineers to come out of school with the basics of their profession (physics, dynamics, structure, etc.) and a lot of the real-world practice of engineering has to come during the years after school ends. To be fair, this is not unlike the academic preparation provided in other professions, even for lawyers. For example, construction law is not a course regularly offered in most law schools. We, as lawyers, must mentor our associates to help them learn the applicable legal principles.
In a matter I was recently managing, the engineers who prepared the plans and specifications admitted that they did not know about the laws precluding the owner, whom they represented, from shifting the responsibility for design to the contractor. In our jurisdiction, the contractor’s immunity from liability for design defects may not be waived by contract. Further, these engineers acknowledged that the only training on such topics that they had received came from contractor trade association meetings, such as “lunch and learn” events. It would appear that actual training in preparing plans and specifications, whether for public or private construction projects, varies from company to company and from individual designer to individual designer. Blindly relying on contract documents prepared by others does not accomplish the task required.
The design professional of record should be knowledgeable of the applicable principles of law in order to produce definite, sufficient, and enforceable plans, specifications, and contract documents. The designer’s lack of a working knowledge of the governing principles of law is one of the major drivers behind claims and disputes in construction today. The contractor cannot be the guarantor of the sufficiency of the plans and specifications prepared by the owner’s engineer.
It is imperative that engineering colleges; design firms that prepare plans and specifications; owners who may employ construction administration personnel, public and private; trade associations; and the designers themselves, whose seals will be affixed to the contract documents, take up this challenge to become informed about the laws and limitations in effect in the jurisdiction in which they practice and in which their projects are to be constructed. All parties in the construction process, including engineers, must be good stewards of the resources entrusted to them to insure the delivery of projects free of avoidable claims and disputes.
Russel W. Wray, Wray & Associates © 2020. Visit www.wraylaw.com for further information.
This article is informational and should not be used as legal advice. One should independently consult with an attorney, prior to relying on any of the information provided herein.