It is common knowledge on a design-bid-build project that a general contractor is required to build its scope of work in accordance with the plans and specifications furnished by the owner, and the owner impliedly guarantees that the plans it provides are “workable and sufficient.” This is what the landmark case of United States v. Spearin established. The Spearin doctrine allows a contractor to effectively manage the risk associated with a particular project and focus on constructability. There is, in some jurisdictions , an exception to this rule. That is when a contractor includes an express warranty that goes beyond warranting its work, and instead, warrants that its work will function as intended under the owner-provided plans and specifications. In that case, all bets may be off. The contractor must honor its warranty obligation to make the project operate as intended by the owner – even if the project’s issues stem from defects in the owner-provided design.
So, what are some examples of express warranty provisions that would saddle a general contractor with these additional warranty obligations? In King County v. Walsh Construction Company II, LLC, the Court of Appeals of Washington explored several versions of warranty language and the implications of that language for contractors. In Walsh, a utility contractor contracted to install a conveyance pipeline for a municipality. The pipeline broke, and the County looked to Walsh, under the express warranty provision in its contract, to repair the pipeline. Walsh contested performing the repair work without additional compensation because it claimed the pipeline broke due to design defects in the plans. Walsh ultimately performed the repairs under a full reservation of rights. The county sued Walsh contending that the costs of the repairs were Walsh’s responsibility and, ultimately, the appellate court was asked to decide if Walsh’s express warranty barred any design defect defense it may otherwise be able to use. Walsh’s express warranty read:
“If material, equipment, workmanship, or Work proposed for, or incorporated into the Work, does not meet the Contract requirements . . . the County shall have the right to reject such Work . . . [.] The County . . . shall require the Contractor. . . to either: (a) promptly repair, replace, or correct all Work not performed in accordance with the Contract at no cost to the County; or Provide a suitable corrective action plan at no cost to the County.”
The Walsh Court held that this guarantee was not broad enough to overcome the County’s implied warranty of the engineer’s design under the Spearin doctrine. This warranty correctly focused on the contractor’s performance of its work as dictated by the plans – not the overall performance and feasibility of the project. The Court also reviewed US Supreme Court cases where an express warranty was overly broad and did commit the contractor to perform warranty work at no cost regardless of design defects. Specifically, it highlighted Port of Seattle v. Puget Sound Sheet Metal Works and Shopping Center Management Company v. Rupp. In Port of Seattle, the contractor undermined its ability to claim design defects because its express warranty read:
“We hereby guarantee to keep the roof installed by us . . . in perfect condition for a term of ten years from this date.”
The broad language of this warranty was held to bind the contractor to maintain and keep its roof work in “perfect” condition even if an “imperfect condition arose from [the contractor’s failure to comply with the plans . . . or . . . a defect in the very plan of construction itself[.]” Designer error was of no consequence. Similarly, in Rupp the court found that the warranty language was “more than merely [an agreement to] repair or replace any defective material[.]” It expressly guaranteed the “satisfactory operation of all materials and equipment installed under the contract.” The Rupp contract also stated that it “include[ed] the plans and specifications.” The Rupp warranty language essentially guaranteed the operation of installed work as opposed to the completion of the project as reflected on the plans.
The three cases above provide a necessary reminder to contractors that they may still be responsible for performing warranty work stemming from design defects if they do not carefully limit the language in their contracts. Always keep warranty language narrowly tailored to the services provided by the contractor. One way to do this is to proactively acknowledge the division of responsibilities between designer and contractor in the contract. In Walsh, the contractor chose to do this by including the following language in a separate provision:
“Contractor will not be required to provide professional services which constitute the practice of architecture and engineering except to the extent provided for in the technical specifications and drawings.”
By having this language in the contract, Walsh was able to deny responsibility where design defects were to blame and demand payment for the pipe repairs. For the court to interpret the express warranty in Walsh differently would have been to run afoul of the above limitation on responsibilities.
Ultimately, a contractor who is performing work based on owner-provided plans and specifications should aim to have warranty provisions that are in harmony with the Spearin doctrine. This can be accomplished by (1) clearly defining the scope of the work covered by the warranty; (2) including a provision that states the contractor is not providing design services, and (3) avoiding the use of broad language. For a project that is publicly bid and that contains broad language about the contractor’s warranty, you may consider whether to opt out of the project, but, at minimum, you should develop a clear understanding with your insurance professional as to your company’s ability to be insured in the event the “defect” in design leading to a defect in construction does not excuse the your company’s performance.