The Plans Are Incomplete, Now What Do I Do?
An Overview Of The Implied Warranty That The Plans Are Complete
William C. Last, Jr.
Once the work starts, it is not uncommon to discover that the plans are incomplete and/or inaccurate. The inadequate plans and specifications may fail to provide the intended result or alternatively include any combination of errors, omissions and conflicts. If the errors are material, the contractor should be entitled to a change order for the costs associated with correcting the errors.
If you are the contractor that discovers the inaccuracies, you must determine what your rights and obligations are under the law and the contract. While most plans and specifications contain some inaccuracies and errors, the degree of those errors and inaccuracies will impact your rights to cover any additional costs. This article will discuss, in general, what rights the contractor has once it discovers defective plans.
The Spearin Doctrine
In every construction contract, the owner impliedly warrants that the plans and specifications are accurate and sufficient enough to build the project. This implied warranty was first set forth in a United States Supreme Court case entitled United States v. Spearin. In that case, Spearin entered into a contract with the Navy to build a dry dock in accordance with the Navy's plans and specifications. The plans and specifications failed to provide information relative to a condition in part of a sewer to which Spearin connected the sewer it constructed. The undisclosed condition later caused the project to flood, and Spearin refused to continue work until the government corrected the condition. Ultimately, the government terminated Spearin. Spearin then sued the government. The U. S. Supreme Court found for Spearin and stated in its opinion "[I]f the contractor is bound to build according to plans and specifications prepared by the owner, the contractor will not be responsible for the consequences of defects in the plans and specifications."
The Court's decision produced what is now commonly referred to as the Spearin Doctrine. Under the Spearin Doctrine, the contractor can recover from the party who supplies the inadequate plans and specifications the cost of the delays, disruption and additional work associated with the defective plans and specifications. The Court's rationale for holding for Spearin was that because the contractor was obligated to specifically follow the plans and specifications, it should not be responsible when the project, built in accordance with the plans and specifications, does not provide the intended results. California courts have adopted the Spearin Doctrine.
Thus, when the owner provides the contractor with a set of plans and specifications to bid on a project and subsequently build that project, the owner impliedly warrants the accuracy and completeness of the plans and specifications.
Exceptions to the Doctrine
Since the adoption of the Spearin Doctrine, owners have modified contract provisions in an attempt to negate the affect of the decision. In addition, courts have created certain exceptions to the doctrine. Some of the most common exceptions follow.
If the contractor fails to follow the plans and specifications, it will not be allowed to rely on the Spearin Doctrine. To avoid this exception, the contractor should notify the owner of the errors before the contractor makes unilateral changes to the design. As soon as the contractor discovers the error, the contractor becomes obligated to comply with contract clauses concerning notification of changed conditions. Similarly, the contractor cannot rely on the Spearin Doctrine when it is negligent in fulfilling the scope of work as set forth in the plans and specifications.
A number of contracts contain clauses that require the contractor to review the plans and specifications to ensure that they are accurate. While the contractor may not be held responsible under such a clause for defects in the plans and specifications that are not apparent on the face of the documents, the clause may bar a claim based on an obvious error. If a contractor finds an error during the bidding phase, it is obligated to inform the owner of the error prior to submission of the bid. The test of whether or not the contractor should have discovered the error is whether a reasonably competent contractor would have discovered the error.
Some contracts include a clause that obligates the contractor to assume the liability for the defective plans and specifications. That type of clause is typically in the form of the contractor warranting that the project will be free from defects. To avoid such a harsh result, the contractor should attempt to delete any such risk-shifting clauses from the contract.
The bid documents in most public work projects include a clause that require the contractor to make site inspection with the owner's representative before the bid is submitted. If the contractor fails to make such a site visit and that site visit would have obviated the error in the plans and specifications the contractor will not be able to rely on the Spearin Doctrine to recover the additional cost associated with error.
Finally, owners often include various forms of exculpatory clauses. These clauses are variations on the previous discussed exceptions to the implied warranty. Such clauses include limits on the owner's liability for plan and specification errors, prompt notification provisions, requirements to review the plans and specifications and report errors, provisions requiring the contractor to build the project in accordance with the applicable building codes, and barring the owner from relying on owner estimates and/or representations.
California courts have enforced such clauses that are narrowly drafted to limit the owner's exposure for errors in the plans and specifications. In general, such clauses will be valid if the clause limits liability for a specific representation or aspect of the plans and specifications. For example, a clause that states that the actual conditions may be different then those shown on the plans and specifications will typically not be enforced. On the other hand, courts enforce clauses stating that soil reports are provided for the contractor's convenience only and that the contractor should make his own investigation of the actual conditions.
Under California law, a public entity cannot be liable for an intentional misrepresentation of a site condition. However, the courts have treated such a misrepresentation as a breach of the implied warranty that the plans and specifications are accurate. It should be noted that the California Public Contract Code has a specific statute that allows a contractor to recover the additional costs associated with differing site conditions for trenches and excavations.
The implied warranty that the plans and specifications are accurate underlies most change order claims. The implied warranty will not provide relief to a contractor if it is negligent, fails to discover and report obvious errors, fails to give prompt notice once the error is discovered, chooses to unilaterally vary from the plans and specifications once the error is found, assumes liability for such errors or releases the owner from such liability.
In closing, a prudent contractor should review the plans and specifications for errors during the bid process. The contractor should also review its obligations under the relevant contract clauses. Finally, the prudent contractor should immediately notify the owner when an error is found and determine how the owner intends to correct it.
This article, ©2000, 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.