James Yand | Miller Nash
Important elements of a strong construction contract include implied warranties and design delegation. It is necessary to pay close attention to these concepts to protect against future disputes. When a contractor is confronted by an owner’s claims that the contractor did not adequately construct a project, a foundational defense is that the owner (through its design professional) provided defective plans and specifications. This is also known as the Spearin Doctrine.
This is the central issue in the Washington Court of Appeals’ recent ruling in King County v. Walsh Construction Company II LLC (2023) (FindLaw No. 83787-7-1 (Wash. App. July 3, 2023)). Walsh affirms this important implied warranty, and ultimately reversed a trial court win for King County arising from a broken sewer pipeline. The case also highlights the importance of close contractual scrutiny of express warranties provided in the prime contract. The Walsh court held that the contractor could maintain its implied warranty defense to a claim that the contractor had an obligation to correct a failed pipeline. Under the implied warranty, as affirmed in Walsh, there is a warranty automatically incorporated into every construction contract requiring the contractor to build in accordance with plans and specifications furnished by the owner: “The [owner] impliedly guarantees that the plans are workable and sufficient.” Put another way, the court explained that “to successfully assert a Spearin defense ‘the contractor must establish that…its obligations went no further than to conform with the plans and specifications prescribed by the owner as part of the contract.’” This clear separation of duties becomes muddled once contractor takes on design responsibilities, commonly referred to as design delegation. When added, the contractor is now responsible to make sure the materials provided to the project are adequate to carry out the design intent.
It is increasingly common to see construction contracts that delegate to the contractor these design responsibilities through express warranties and expanded scopes of work. The owner may modify the contract to include an express warranty that the materials and equipment installed by the contractor will “operate satisfactorily under the plans and specifications of the owner.” If that express warranty or some similar language is included by the owner, it will displace the implied warranty of design adequacy. In the Walsh contract, no such express warranty existed. Instead, the Walsh contract disclaimed any obligations by the contractor to provide design services or to maintain the pipeline in perfect condition for a specified period of time. This disclaimer should serve as an important lesson for any contract administrator that wants to avoid any design responsibilities that are now prevalent in many construction contracts. This understanding will preserve a fundamental defense of the contractor if (and when) design deficiencies become a problem or disputed change order on a project.
In summary, look for any warranty provision in a construction contract that the work will “operate satisfactorily under the plans and specifications of the owner.” This is frequently identified as a warranty that the “materials are suitable for their intended purpose.” Although innocent sounding, it can have grave consequences down the road. When the owner’s designer specifies the materials, the contractor should seek to have the warranty of suitability of materials removed, so the owner maintains the risk for its designer’s selection and approval of materials.
When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.