Expert Commentary

Design Disclaimers and Implied Warranties

Citing a recent case, Kenneth Slavens discusses the importance of precise language used in disclaimers that are part of design packages.


Design Liability
November 2002

The use of exculpatory language on design documents has been in practice for years, though it is seemingly more prevalent today in this age of risk avoidance. Though sometimes an effective means of avoiding exposure, the design professional must draw the language used in disclaimers as carefully as the remainder of the design package and must make clear the real intent. A recent federal court of appeals case drew the distinction between a disclaimer specific enough to shift the risk of design errors and one that fails to escape the reach of implied warranties created by the design and contracting processes. The case is White v Edsall Construction Company, Inc., 296 F3d 1081 (Fed App 2002).

The Spearin Doctrine

The Spearin Doctrine holds that since a contractor is bound by its contract to build according to the specifications, the contract carries with it an implied warranty that the specifications are free from design defects. The doctrine originated in a U.S. Supreme Court case involving disputes over a design in 1918, and has, since its first recital, made its way into disputes involving design professionals regardless of the type of contract or project out of which the dispute arises.

The implied warranty of the Spearin Doctrine attaches only to design specifications detailing the actual method of performance. It does not accompany performance specifications that merely set forth an objective without specifying the method of obtaining the objective.

Edsall Construction Company's Claims

The dispute that developed between Edsall Construction Company and the U.S. government arose out of a fixed price contract for the construction of a facility in Montana to house helicopters. The facility called for "tilt-up canopy doors" weighing about 21,000 pounds each. The design used a system of motors, cables, pulleys, and counterweights to operate the doors. The cables attached to the doors at "pick points."

Edsall was the successful bidder on the facility, and subcontracted the door installation to Uni-Systems, a company with substantial experience in designing and installing hangar doors.

Uni-System discovered that the three-pick-point design called for in the contract documents would not work, and proposed a four-pick-point system. The contracting officer for the project understood that the four-pick-point was a new design, but advised that there should be no increased cost to the government.

A claim was eventually submitted for the additional costs based on the new design. The claim was rejected because the design change on which the claim was based was not presented before bidding as required by the design documents.

The drawings at issue contained the following disclaimer:

CANOPY DOOR DETAILS, ARRANGEMENTS, LOADS, ATTACHMENTS, SUPPORTS, BRACKETS, HARDWARE, ETC. MUST BE VERIFIED BY THE CONTRACTOR PRIOR TO BIDDING. ANY CONDITIONS THAT WILL REQUIRE CHANGES FROM THE PLANS MUST BE COMMUNICATED TO THE ARCHITECT FOR HIS APPROVAL PRIOR TO BIDDING AND ALL COSTS OF THOSE CHANGES MUST BE INCLUDED IN THE BID PRICE.

The structural engineer had placed the disclaimer on the drawings. The structural engineer testified that the purpose of the disclaimer was to act as an "informational flag" to bidders that the bidders needed to verify the three-pick-point design. The drawings also were annotated with the "v" notation for verify. Some verification points were the schematic details, and some were door weight and the weight per pick-point.

The Court's Analysis

The court analysis rested upon its interpretation of implied warranties as they relate to the Spearin doctrine and who has responsibility for design defects.

Implied Warranties. The court discussed the Spearin doctrine implied warranty. The court noted that the implied warranty exists to protect contractors who fully comply with the design specifications. Contractors, the court observed, are not responsible for defects in the design.

Against this background, the court went on that "general disclaimers" that require the contractor to check plans and determine project requirements do not overcome the implied warranty, and, as a result, does not shift the risk of design flaws to the contractors who follow the specifications. The court held:

Only express and specific disclaimers suffice to overcome the implied warranty that accompanies design specifications. Absent such disclaimers, the contractor is entitled to any additional costs reasonably incurred to produce a satisfactory result.

The implied warranty, however, does not eliminate the contractor's duty to investigate or inquire about a patent ambiguity, inconsistency, or mistake when the contractor recognized or should have recognized an error in the specifications or drawings…. This duty requires contractors to clarify patent ambiguities, but does not require them to ferret out hidden or subtle errors in the specifications.

[Contractors] are not expected to exercise clairvoyance in spotting hidden ambiguities in the bid documents, and they are protected if they innocently construe in their own favor an ambiguity equally susceptible to another construction … [because] ambiguities in contracts drawn by the Government are construed against the drafter.

Edsall's Claim: Design Requirement or Performance Specification. The court considered the merits of the contractor's claim. The court concluded that the drawings at issue incorporated significant design characteristics. The characteristics included the number of pick points and the distribution of the load at three points on the truss above the door. These were design features that the contractor "was expected to follow." In addition, the court agreed that the design set out in the documents was defective and would not have worked had the design been followed.

The court drew a distinction between a design requirement and a performance specification. In this case, since the contractor had to seek and receive approval for any change from the plans, the contractor could not alter the design without approval. On the other hand, the court reasoned that the contractor could have chosen any method of building a workable tilt-up door that would have constituted a performance specification. Under this analysis, the three-pick-point door design was a design requirement, not a performance specification.

Since the three-pick-point door was a design requirement, the court concluded that there was an implied warranty as to the adequacy of the design. Given the implied warranty, the owner was responsible for the consequences of the design defects absent an express and specific disclaimer.

General versus Specific Disclaimers. The court here found that the disclaimer was only a general disclaimer and not specific enough to overcome the implied obligations. The court concluded that though the disclaimer required the contractor to verify certain items in the design, the disclaimer did not "clearly alert" the contractor that the design might contain substantive flaws requiring correction and approval before bidding. While the disclaimer suggested the possibility of minor problems, the disclaimer did not shift the risk to the contractor. The failure of the disclaimer, according to the court, was that it did not alert the contractor that the design might not work.

The court went on that the contracts document could have been drafted such that the risk of design defects would have been shifted to the contractor; however, this disclaimer did not do that. The disclaimer directed the contractor to check "details" and not the "design" itself.

The court concluded that the contractor was entitled to recover any additional costs reasonably incurred to produce a workable tilt-up canopy door.

Conclusion

As a design professional, you will need to ask yourself what you are trying to accomplish with the notes on the drawings. Are you trying to pass the responsibility for the design to the contractor? Do you just want to know if the design is constructible? Do you want to relinquish control over a given part of the project?

There is no right or wrong answer to any of this. What the Edsall case tells us is that we must say what we mean. Though the argument was made, did the design in the Edsall case really mean to direct the contractor to review the design, and thereby accept reasonability for it? We may never know the answer to that, but what we do know is that if that was the intention, you need to tell the contractor what the obligations are, i.e., design responsibility for a portion of the project.

Courts are reluctant to allow responsibility to be shifted to another unless it is accomplished in an unambiguous manner. If you really want the contractor to design a part of the project, tell the contractor before the bid that this will be his or her obligation.


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