Relying On A Building Inspector’s Approval Of The Work Does Not Shield The Contractor From Liability

Relying On A Building Inspector’s Approval of the Work
Does Not Shield
The Contractor From Liability

By
William C. Last, Jr.

This article is in response to a recent inquiry as to who is responsible for the cost of correcting non-code compliant work that was approved by the building inspector during the course of construction. In short, what are a contractor’s obligations relative to complying with building codes and what are the building inspector’s obligations for approving work that is not code compliant?

While the answer to questions regarding building inspectors are not particularly complicated, a contractors obligations are more complicated.

A Public Employee Is Immune From Liability
For Approving Non-Code Compliant Work

It is well established under California case law that a building inspector may knowingly and intentionally approve work that is not code compliant without incurring any liability to the owner of the building and/or the contractors. California statutes provide that public entities and employees have immunity from liability for certain types of actions or inactions. Public entities are generally immune from liability except as provided by statute. Similarly, the public entity is immune if the public employee is immune from liability. A specific statute makes public employees immune from injuries that result from their discretionary acts. The building inspector’s approval or disapproval of work is such a discretionary act. Irrespective, there is a specific statute exempting public entities from liability for approved plans or the design of a work of improvement on public lands.

A public employee can be liable if the required act or inaction concerns a ministerial task or if there is a violation of mandatory duty. For example, the refusal to issue a building permit under certain circumstances may result in liability. Similarly, the issuance of a building permit to an unlicensed contractor has resulted in liability since it violates a mandatory duty not to issue permits to unlicensed contractors.

However, public entities and their employees have additional immunity from other forms of civil liability. For example, public entities are immune from liability for a public employee’s fraudulent acts or negligent misrepresentations. While a public employee may be personally liable for fraud or corruption, he or she is not liable for intentionally failing to inspect property.

A Contractor’s Liability For Non-Code Compliant Work

While a public entity or official is immune from such liability, the contractor has few, if any, legal arguments to avoid liability. The contractor can be liable even if it fully complies with plans and specifications that are not code compliant.

In order to become licensed, a contractor is required to exhibit the knowledge and experience that is necessary for the safety and protection of the public. Such knowledge includes building code requirements. Once a contractor becomes licensed, California law requires the contractor to complete its work in an appropriate manner. For example, a contractor who willfully departs from accepted trade standards (i.e., from good and workmanlike construction) or disregards the plans and specifications violates the requirements of California Business and Profession Code section 7109. Similarly, a contractor who willfully or intentionally disregards the state or local building codes violates the requirements of California Business and Profession Code section 7110. As a consequence, a contractor can be disciplined by the Contractors State License Board.

Despite the contractor license law requirements, the legal basis for such liability is typically contractual in nature. Almost every construction contract includes a clause that obligates the contractor to complete the contracted for scope of work in a manner that complies with all applicable building codes and the requirements of the building inspector. Such language could be in the following form:

“Contractor agrees, for the consideration and under the terms and conditions hereafter set forth, to furnish and transport at its own cost and expense all labor, materials, tools, implements, equipment, scaffolding, permits, power, sales and other taxes, fees, supplies, appliances, hoisting, transportation, supervision, coordination, communication, samples, shop drawings, storage, and all other things necessary to perform and completely finish in accordance with the Prime Contract, in a first-class and workmanlike manner, and to the complete satisfaction and approval of Contractor, free of any and all liens and claims of laborers, material men, suppliers, and subcontractors, and in conformity in all respects with all applicable federal, state, county and municipal laws, ordinances, rules, and regulations, the following work and all work incident thereto.”

Clauses similar to the foregoing are intended to shift the risk of ensuring that the work complies with the building codes from the architect and the owner to the contractor.

However, other standard form contracts do not require the contractor to ascertain that the plans and specifications are in accordance with applicable laws, statutes and ordinances. But they do require the contractor to notify the owner if violations of applicable laws and ordinances are discovered ( For example, see AIA Document A201-1997 section 3.2)

California courts have held that such contractual provisions, coupled with licensing laws, obligate the contractor to review the plans and specifications for compliance with building codes. For example, in the case entitled Howard J. White v. Varian Associates (1960) 178 Cal. App. 2nd 348, the court found the contractor was not entitled to the additional

cost of installing cast-iron sewer pipe instead of clay pipe called for in the specifications. An ordinance of the city of Palo Alto requires cast-iron pipe. The contract contains an express provision: "The latest Plumbing Code of the City of Palo Alto is hereby made a part of this specification for minimum requirements....The Contractor shall furnish without any extra charge any additional material and labor when required by the compliance with these rules and regulations....

Previous articles written by this author have discussed the owner’s implied warranty that plans and specifications are complete. The cases concerning the implied warranty also obligates the contractor to review the plans and specifications and advise the owner if he discovers any inaccuracies in the plans and specifications. However, the courts have also held that a contractor’s obligation to review the plans and specifications for code compliance is not unlimited. In one case, an appellate court held that if the code issues cannot be discovered after a reasonable review of the plans and specifications, the contractor is entitled to recover the additional cost of building the structure so that it complies with the building code requirements. In essence, a contractor’s duty relative to the review of the plans and specifications is based on the knowledge and experience that a reasonable contractor exhibits under similar circumstances.

The fact that the plans and specifications were prepared by an architect does not necessarily excuse the contractor from reviewing the plans and specifications for code compliance. However, if they were prepared by an architect and/or an engineer, the courts will be less inclined to hold a contractor to a high standard in discovering code violations. Additional factors the court should consider include the nature and the complexity of the project.

The foregoing analysis is based on a contractor’s contractual obligations. In addition, a contractor can incur tort liability for the cost of correcting negligent workmanship. A discussion of the application of negligence theory of liability to non-code compliant workmanship is a complex and evolving area of the law. Due to the limited scope of this article, the following discussion of the negligence theory of liability is only intended to alert the reader to the issue.

In essence, if a contractor’s workmanship falls below the standard of care and that poor workmanship results in owner being damaged, the owner can recover those damages from the contractor based on a negligence theory of liability. Typically, building codes establish the minimum standard of care for a contractor’s workmanship. The standard of care can also be established by the requirements of the plans and specifications. The potential plaintiffs and defendants in a negligence theory of liability that is based on non-code compliant work can vary.

However, if a contractor unknowingly builds a structure relying on architect and/or engineer prepared plans and specifications that contain code violations, the contractor should attempt to seek indemnity from the architect and/or engineer.

Conclusion

Clearly, contractors can rely on the issuance of an occupancy permit by the building inspector as a defense for non-code compliant work. It is equally clear that a public entity is not liable for the approval of non-code compliant work.

The contractor’s obligation to comply with building codes and ordinances is based on contractor licensing laws, the contract and the standard of care for workmanship. The contractor can attempt to shift its obligations for code compliant plans to the owner and the architect. However, the contractor should make a practice to review the plans and specifications for code compliance prior to entering into the contract.

If the contractor finds inaccuracies and errors in the plans and specifications that are code violations it should immediately notify the owner. If the errors and inaccuracies are discovered after the work commences the contractor can still contend that the additional costs required to bring the work into compliance are the obligation of the owner if a reasonable contractor would not have found the errors.

This article, ©2001, was written by William C. Last, Jr. Mr. Last is an attorney who has been specializing in Construction Law for over 20 years.. In addition to belonging to a number of construction trade associations, Mr. Last holds a California “A” and “B” license. He can be contacted at 415-764-1990 or 650-425-7679. A number of his past articles can be found on his website (lhfconstructlaw.com). This bulletin is published periodically to provide general information about current legal issues. The articles are not intended to be a substitute for the advice of an attorney as to a specific problem. If you have a specific legal question or need legal advice, you should contact an attorney.