March  7, 2003



Bulletin #64, Owners' Plans - What If They Are Wrong? (March 7, 2003)

When an owner gives a contractor plans, the owner is providing an implied warranty that the plans are accurate and free from defects. This warranty protects contractors who fully comply with the design specifications. This implied warranty does not allow a contractor to stick its head in the sand and ignore obvious defects, but it limits a contractor’s liability when the owner’s plans contain more subtle defects.

Recent court cases have found owners liable when they supply faulty plans. If a change in the plans is necessary, the owner, and not the contractor, bears the responsibility for the cost of correction.

Contract Disclaimers Do Not Remove Owner’s Implied Warranty

In the case, White v. Edsall Construction Company Inc., a contractor submitted a bid to the government for the construction of a helicopter hanger. After the contract award, the contractor discovered that the government’s design would not work.

The government attempted to shift the redesign costs of the hanger to the contractor, relying on contract disclaimer language, which required the contractor to verify that the plans were free of defect. In rejecting the government’s argument, the court held that:

General disclaimers requiring the contractor to check plans and determine project requirements do not overcome the implied warranty [that the owner’s plans are free from defects], and thus do not shift the risk of design flaws to the contractors who follow the specifications.

296 F.3d 1081, 1085 (Fed. Cir. 2002). Therefore, even if the contract between the owner and contractor makes the contractor responsible for the plans, at least one court has ruled the owner remains responsible for undiscovered defects.

Building Codes Do Not Overcome Owner’s Implied Warranty

Another court found that a contractor was entitled to the increased costs of construction when the plans provided by an owner were defective. In the case, Associated Builders, Inc. v. Oczkowski, an owner provided a builder with detailed drawings. A local official discovered that the roof plans were violating the Building Code. The owner, and not the contractor, was found responsible for the revisions to the plans, and the demolition and reconstruction of the roof.

The court specifically rejected the owner’s argument that every construction contract includes an implied warranty that the contractor will comply with applicable building codes, therefore, the contractor was liable. The court found:

A contractor who completes a construction project in a workmanlike manner, and in strict compliance with plans furnished by the owner will not be held liable for damages resulting from defects in the owner’s specifications.

801 A.2d 1008, 1012 (Me. 2002). Once again, the court held that when an owner provides plans, it is responsible for subtle defects.

Disclaimers by Contractor

In the Associated Builders’ case, the court found that there were additional grounds for not holding the contractor liable, because the contractor had disclaimed, in its contract, liability for problems associated with the plans provided by the owner. SMACNA contractors should follow the example in Associated Builders, and, where possible, insert a provision providing that the owner (and not the contractor) is responsible for defects in the plans.

Contractor Still Has Duty

While contractors are not liable for subtle defects in an owner’s plans, courts have consistently held that a contractor cannot ignore obvious defects. A contractor still has a duty to investigate or inquire about a clear ambiguity, inconsistency or mistake in the specifications or drawings. This duty requires contractors to clarify ambiguities, but does not require them to ferret out hidden or subtle errors in the specifications.

What constitutes an obvious defect is hard to define. The general rule is that contractors must act professionally, and bring to everyone’s attention defects that an experienced contractor would normally identify in reviewing the plans.

Conclusion

Owners cannot avoid their responsibility of providing accurate plans by including contract disclaimers or relying on building codes. The owner will be liable for defects in the plans, unless contractors ignore defects which should have been reasonably discovered. If a contractor finds a defect, it should inform the owner.

Recent court decisions give some protection for contractors from owners who unfairly attempt to shift the burden of responsibility for defects in owners’ plans. Contractors should remain vigilant in deleting such contract clauses. Circumstances vary with each project, but contractors can take comfort that they may not be held responsible for subtle defects in plans provided by owners.

 

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