This Week in Advocacy— HB 2170: Where Does Implied Warranty Belong?
David Lancaster takes a closer look at implied warranty and HB2170.
For 110 years, Texas has relied on the same liability precedent when it comes to assigning responsibility between owners, contractors and architects. This precedent established by a 1907 Texas Supreme Court decision in the Lonergan case, which decided, “In the absence of an express contractual warranty running from the owner to the contractor that the plans were sufficient to construct he building, the contractor bears the risk of all losses arising from defects in the plans and specifications” (Sean M. McChristian, “Moving from Mastec to Metcalf).
This decision, however, has been in conflict with a 1918 United States Supreme Court decision in the Spearin case, which decided that “Implied warranty is not overcome by general clauses in a contract requiring the contractor to examine the site, to check the plans, and to assume responsibility for the work until completion and acceptance” (Sean M. McChristian, “Moving from Mastec to Metcalf).
For decades, Texas has continued to follow the precedent set in the Lonergan case rather than the Spearin case, assigning proportional responsibility based on the problem discovered with the project. (Lonergan was reaffirmed as the “law of the land” by the SCOTX in 2012 in the El Paso Field Services v. MasTec North America (MasTec) decision.
The recently introduced HB 2170 would change this, assigning an implied warranty on the plans an owner gives to a contractor. This would give the contractor an automatic defense against a suit being filed by the owner, as long as the plans were strictly followed; it might even provide him or her an opportunity to sue the owner for damages, if following faulty plans were shown to have caused damages to the contractor and/or his or her subcontractors. The only recourse an owner would still have would be to sue the architect or engineer who drafted the plans to pay to fix any problems in the building.
To avoid total responsibility, the design professional would be forced to prove that the contractor and subcontractors had not executed the plans precisely and, therefore, had a proportional responsibility to share in paying damages.
How much and how badly would this affect architects?
First, it would impact the architect’s traditional role of owner’s representative. If the owner has an implied warranty of providing good plans, the architect becomes the first, if not only, target in subverting this role. To protect against a potential suit by an owner, architects would probably need to observe the entire construction process to ensure that the plans were being strictly followed. They would need to be able to demand compliance with their directions by the contractor and subs, something that doesn’t happen now either contractually or as a standard practice.
Professional liability policies will almost certainly increase dramatically in cost, with deductibles likely to skyrocket as well.
In conclusion, Texas has spent 110 years acting on the premise that the contractor is a professional capable of looking at plans, and upon seeing a problem, calling it to the attention of the architect and/or owner. This bill would be a disincentive for contractors to identify situations where plans and construction practices don’t mesh properly—in fact, where calling attention to them might expose those constructors to liability they could otherwise avoid completely.
All in all, passage of HB 2170 would be something more akin to rearranging the deck chairs on the Titanic—only then it will be the architect forced to drag all the other parties in a construction project into a lawsuit, just like the contractor does today.