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Owner’s Design Defects Can Excuse Contractor’s Own Defective Performance

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Generally, the implied warranty of the adequacy of the plans and specifications, also known as the Spearin Doctrine, allocates risk to the owner for any defect in the design of the project. This influential federal decision has been applied by state courts across the country, including its adoption as part of Washington construction law.

Recently, the Washington Supreme Court, in Lake Hills Investments, LLC v. Rushforth Construction Co., Inc., affirmed the long standing precedent that limits a contractor’s liability for defects when the contractor follows the owner provided plans and specifications. This tracks Washington’s public policy that allocates risk and liability on construction projects between the owner, architect and contractor based on each party’s role. The decision affirms the rule that a contractor can apply the Spearin defense to reduce its liability even if some of the defects were caused in part by its own defective work.

The owner in Lake Hills had withheld millions of dollars in progress payments and proceeded to file suit against the contractor for breach of contract. The contractor responded to this lawsuit by claiming that the delays and defects had resulted from faulty design specifications and plans provided by the owner and its design team. After a two month trial, the jury returned a split decision.

On appeal, the Court of Appeals found that the jury instruction for the affirmative defense of faulty plans or specifications was misstated and therefore, prejudiced the owner. The question before the Washington Supreme Court was whether the use of the word “solely” in the Spearin Doctrine jury instruction was incorrect.

The Supreme Court explained that the Spearin defense is “based on control” or lack thereof by the contractor. Specifically, where an owner is contractually responsible for providing the design and it provides defective or incomplete plans, a contractor should not be responsible for damage caused since it was “not the source of the defects.” As applied, the Spearin Doctrine is a “complete defense” to design defect claims only if the damage is “solely due” to the defective design. If the defect is not due solely to defective design, the jury must allocate between design and installation defects. Each side bears the risk for their role in the defects.

This decision clarifies that Spearin still applies even if the owner is able to point to areas that contractor failed to properly perform.

Practice Tip

Contractors should be aware of the many implied obligations in construction contracts when they negotiate their scope of work with owners and other contractors. A contractor generally has a contractual duty to perform work in a workmanlike manner and free from defects in materials or workmanship. An owner who furnishes plans and specifications for the work impliedly warrants to the contractor that they will be sufficient for the intended purpose. Each side normally bears the burden of performing their respective obligations.

Be aware of contract clauses that seek to override the implied warranty of the adequacy of plans and instead shifts the design responsibility onto the contractor. This leaves the contractor holding the bag for any defects, even if the root cause was the flawed plans and specification prepared by the owner.