This article was first published in the American Society of Concrete Contractors newsletter The Voice in February 2021. Klinger is the concrete construction specialist for ASCC and is the voice of the ASCC Hotline, which provides free technical advice to its members. The Voice is a benefit of ASCC membership.
In his suspense novel “Skyscraper”, author Robert Byrne employs lead character Brian Mitchell, an intrepid Colorado-based consulting engineer, as a foil to introduce and explain a massive construction failure and its aftermath to a non-technical audience. To oversimplify enormously, Google Books advertises the novel’s plot line as follows: “An engineer discovers that the 66-story Zalian Building is flawed throughout and is in danger of collapsing and that some people will do anything to suppress the facts.”
Published in 1984, the novel identifies an inconvenient construction industry shortcoming that persists to this day. After the tower collapses and the dust settles, engineer Mitchell’s post-mortem forensic report explains that construction failures can yield information of great educational value—that in an ideal world, technical data and details regarding failures would be disseminated across all industry platforms so lessons can be learned.
(In the case of the Zalian Building, the “failures” include reckless design flaws, chronic wet load deliveries of ready mixed concrete, substandard workmanship, active concrete cracks, and general monkey-business among the various project participants. In the real world, “failures” can describe other miscues: bid errors, conflicting or exculpatory contract language, inadequate site condition surveys, and so on. If technical data and details were revealed and distributed after a failure, Mitchell argues, the industry as a whole would benefit.)
But that doesn’t always happen, of course. Construction projects have an unfortunate tendency to become directional. In other words, they can either “go south” or “get western.” In such cases, technical data and other valuable information may be suppressed by one or more of the parties. Who is there among us that can say how many failure records remain sealed today in the archives of owners, designers, contractors, consultants, insurance companies, attorneys, or other compensated advocates? How many of us have had to sign non-disclosure agreements before we are qualified to bid on a repair project? Just how big is this iceberg?
On the other hand, the well of information is not completely dry. Here at the ASCC technical division, failure information gleaned from various sources routinely finds its way across our desks. Such sources include media and internet accounts, industry and trade publications, ASCC member hotline calls, and email forum threads, all of which in turn become the basis for what ASCC members see reflected in our Position Statements, hotline call responses, webinars, articles we write for ACI, and other industry publications.
As one might expect, most of the failure scenarios we consider focus on concrete-related technical problems that require solutions provided by engineers and concrete specialists. But sometimes we run across lessons learned from our colleagues in the legal profession that at first glance don’t have anything to do with concrete, but upon further review are of value to contractors.
For example, when it comes to construction law, the “patron saint” of contractors is the so-called Spearin Doctrine, an implied warranty from the owner to the contractor, which is named for a construction defect case decided in favor of the contractor by the U.S. Supreme Court in 1918. The case is summarized in the ACI/ASCC Contractor’s Guide to Quality Concrete Construction as follows:
“The Spearin Doctrine states ‘it is well established that a contractor who performs according to detailed plans and specifications is not responsible for defects in the result.’ Thus, a contractor who can demonstrate that they have strictly complied with all aspects of the plans and specifications can successfully argue that their work was not defective, and that their work was not the cause of the defects. Most importantly, if compliance is established, the owner/designer is responsible and not the contractor. However, the contractor must be prepared to present evidence in court that it fully complied with all aspects of the owner’s plans and specifications. If the contractor is unable to demonstrate that it complied with all requirements, it will not prevail. In one case, a contractor established compliance with all requirements except for curing; because inadequate curing could have caused the lack of strength, the court ruled the Spearin Doctrine did not apply.”
Since 1918, unsealed accounts of Spearin disputes available in the public domain tell an ongoing tale of legal gamesmanship where the players constantly attempt to shift risk between owners and contractors. But a recent appellate court decision described in ASCE’s Civil Engineering magazine (Jan/Feb 2021) features a new legal approach; an example of creative lawyering used to prove that the general contractor (GC) owes Spearin warranty coverage to a subcontractor, leaving the owner totally out of the dispute.
This landmark case involved a subcontractor who proposed a product during a pre-bid meeting among the owner, the GC, and the design team. After the meeting, all parties agreed the product met the intent of the owner’s performance specification requirements and so was deemed appropriate for use on the project. To seal the deal, the GC prepared a buyout subcontract for the agreed-upon product.
In the subcontract language, the GC included a clause that limited the subcontractor to using only the proposed product. There were no “or equal” provisions. In addition, the GC added a so-called “integration” carve-out clause into the contract as follows:
“This Agreement is complete and shall not be interpreted by any reference to any previous bid, letter, proposal, document, or understanding, written or oral, or other document or agreement except as specifically provided in this Agreement.”
In other words, whatever was said in the pre-bid meeting doesn’t count and anything else that may have been discussed and agreed to by all parties before the subcontract was executed never happened. And that is when the project went “directional.”
At some point during the subsequent submittal process, reviewers of the proposed (now mandatory) product technical data discovered the product actually did not meet the owner’s performance specification and could not be used on the project.
Upon discovery, the subcontractor insisted that a change order be cut to cover costs associated with providing an alternate product. After all, the sub argued, they had simply provided the exclusive, sole-source product as dictated in their subcontract. Ultimately, the GC refused and terminated the subcontractor for default. The case escalated to both trial and appellate courts, where the subcontractor prevailed in each decision and was awarded damages.
As it turns out, the GC made at least two fatal errors. One miscue was dictating an exclusive, sole-source product with no “or equal” option. This constituted a shift of risk exposure from the owner to the GC. Since the owner’s performance specification was changed to the GC’s prescriptive specification, the GC became liable to provide Spearin warranty coverage to the subcontractor.
The second error was to ban any reference to any previous meeting agreements, conversations, understandings, anything committed to writing that discussed the suitability of the product for use. After all, the court held, both the GC and the design team were sophisticated enough and quite able to understand early on that the product was unsuitable. Whatever the subcontractor may have represented during the pre-bid process was not fair game for consideration per the “integration” carve-out clause placed by the GC into the subcontract.
Even though this case did not involve concrete construction, there are lessons to be learned and take-aways that could apply to concrete specialty contractors:
- The Spearin implied warranty can be enforced between GCs and subcontractors without involving the owner at all.
- The burden of proof in Spearin warranty disputes is totally on the contractor.
- Performance specifications for ready mix concrete effectively void the implied Spearin warranty, transferring risk from the owner to the contractor when the contractor becomes the designer.
- The Spearin warranty can easily be voided with strategically worded exculpatory contract language and carve-outs. Be wary if AIA document AIA 201-2017 is part of the bid or contract documents.
- Spearin disputes claiming design defects have been tossed out of court because “the contractor should have known better” or “why didn’t the contractor submit a pre-bid RFI?”
- Contractors should perform thorough reviews comparing general condition clauses to specification requirements to flush out exculpatory clauses or carve-outs that shift risk to the contractor.
Jim Klinger is Concrete Construction Specialist for the American Society of Concrete Contractors. He may be contracted at [email protected].