Contractors, Make Sure to Disclaim Dangerous Design Disclaimers

Photo of Design Documents

Nearly all construction contracts are accompanied by drawings and specifications depicting work requested under the contract.  General contractors, and their subcontractors alike, will be bound to these drawings and specifications and must strictly adhere to them.  When contractors conform to the drawings and specifications, contractors typically can avoid liability and often seek damages if the drawings and specifications were defective and faulty. Construction lawyers have dubbed this the “Spearin Doctrine.”  Under the Spearin Doctrine, owners impliedly warrant that their drawings and specifications are adequate, and the project can be completed if they are adhered to. Most states, including Nebraska and Colorado, have adopted the Spearin Doctrine.

However, the Spearin Doctrine has been under attack in some states – Nebraska being the most recent challenger state.  In construction contracts, owners often include contractual “design disclaimers,” indicating that the drawings and specifications are not to be relied upon, or else the contractor does so at their own risk.  Simultaneously and contradictorily, these same contracts also frequently require strict adherence to the drawings and specifications.  Contractors can quickly find themselves in court trying to determine who should bear the risk of  inaccurate, defective drawings and specifications.  The Nebraska Court of Appeals recently determined that design disclaimer language may be enforceable against the contractor, even after the contractor has relied on the defective drawings and specifications to its detriment.

In ARR Roofing L.L.C. v. Nebraska Furniture Mart, Inc., No. A-18-284, 2019 WL 2755100 (Neb. Ct. App. July 3, 2019), the owner, Nebraska Furniture Mart (NFM), contracted with a roofer, ARR Roofing (ARR), for the construction of a new roof, as well as repair and maintenance of existing decking.  Once construction began, ARR discovered the original decking differed from the decking depicted on the owner-provided drawings and specifications.  When the parties could not resolve their issues, ARR sued NFM for breach of contract. ARR argued that it was entitled to rely on the defective drawings and specifications and recover damages because the “contract documents” explicitly included the drawings and specifications. ARR also argued that the contract required it to perform its work “in strict adherence” with the drawings and specifications.  Because the drawings and specifications were inaccurate and defective, ARR argued that it could not possibly strictly adhere to the drawings and specifications, entitling it to damages.

The Nebraska Court of Appeals disagreed with ARR and found in favor of NFM.  The court’s decision afforded substantial weight to the contract’s explicit design disclaimer. The design disclaimer stated, in part:

In the event the Contractor is furnished any building condition data, prior to, at, or after the Contractor has signed the Agreement, or in the event the Drawings or Specifications contain any building condition data, such data shall not be part of the Contract and is hereby excluded therefrom.  There shall be a constructive presumption that the Contractor did not rely on such data, but at his own risk utilized such data…

Reading the design disclaimer in context with the contract as a whole, the Nebraska Court of Appeals enforced the design disclaimer provision against ARR, in favor of NFM.

Contractors should take care to review their contracts for similar design disclaimers and should not assume courts will uniformly apply the owner’s implied warranty of the adequacy of the drawings and specifications.  As the law stands in Nebraska, if a contract contains design disclaimer language similar to that found in the ARR-NFM contract, Nebraska courts will likely find the provision enforceable against the contractor.  A minority of states permit similar design disclaimers when they are targeted, specific, and clear.

In light of this decision, it is important for contractors to know when they are bearing the risk of inaccurate drawings and specifications.  More importantly, contractors should endeavor to shift the risk of design inaccuracies to the owner altogether by negotiating this design disclaimer out of their contracts.  While mid-project changed circumstances may often be resolved through change orders and change directives, ARR v. NFM demonstrates the fallibility of mid-project modifications and should make all contractors wary of relying on change orders to clean up an owner’s defective drawings and specifications.  Contractors are better off laying a safe foundation through targeted negotiations, rather than trying to crawl out from beneath the thumb of a harsh, but enforceable, design disclaimer through change orders.

If you have any questions about design disclaimers in your construction contracts, or construction project negotiations, please contact one of Woods & Aitken's Construction Attorneys. For additional construction news, tips, and updates, we encourage you to view our Construction E-Brief archives.