Under current Texas common law, the contractor—not the owner—bears the risk of defects in a project’s design documents unless the contract expressly provides otherwise. The owner and contractor may contractually allocate that risk however they see fit, but if the contract is silent, the contractor is on the hook.
This rule dates all the way back to the 1907 case of Lonergan v. San Antonio Loan & Trust Co., 104 S.W. 1061 (Tex. 1907). In that case, the contractor agreed to construct a building in accordance with design documents supplied by the owner. The building later collapsed due to issues with its design. A dispute arose as to which party should bear the liability for the collapse. The ensuing lawsuit worked its way up through the trial court and appellate courts, and the Supreme Court of Texas ultimately held that the contractor was better situated to know whether the project’s design was defective and that, by submitting a bid based on the design documents, the contractor accepted the risk of defective plans.
The “Lonergan Rule” strikes many contractors as inherently unfair. Afterall, contractors typically are not involved in preparing the design documents and, in most cases, are not even qualified to perform design services. Most other state and federal courts, including the Supreme Court of the United States, acknowledge that and, therefore, hold that a project owner—not the contractor—impliedly warrants the sufficiency of the design documents. United States v. Spearin, 248 U.S. 132, 135-36 (1918). Texas is in the minority on this issue.
House Bill 2901, which is currently under consideration by the Texas Legislature, would conform our state law with the majority view. If passed, the new law would provide that:
A contractor is not civilly liable or otherwise responsible for the consequences of defects in and may not warranty the accuracy, adequacy, sufficiency, or suitability of plans, specifications, or other design or bid documents provided to the contractor by:
(1) the person with whom the contractor entered into the contract; or
(2) another person on behalf of the person with whom the contractor
entered into the contract.
Further, any attempt to waive the effect of the new law would be void.
This proposed new law would correct the inequity of the current Lonergan Rule and bring Texas law into conformity with the majority of courts in other states and the federal judiciary.
We will keep you posted on the progress of HB 2901.