Texas’ approach to liability for design defects on construction projects is a unique one. So unique, in fact, that every other state has a uniform approach under the Spearin doctrine. However, in June 2021, Texas Governor Greg Abbott signed SB219 into law. Under this new legislation, a contractor’s liability for defects stemming from designs provided by the owner has been severely limited.
This law goes into effect as of September 1, 2021. Let’s take a look at how these changes will affect Texas contractors.
Spearin doctrine vs Texas approach to design defect liability
The generally accepted rule across the country when it comes to design defect liability is known as the Spearin Doctrine. This gets its name from a US Supreme Court case back in 1918 and is still alive today. The basic premise is this. When a contractor follows the plans and specs furnished by the owner, and they turn out to be defective, the owner, not the contractor, is liable for any damages resulting from said defects. This is the approach in nearly every state in the country.
Except for Texas.
Texas has been beholden to a state Supreme Court decision from way back in 1907, that tackled such design defects a bit differently. The case was Lonergan v. San Antonio Loan & Trust. And this so-called Lonergan approach essentially states that a contractor can’t bring a claim against the owner for defective plans or specs, unless the contract specifically shifts liability for such defects to the owner. Otherwise, the contractor will be liable for any defects arising from such inadequate or inaccurate designs.
Texas Legislature limits the design defect liability for contractors
- SB219: Relating to civil liability and responsibility for the consequences of defects in the plans, specifications, or related documents for the construction or repair of an improvement to real property or of a road or highway
- Primary sponsor
- Effective date:
- Contracts entered into after September 1, 2021
With the passage of SB219, Texas is shifting the liability for defects in any designs, specifications, or plans, away from contractors when the plans were provided by the owner, the owner’s agent, or the owner’s design architect or engineer. The specific statute will read as follows:
“A contractor is not responsible for the consequences of design defects in and may not warranty the accuracy, adequacy, sufficiency, or suitability of the plans, specifications, or other design documents provided to the contractor by a person other than the contractor’s agents, contractors, fabricators, or suppliers, or its consultants, of any tier.”
But this isn’t a full shield from liability. Contractors are still required to exercise a reasonable amount of diligence when implementing the designs provided by the owner. And, if a potential defect is uncovered, the contractor has a duty to disclose that information.
Contractor’s duty of disclosure
One important aspect of this new legislation is the new disclosure duty for contractors to limit their liability.
“A contractor must, within a reasonable time of learning of a defect, inaccuracy, inadequacy, or insufficiency in the plans, specifications, or other design documents, disclose in writing to the person with whom the contractor enters into a contract the existence of any known defect in the plans, specifications, or other design documents that is discovered by the contractor, or that reasonably should have been discovered by the contractor using ordinary diligence, before or during construction.”
Note the term “ordinary diligence.” The statute proceeds to define it as “reasonable preparation of a bid or fulfillment of its scope of work under normal circumstances.”
This means that a contractor is only expected to act in the contractor’s capacity as a contractor. There is no need to consult with a licensed or a registered architect or engineer to determine whether or not a defect exists. But some caution should still be taken. If a contractor fails to disclose such a design defect as required under this section, they can be held liable for the consequences of defects that resulted from the failure to disclose.
Applicability and exceptions
The new legislation applies to all contracts for the construction or repair of an improvement to real property. But of course, there are exceptions to every rule.
So what types of projects or contracts don’t fall under this new legislation?
- Critical infrastructure projects (as defined under the new Tex. Bus. & Com. Code §59.001(3) or any project necessary to the operation of and directly related to the critical infrastructure facility.
- Some examples include refineries, chemical plants, water treatment or pump stations, gas compressor stations, telecommunication facilities, freight transportation facilities, etc.
- Design-Build contracts
- Engineering, procurement, and construction (EPC) contracts
- Contracts that include a provision which provides that the contractor agrees to provide input and guidance on plans, specs, or other design documents to the extent that:
- The contractor’s input and guidance are provided as signed and sealed work product of a person licensed or registered as an architect, engineer, or land surveyor
- The work product is incorporated into the plans, specs, or other design documents used
Now that Governor Abbott put pen to paper and enacted SB219, Texas contractors can breathe a collective sigh of relief. Texas’ rather harsh approach to design defects has, finally, been curbed a bit under this new legislation.
Although due diligence is still necessary to identify and disclose any potential issues, preventing blanket liability for such defects is no longer a matter of contract, but a matter of law.