Owner’s implied warranty of drawings and specifications under Missouri law. Penzel Construction Company, Inc., v. Jackson R-2 School District. Missouri Court of Appeals, Eastern District (2017), by Hugh Anderson

Summary: Under the Spearin doctrine, now approaching its centennial, a public owner makes an implied warranty in every  construction contract that the government’s drawings and specifications are adequate for the contractor to perform the work required by the contract. Originally a federal legal principle, the Spearin doctrine has been followed or adopted in most jurisdictions in the United States. The Penzel case appears to be the first express endorsement of Spearin in Missouri.

In Penzel, the contractor’s electrical subcontractor experienced great difficulty in completing its work, finishing some 16 months behind schedule and allegedly incurring substantial additional cost to perform the work. According to the subcontractor, the primary cause of the problem was a flawed electrical design, ranging from specifications calling for outdated products to omissions of essential items such as emergency ballasts. On behalf of its subcontractor, the general contractor brought a claim for additional compensation that eventually reached the Missouri Court of Appeals.

Decision: In expressly adopting the Spearin doctrine, the Missouri Court of Appeals noted that the doctrine was consistent with principles set out in  other Missouri cases. The court endorsed several overlapping points from Spearin and various Spearin-related cases from other jurisdictions:

  1. The public owner impliedly warrants that a contractor that follows the government’s design will be shielded from liability for a result that is unsafe or defective.
  2. A contractor is entitled to additional compensation for delays attributable to defective or erroneous
  3. Although the  design  is  impliedly  warranted  to  be “reasonably accurate,” there is no warranty of perfection.
  4. To sustain a Spearin claim, the contractor must show that the design was defective or substantially
  5. To be deemed defective, a design is so faulty as to prevent or unreasonably delay completion of contract
  6. The warranty is that the design is “free from significant defects.”
  7. An extreme degree of defectiveness is not necessary to prevail under a Spearin The project need not be unbuildable and the design need not be “wholly inadequate.”
  8. The level of care and competency used to prepare the design is not a relevant

The Missouri Court of Appeals supported the Spearin doctrine based in part on the conclusion that the owner is in a better position to assess the design and therefore prevent losses from occurring in the first instance. The court stated that it would be costly and inefficient to transfer a duty to verify the accuracy and suitability of the design to the bidders/contractor.

Based on the Spearin doctrine and an extensive review of facts regarding damages, the Court of Appeals concluded that the owner was not entitled to summary judgment and returned the case to the trial court for further proceedings.

Comment: The express adoption of the Spearin doctrine in Missouri is not intrinsically controversial. The case has  drawn concern and criticism from some reviewers for two reasons. First, the decision does not require expert opinion to establish that the owner’s design professionals negligently prepared the electrical drawings and specifications. Second, the case could be construed as establishing a perceived gap between the liability of the design professionals (requiring application of the professional standard of care) and the implied owner’s warranty arising from Spearin. These concerns appear to be overstated.

Although the Penzel decision did not require that the inadequacy of the design for Spearin purposes be established through the testimony of design professionals, the case did feature the testimony of experienced construction professionals regarding the adequacy of the design from the contractor’s perspective. As noted above, the issue in a Spearin claim is not the process used to create the design, but whether the result is adequate for construction. As to some issues this could be established without experts. In any event, one  of the  contractor’s two witnesses as to the adequacy of the electrical design was an engineer/construction manager with 40 years of experience; the other was a senior executive (with a noteworthy 60 years’ experience) at a large electrical contracting firm. Although there might be a question as to the weight to give their testimony, and they would not have been qualified to testify about whether the electrical engineers had met the professional standard of care, they were nonetheless deemed qualified to opine regarding the adequacy of the design for bidding and construction purposes.

Because (a) whether there is an implied warranty of the design by owner under Spearin and (b) the professional liability of the design professionals are two different issues, there is the possibility of the owner being caught in the middle—forced to live with the consequences of the implied warranty, but unable to establish professional negligence by the designers. This has always been a possibility under the Spearin doctrine, and it has not been a significant problem. The project owner in Penzel has the right to pursue a claim against its design professionals. If the electrical design is as flawed as the contractor contends, the owner’s claim will likely be successful. In reality, the burden on a contractor to establish a design’s inadequacy is not significantly  different from the burden on owner  to establish professional liability. Note, for instance, that just as a design professional is not held to a standard of perfection, neither is the design that is tendered to bidders and contractors held to a perfection standard—despite the use of the term “warranty.” And in some cases the inadequacy of a design may trace back to the owner, for example if owner furnished inaccurate information to the design team regarding owner’s existing facilities.