Contractor's Liability for Defective Design Flashcards
Absent contractual guarantees or assumption of liability for defective design by an owner, does a contractor bear that risk?
Yes. Lonergan v. San Antonio Loan & Trust (1907) TX Supreme Court
Lonergran Holding
holding that in the absence of express contractual language, contractors accept a contract and its plans and specifications at their peril and, as a matter of law, the specifications are not guaranteed by the owner. The Court reasoned that, since the contractor contracted to construct the building in accordance with the specifications, the contractor implied that it understood them and, therefore, was in the same position as the owner to know if they were sufficient.
U.S. v. Spearin Holding (Federal Case) Contrary to Lonergan
the U.S. Supreme Court held that the
owner implied warranted the sufficiency of the plans and specifications. The Court also stated that this implied warranty could not be overcome by boilerplate terms requiring the contractor to check the plans and the job site. In reaching its holding, the Court stated, “if a contractor is bound to build according to plans and specifications prepared by the owner, the contractor will not be responsible for the consequences of the defects in the plans and specifications.”
Texas is in the minority of states that do not follow this case.
TX Supreme Court cited Lonergran in 2012
EL Paso Field Services v. MasTec
Texas appellate cases have split on an owner’s implied covenant; however, the Supreme Court cited Lonergan with approval in the 2012 case of El Paso Field Services v. MasTec North American, Inc
LAN/STV v. Martin K. Eby Const. Co. TX Supreme Court (2014)
wherein it held that a contractor had no cause of action against a design professional absent a contractual relationship.
Is a contractor’s exposure for defective plans is limited?
- The exposure of a contractor is based on a failure to deliver a completed project
– not an implied warranty of the design documents.
Summary of Law
Despite these realities, the Texas Supreme Court recently clarified in El Paso Field
Servs., L.P. v. MasTec N. Am., Inc. that the contractor, not the owner, bears the risk of deficient
design when the contract is silent on the issue. The Texas Supreme Court opinion in MasTec is
consistent with its 1907 opinion in Lonergan v. San Antonio Loan & Trust Co., but inconsistent
with the majority rule announced by the Supreme Court of the United States in United States v.
Spearin.
What is the extend of liability?
In Lonergan, the Texas Supreme Court held that the contractor’s risk for design ends at
the completion of the project. At least one subsequent case extended the contractor’s
responsibility for design deficiencies through the warranty period. Specifically, in Emerald
Forest Util. District v. Simonsen Constr. Co., Inc. a utility district hired an engineer to design
and a contractor to construct an underground sewer system.
Does a Contractor Impliedly Warrant the Plans and Specifications?
Although the Lonergan Rule might have the effect of the contractor impliedly warranting the plans and specifications, the Texas Supreme Court expressly rejected such a warranty.
Lonegran Facts
• Contractor almost finishes a building
• Building collapsed
• Contractor refused to replace the structure
• Owner sued contractor
• Court assumed for the purposes of the appeal
that there was a design defect that caused the
collapse
• Contract is silent regarding responsibility for
design errors
Lonergan Rule
• The owner does not impliedly warrant the
plans and specifications
• Contractor bears the risk for defective plans
and specifications in the absence of language
to the contrary
MasTec Facts
• El Paso provided bidders a survey map prepared by a third party documenting “foreign crossings” along a
pipeline right of way
• Inexperienced pipeline contractor, MasTec, issued
bid to El Paso that was half of the average bid
• El Paso awarded contract to MasTec based on a fixed
price
• MasTec discovered far more foreign crossings and
claimed additional damages
• El Paso denied claim and MasTec filed suit.
