Out with Lonergan, In with Spearin: Texas Legislature Provides Contractors with Limited Protection for Defective Plans and Designs

As of September 1, 2021, in a change to Texas caselaw that had been in place for over a century, Texas contractors now have protection in certain circumstances from liability for defective plans and specifications provided to the contractor by someone else. In the 1907 Texas Supreme Court case Lonergan v. San Antonio Loan & Trust, the court held that it was the contractor’s responsibility to reconstruct a collapsed building even though the collapse was due to a defect in the design plans and specifications prepared by the architect hired by the project owner and provided to the contractor by the project owner. In 2012, in El Paso Field Services v. Mastec, the Texas Supreme Court reaffirmed its decision in Lonergan.

In contrast, in 1918, the United States Supreme Court ruled on a question similar to the Lonergan case in United States v. Spearin and came to a different conclusion, holding that it is not the contractor’s responsibility to determine the sufficiency of plans and specifications provided to it by the project owner. Since the Spearin decision in 1918, 36 states and the District of Colombia have followed, at least in part, sometimes by court decision, sometimes by statute, the Spearin decision of not holding the contractor liable for defective plans and specifications provided to the contractor by someone else.

New Statutory Protections for Texas Contractors Related to Defective Plans/Specifications/Design Documents

In an effort to bring Texas in line with the jurisdictions that follow Spearin, the Texas Legislature added a new chapter (Chapter 59) to the Texas Business and Commerce Code titled “Responsibility for Defects in Plans and Specifications.” Chapter 59, which became effective on September 1, 2021, applies to contracts for the construction or repair of an improvement to real property and provides that:

• A contractor doing work in Texas is not responsible for the consequences of design defects in plans/specifications/design documents and may not warrant the accuracy, adequacy, sufficiency, or suitability of plans/specifications/design documents provided by a person other than the contractor’s agents, subcontractors, fabricators, suppliers, or consultants.
• If a contractor learns of a defect, inaccuracy, inadequacy, or insufficiency in the plans/specifications/design documents, the contractor must, within a reasonable time, disclose in writing to the person with whom the contractor entered into a contract the existence of any known defect in the plans/specifications/design documents or any defect that reasonably should have been discovered by the contractor using ordinary diligence, before or during construction.
• Chapter 59 provides that “ordinary diligence” means the observations of the plans/specifications/design documents that a contractor would make in the reasonable preparation of a bid or fulfillment of its scope of work under normal circumstances. “Ordinary diligence” does not require the contractor to engage an engineer or architect to review the plans/specifications/design drawings.
• If the contractor fails to disclose a defect as described above, the contractor may be liable for the consequences of defects that result from the failure to disclose.

Texas contractors should also be aware that the provisions of Chapter 59 cannot be waived by the parties and any purported waiver of Chapter 59 is void.

Exceptions to Chapter 59

Notably, Chapter 59 does not apply to construction or repairs to a “critical infrastructure facility,” which is defined in the statute as including but not limited to the following: petroleum or alumina refineries, electrical power generating facilities, chemical manufacturing facilities, water treatment plants, liquid natural gas terminals, telecommunications systems, ports, rail yards, gas processing plants, oil/gas pipelines, oil/gas drilling sites, or airports.

Chapter 59 also does not apply to construction work done under a design-build contract or an EPC contract in situations where the part of the plans/specifications/design drawings that is alleged to be defective is the contractor’s responsibility.

Finally, Chapter 59 does not apply to portions of contracts between an owner and contractor under which the contractor agrees to provide input and guidance on plans/specifications/design drawings, where the contractor’s input and guidance are provided as the signed and sealed work product of a licensed, registered engineer or architect, and that work product is incorporated into the plans/specifications/design documents used in construction.

Architect’s/Engineer’s Standard of Care

In addition to adding Chapter 59 to the Texas Business and Commerce Code, the Texas Legislature also revised Chapter 130 of the Civil Practice and Remedies Code to require that construction contracts for architectural or engineering services or a contract related to the construction or repair of an improvement to real property that contains architectural or engineering services as a component part must require that the architectural or engineering services be performed “with the professional skill and care ordinarily provided by competent architects or engineers practicing under the same or similar circumstances and professional license.”

If one of the above-described contracts contains a different standard of care than that established by the statute, the provision containing the different standard of care is void and unenforceable and the standard of care established by the statute applies.