The Spearin Doctrine: Winning Your Claim and Prevailing on Your Defense

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Construction Law
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Now over a century old, the Spearin Doctrine has been instrumental in saving countless contractors from cost overruns attributable to errors and omissions in the plans and specifications.  In addition, it has been used defensively to protect contractors from construction defect claims where the defects are shown to be attributable to such errors and omissions. 

At its core, the doctrine is simply an implied warranty.  Implied warranties are commonplace in the law and can arise by statute or from case law.  Spearin arose by case law and provides that a project owner impliedly warrants that the plans and specifications are accurate and if they are followed will result in acceptable work[1]United States v. Spearin, 248 U.S. 132 (1918).  This certainly sounds simple enough.  Successfully employing the Spearin Doctrine, however, can be challenging.  This article focuses on such challenges and how to overcome them. 

  1. Avoiding the Avoidance Clause

Many if not most commercial disputes and litigations could have been avoided at the contract negotiation and drafting stage.  This is especially true in the construction context.  Frequently, however, an owner anxious to proceed or a contractor thrilled to have been awarded the project will not give adequate attention to the critical terms of the contract.  Too often there is the expectation that any future disputes relating to the work or payment will be amicably resolved when they arise.  When such disputes involve substantial amounts of money, however, amiability is often quickly cast aside. 

In the United States we have the doctrine of freedom of contract, which means that parties are generally free to include any terms they wish in their contracts provided those terms do not contemplate illegal activity or violate some fundamental public policy.  With this freedom comes the freedom to enter into “stupid” contracts from which the law will not save you.  So if you agree to waive certain rights or warranties, the courts will generally not come to your rescue.  Because the Spearin Doctrine is an implied warranty, its protections can be waived by an express contract term.  Owners will often seek to avoid the Spearin Doctrine or other implied warranties through an avoidance clause.  These clauses typically do not mention the Spearin Doctrine nor even implied warranties.  But they still shift the risk for errors in the plans and specifications to the contractor.  For example, such a clause may read as follows:

Contractor shall verify the accuracy and completeness of all design drawings and specifications and shall promptly notify Owner of any errors or omissions in same.  Contractor assumes full responsibility for any such errors or omissions that he fails to bring to Owner’s attention.

An avoidance clause effectively negates the Spearin Doctrine and shifts the risk of defective plans and specifications to the contractor.  To be effective, however, such clauses must be express and specific as opposed to general.  This is because waivers of rights and warranties must be made knowingly.  General clauses, such as those merely requiring contractors to visit the site, review plans and familiarize themselves with the requirements of the work will not impair a contractor’s right to rely upon the adequacy of the plans and specifications per Spearin. 

Thomas & Marker Const., Co. v. Wal-Mart Stores, Inc., 2008 WL 4279860 (S.D. Ohio) (Spearin doctrine only negated by express and specific contract provisions). 

Only through a detailed and careful review of the proposed contract can the contractor identify these potentially serious waivers of rights and assumptions of liability. 

  1. Reliance on the Plans and Specifications Must Be Reasonable

To trigger the protections of the Spearin Doctrine, the contractor must both rely on the owner’s drawings and specifications and that reliance must be reasonable[2].  One would think that reliance would be a given, as every contractor would necessarily want to fully examine and perform its work in accordance with the plans and specifications.  But this is not always true.  Depending upon the scope of the work at issue and the contractor’s experience in performing that type of work, some contractors will perform their work after little more than a cursory review of the plans.  In fact, some might not look at them at all.  Not only is this very risky but in doing this the contractor is effectively waiving the protections of the Spearin Doctrine.  After all, one cannot blame their construction defects on plans that they never bothered to review. 

The reasonableness of one’s reliance is a grayer area.  “Reasonableness” is a concept that runs through many areas of the law.  In determining whether a contractor’s conduct is or is not “reasonable,” the question is whether that conduct is consistent with what an ordinary and competent contractor would have done under like circumstances.  So if the plans contain glaring errors and omissions, such as missing structural supports or fundamental inconsistencies in design, a contractor’s reliance on these plans would not likely be considered reasonable.  But if the errors are subtle and not discoverable absent a detailed engineering analysis, a contractor’s reliance would more likely be considered reasonable. 

When plans and drawings are in any way suspect, the prudent course of action is always to seek clarification from the owner.  And if during the course of performing the work per the design drawings, defects in the work come to light, the contractor should obviously stop that work immediately.  Contractor’s continued reliance on the plans in the face of such defects would obviously not be reasonable. 

  1. Proving Increased Costs

As with so many construction claims, the contractor often succeeds in establishing both the owner’s breach of the contract and the contractor’s entitlement to some damages but fails to establish the most important element of his claim – the actual amount of damages.  When relying on Spearin to assert a claim for increased costs (rather than defensively), the contractor must show the actual costs and delay it incurred as a result of the error or omission in the design drawings or specifications.  Simply put, the error and the added costs or time must be clearly linked.  Without this and a credible calculation of damages, a court or arbitrator is powerless to provide any relief.

In the throes of timely completing a troubled project, a contractor will too often put off documenting and quantifying his claim(s) until at or near the project’s end.  This is a very bad idea.  Immediately upon the discovery of the error(s) in the plans, the contractor should establish a cost code or category for all extra costs suffered as a result of the error(s).  Similarly, all delays suffered should be called out in each subsequent iteration of the project schedule.  And of course, the owner should be regularly updated as to these costs and delays.  Depending upon the magnitude of the claim, it may be wise to assign one or more persons exclusively to the ongoing gathering and calculation of claim specific costs and delays.  Calculating costs and delays contemporaneously, rather than months or even years later, will result in a far more accurate and provable claim.

Conclusion

Spearin is arguably the most important decision ever issued in construction law.  The protections it affords contractors are invaluable.  Preserving and availing oneself of those protections however, is not always easy.  It requires the contractor to be vigilant at virtually every phase of the project.  Such vigilance, as outlined above, will pay great dividends should an error or omission in the design drawings or specifications give rise to a claim. 

 

[1] In Spearin, a contractor was retained by the United States government to construct a dry dock at the Brooklyn Navy Yard for a lump sum.  Completing the work required the relocation of a sewer section that intersected the work site.  The plans that the government provided omitted a dam which, after a heavy rainfall, broke and flooded the dry dock.  The extra work necessitated by the omitted dam alone was nearly more than the original lump sum value of the contract.  In ruling in favor of the contractor, the Supreme Court, for the first time, found that there exists an implied warranty by the owner that the plans and specifications will be free of defects and adequate to accomplish the purpose in view. 

[2]Project requirements can be design specific, performance specific or a combination of both.  Design specific requirements are detailed and describe the exact materials to be used and how the work is to be constructed.  Performance specifications, in their purest form, only provide for the desired result with the means and methods of achieving that result left to the discretion of the contractor.  As a general rule, the Spearin Doctrine would not apply where the project requirements are performance specific as they would contain no design specific details to which the contractor could point to as being erroneous or deficient.  As the purely performance based project is rare, there will almost always be at least some argument for application of the Spearin Doctrine.