A New Determination Of Design Defect Liability For Texas Contractors

• Published date: 13 September 2021
• Subject Matter: Corporate/Commercial Law, Government, Public Sector, Real Estate and Construction, Contracts and Commercial Law, Government Contracts, Procurement & PPP, Construction & Planning
• Law Firm: Butler Snow LLP
• Author: Andrew D. Tingan

On September 1, 2021, Texas S.B. 219 went into effect. This new law incorporates Chapter 59 into the Texas Business and Commerce Code. In short, when a client provides plans or specifications containing design defects to a contractor, Chapter 59 limits contractor liability related to those design defects. The text of the law states:

A contractor is not responsible for the consequences of design defects in and may not warranty the accuracy, adequacy, sufficiency, or suitability of plans, specifications, or other design documents provided to the contractor by a person other than the contractor's agents, contractors, fabricators, or suppliers, or its consultants, of any tier. Tex. Bus. & Com. Code Ann. ' 59.051.

This new statute applies "only to a contract for the construction or repair of an improvement to real property." Id. at ' 59.002.

S.B. 219 diverges from the long-standing doctrine set out by the Supreme Court of Texas in Lonergan v. San Antonio. In Lonergan, a house collapsed before final completion as a result of a defect in the plans given to the contractor by the owner. Lonergan v. San Antonio Loan & Tr. Co.,104 S.W. 1061, 1062 (1907). Following the collapse, the contractor abandoned the project, and the owner sued the contractor. Id. The contractor argued that the collapse was not due to defects in the building materials, but rather that the defects in the original plans were to blame. Id.

Despite the contractor's argument'and the contractor's lack of liability in creating the defects'the court held that the contractor was responsible for the defects and the collapse of the property. Id. at 1066. The court also held that the owner did not guarantee the plans merely by supplying them. Id. at 1066. In assessing liability, the court reasoned that the "[l]iability of the builder does not rest upon a guaranty of the specifications, but upon his failure to perform his contract to complete and deliver the structure." Id. at 1067. Following this logic, the court rejected any alternate theory of liability and held the contractor liable. Id. at 1069.

Lonergan and its progeny established that, for an owner to be held liable for breach of contract based on a design defect in the original plans, a construction contract needed to include express language allocating risk to the owner. Id. at 1066. Without this language, a contractor would generally be held liable. Prior to S.B. 219, Texas contractors were required to specifically assign fault to another...