It’s no secret; construction projects are frequently rife with defective plans and specifications. Determining if the contractor has a claim for additional time and/or compensation is often complex and time-consuming. Given the magnitude of damages which can result from defective plans and specifications, many contractors have no choice but to assert a claim. This article discusses some of the general issues associated with these complex claims.
What are Defective Plans and Specifications?
Defective plans and specifications are generally contract documents which, if used, would violate applicable building codes and/or standards of care, or otherwise be unbuildable. Below are three types of defective plans and specifications:
– Building Code Violations
If the plans and/or specifications do not adhere to applicable building codes, the documents are deemed defective. In such a case, a contractor generally cannot be held liable for the resulting construction defects, so long as the contractor followed the approved plans and specifications. However, contractors are not free to blindly follow defective plans and specifications. In unique situations, the contractor may be liable for defective construction if the defective construction plans required the contractor to violate the contractor’s own standard of care. While contractors are entitled to rely on the plans and specifications issued by the owner, they are still duty-bound to independently satisfy the applicable standards of care for performing the contractor’s own work.
– Misrepresentation of Conditions
A major factor in winning a construction bid is having the right price. To do that, contractors review complex bid documents, project conditions, and the overall scope of the project to help define the contractor’s expected costs, construction sequence, and schedule. When an owner’s plans and/or specifications misrepresent the jobsite conditions, it will likely impact the entire construction project. The contractor may be forced to temporarily absorb unforeseen costs and delays in order to quickly remedy the owner’s misrepresentations. Depending on the specific contract language, the owner may be liable for the cost of the contractor’s additional time and work.
– Failure to Disclose Conditions
An owner’s failure to disclose project conditions (as opposed to an affirmative misrepresentation of conditions) can also create project impact and additional contractor costs. And, just like an affirmative misrepresentation, the owner is responsible to pay the contractor’s additional costs for standby time, project delays, and extra work necessary to remedy the undisclosed condition(s).
What is the Implied Warranty of Correctness?
When the project owner issues the contractor plans and specifications, the owner impliedly warrants that: (1) if the contractor follows these plans and specifications, the resultant product will not be defective or unsafe; and (2) if the resultant product proves to be defective or unsafe, the contractor will not be held liable. This implied warranty has been recognized by courts as the “Spearin doctrine.”
The Spearin doctrine holds that “…[I]f the government furnishes specifications for the production or construction of an end product and proper application of those specifications does not result in a satisfactory end product, the contractor will be compensated for its efforts to produce the end product, notwithstanding the unsatisfactory results.” (PCL Const. Services, Inc. v. U.S. (Fed. Cl. 2000) 47 Fed.Cl. 745, 792.)
How Does a Contractor Prove a Breach of the Implied Warranty of Correctness of Plans and Specifications?
In order to recover on a claim for breach of implied warranty of correctness of plans and specifications the contractor must prove that: (1) the owner provided the contractor with the plans and specifications for the project; (2) the contractor was required to follow the plans and specifications provided by the owner in bidding and in constructing the project; (3) the contractor reasonably relied upon the plans and specifications for the project; (4) the plans and specifications provided by the owner were incorrect; and (5) the contractor was financially harmed because the plans and specifications were incorrect. (Judicial Council of California Civil Jury Instruction 4500, Judicial Council of California Civil Jury Instruction 4500.)
What Damages are Recoverable by the Contractor for Defective Plans and Specifications?
Extra work is work that was not included in the overall scope of the original contract documents. A contractor who is performing work that follows the detailed plans and specifications provided by either the owner or the architect, that turns out to be defective in some capacity is entitled to collect the costs of the extra work and the costs of delays.
A contractor who performs extra work does not necessarily recover those costs. In order to recover compensation for extra work a contractor must first comply with the contractual formalities to secure additional payment. All public and most private contracts will require the contractor to: (1) obtain a written directive or written change order; (2) obtain a written agreement regarding additional compensation; and (3) give written notice that the contractor considers this additional work to be extra work. For additional information see our article on Change Orders
If the contractor did perform extra work but did not go through the proper procedure stated in the contract documents, the contractor may still be able to recover. If the contractor and owner orally agreed to additional payments for additional work, various recovery methods such as estoppel or substantial compliance may be used to recover funds for the contractor.