Are you responsible for errors and omissions in a project’s design as the contractor? Some might automatically believe, “Of course not.” Indeed, how could a contractor be responsible for the mistakes of a licensed design professional? The answer to that question is more complicated than you might first think.
Meet the Lonergan Doctrine and the Texas laws that address it in part.
Construction projects in every other state in the country, as well as for the federal government, are subject to the Spearin Doctrine. The Spearin Doctrine comes from a 1918 U.S. Supreme Court decision about a brick-lined sewer that collapsed when put into service. Spearin refused to rebuild it, arguing that the sewer was under designed for the water flow. The Navy terminated the contractor, but the Supreme Court disagreed, ruling that the Navy’s issuance of plans impliedly warranted the adequacy of that design. Thus, under Spearin, if a contractor is required to build according to plans and specifications provided by the owner, the contractor will not be responsible for the consequences of defects in the plans and specifications. Forty-nine other states adopted this rule.
But not Texas. Texas follows the Lonergan Doctrine. The Lonergan Doctrine comes from the Texas Supreme Court decision in 1911 from Lonergan v. San Antonio Loan and Trust. Under this doctrine, Texas contractors who agree to build according to plans and specifications provided by the owner may be liable for delivering a completed project despite design errors or omissions. The court’s ruling reasoned that contractors know the building business better than owners. Critics of the decision point to post-Lonergan development of rigid education and licensing requirements for the authors of modern plans. But the Lonergan Doctrine lives on, although its application is now somewhat limited by statute. You should know when and how it applies to you.
The Texas Legislature has taken steps since 2019 to express who has responsibility for design deficiencies on a construction project in Texas. For example, Chapter 474 of the Texas Transportation Code applies to Texas Department of Transportation (TxDOT) construction projects. There, the contractor cannot be liable to TxDOT or responsible for deficiencies or defects in the project specifications. Also, keep in mind that a provision in a TxDOT contract is void and unenforceable if it conflicts with the applicable statute.
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The legislature created Chapter 59 of the Texas Business and Commerce Code in 2021, addressing certain private construction contracts. It essentially provides the same restrictions on design responsibility — the contractor is not liable for the consequences of a design defect or deficiency and cannot warrant the sufficiency of the design documents in a contract. Like the statute for TxDOT projects, any provisions in a contract that conflicts with the applicable statute is void and unenforceable.
But the statute doesn’t apply to all private work. First, there is a large carve-out of project types that are not subject to the statute. These projects are defined as “critical infrastructure facility” projects. The list of these projects is too long to list here but suffice it to say that it includes construction projects in oil and gas, energy generation, communications, water treatment, and chemical manufacturing. This is not a complete list. But if the project you are bidding or working on is a critical infrastructure facility project, your contract can still make you liable for design deficiencies and require you to warrant the sufficiency of the design.
The statute has two other exceptions, related to the author of the design. It does not relieve the contractor of responsibility for design-build contracts or engineering, procurement, and construction (EPC) contracts. Likewise, if the design deficiency or defect is in design documents that the contractor provided, then the contractor cannot shed responsibility for the consequences of the design defect or deficiency.
That is not the end of the impact of the statute. If your contract is not a critical infrastructure facility project and you are not a design-build or EPC contractor, you cannot be required to warrant the sufficiency of the design documents or be responsible for the consequences of a design defect or deficiency.
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But the statute does not absolve you of all responsibility related to design.
The statute says that the contractor must, within a reasonable time of learning of a defect or deficiency in the design, inform its contracting partner in writing of the defect or deficiency. So, the contractor still has an obligation to notify the owner of defects within a reasonable amount of time. What is a reasonable amount of time? That completely depends on the circumstances. If your contract defines a reasonable amount of time, you should go with that definition. If not, it could depend on the type of project, the type of defect discovered, the stage of the project, and several other factors.
In addition to providing written notice to the owner within a reasonable amount of time of discovering a defect or deficiency, the contractor also has an obligation to notify the owner of defects or deficiencies in the design documents “that reasonably should have been discovered by the contractor using ordinary diligence, before or during construction.” This is basically a standard of care placed on contractors to use ordinary diligence and notify the owner of defects or deficiencies discovered in exercising ordinary diligence.
The statute defines “ordinary diligence” as “the observations of the plans, specifications, or other design documents or the improvement to real property that a contractor would make in the reasonable preparation of a bid or fulfillment of its scope of work under normal circumstances.” It does not require the contractor to engage a design professional to review the design documents.
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There is no case law yet on the application of this provision to a real-world dispute about design responsibility, but ordinary diligence might come down to the typical efforts and work that a contractor undertakes when reviewing design documents during the bid process and during active construction. If you do come across a potential design defect during the bid, pre-construction, or construction, it is best to inform the owner in writing at that time. The statute explicitly says that a contractor can be liable for the consequences of a design defect it fails to disclose.
So, what is the bottom line? For TxDOT projects, it appears to be that the contractor cannot be responsible for design defects, period. For private projects, you can take away the following.
First, if you have a critical infrastructure facility project or are a design-build or EPC contractor, the protections of the statute do not apply to you. That does not mean that you cannot negotiate terms into your contract that make clear you are not responsible for the design or that specifically defines what design you are responsible for. The Lonergan Doctrine says that the contractor is responsible for the construction consequences of a design defect, unless the contract says otherwise.
Second, if you fall under the protections of the private project statute, you and your team still need to review the design documents before and throughout construction in the same way as any other reasonable contractor under similar circumstances. If you find a defect or potential defect, best to pass that information along to the owner and/or design professional in writing as soon as you can.
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These protections are meant to keep design responsibility where it belongs, with the designer. But it is not a get out of jail free card.
