The Spearin Doctrine Revisited
Construction and Procurement Law News, Q2 2017
In the recent case Penzel Construction v. Jackson R-2 School District, a Missouri appellate court recognized and re-affirmed the Spearin Doctrine for a claim involving defective plans and specifications provided by the government. The general contractor brought a breach of contract action against a school district based on breach of implied warranty for furnishing deficient and inadequate plans and specifications to the contractor for a construction project involving an addition to a high school.
The owner furnished the plans and specifications for the Project to the contractor, who in turn provided them to the electrical subcontractor. Neither the contractor nor electrical subcontractor noticed any errors in the plans during the bidding process. At the end of the project, the electrical subcontractor claimed the sixteen-month delay was the result of the plans’ defects and inadequacies. The contractor brought a claim against the school district on behalf of the electrical subcontractor.
As a brief synopsis, Spearin is a widely recognized federal case which stands for the proposition that when a government owner includes a detailed specification in a contract, it impliedly warrants that the plans are “reasonably accurate.” If the plans and specifications are defective, unbuildable, or unsafe, the government is liable for the resulting consequences. In determining whether plans or designs are defective, courts look at the cumulative effect of the alleged errors. Not all states have adopted the doctrine.
The Missouri court had to first address whether the contractor’s claim based was actionable in Missouri, as such an action had not previously been expressly accepted or rejected in the state. Noting that Spearin aligns with principles established by prior Missouri case law – namely, that a contractor who bids a job in reliance on the government’s representations of what a project will entail will not be punished because the resulting product is defective – the court recognized Spearin claims on Missouri public construction projects.
A Spearin claim is a breach of contract claim. The two issues of concern in this case were (1) whether the government owner actually breached the contract, and (2) whether the contractor suffered damages that it could prove with reasonable certainty. As to the first issue, the plans and specifications are considered “defective” if they are “so faulty as to prevent or unreasonably delay completion of the contract performance.” The court found that the contractor had sufficiently met its burden as to whether the plans were defective under the meaning of Spearin.
As to the second point, the court found that there was sufficient evidence to determine that the defective plans damaged the contractor and the amount of those damages. Specifically, the court found that the contractor presented an “adequate basis” under the modified total cost method for calculating a rational estimate of damages. The goal of the modified total cost method and the goal of Missouri contract law are consistent—both seek to place the non-breaching party in the same position he or she would be in absent the breach, while only penalizing the breaching party to the extent he or she is responsible for the other’s damages.
Penzel Constr. v. Jackson adopts, for Missouri, the Spearin Doctrine as an acceptable cause of action for breach of contract arising from defective plans or specifications. Generally, this requires (1) a contractor or subcontractor (with a “pass-through” agreement) on a government construction project, (2) where the government owner furnishes plans and specifications for the contractor’s (or subcontractor’s) work, (3) those plans and specifications are “defective,” and (4) those deficiencies cause additional costs. Intrinsic in this analysis is whether the specification at issue is a design specification or a performance specification, as the Spearin doctrine applies only to design specifications. If contractors are careful, diligent, and honest, and if design specifications are defective, the Spearin doctrine may provide a remedy.