Through Senate Bill 219, now codified in Chapter 59 of the Texas Business & Commerce Code, the Texas legislature reassigned liability risks for construction design defects in Texas by joining a majority of jurisdictions as a result of the decision of the Supreme Court of the United States in United States vs. Spearin, which considers that the contractors who are ârequired to build according to the plans and specifications prepared by the owner[arenotresponsiblefortheconsequencesofthedefectsintheplansandspecificationsâ248US132136(1918)[neserapasresponsabledesconsÃ©quencesdesvicesauxplansetdevis248US132136(1918)Ils’agitd’unrenversementdelapositionminoritairesuivieauTexasdepuisavantlaPremiÃ¨reGuerremondialesousleLonergan doctrine, which allows the parties to place the risk of loss for faulty construction plans or specifications on contractors, unless the contract language clearly and explicitly states otherwise. While the new law includes several exceptions and a reporting requirement for contractors, it reflects a clear limitation on contractors’ liability for unknown construction design defects. The law entered into force on September 1, 2021 and, with some exceptions, applies to construction contracts concluded from September 1, 2021 for repairs and improvements to real estate. See Tex. Bus. & Com. Code Ann. Â§ 59.002 (a).
Limitations of Liability
Chapter 59 of the Texas Business & Commerce Code protects contractors from liability for defects resulting from construction plans, specifications, or design documents provided to the contractor by third parties without a contractual or agency-type relationship with the contractor. Identifier. Â§ 59.051 (a). Unless a contractor (or a person acting on behalf of the contractor or its agents) provides the defective design information, the contractor is not legally responsible for consequences arising from defective construction plans or designs. . Identifier. In addition, any contractual provision attempting to waive the protections provided by law is void. Identifier. Â§ 59.003.
Contractor reporting requirements and exceptions
Chapter 59 does not protect contractors from liability for design defects in all circumstances. Contractors have an obligation to provide timely written disclosure to their contractual counterpart (usually the owner) if the contractor discovers any defects or inaccuracies in the design documents. Identifier. Â§ 59.051 (b). This disclosure requirement also extends to defects or inaccuracies that a contractor using “ordinary care” would reasonably have discovered before or during a construction project. Identifier. Ordinary diligence is defined as “the observation of plans, specifications or other design documents or the improvement of real estate that a contractor would make in the reasonable preparation of an offer or in the performance of his work. under normal circumstances â. Identifier. Thus, if a contractor fails to disclose a known defect or a defect that he reasonably should have discovered, he may be held liable for the consequences of the defect. Identifier. Â§ 59.051 (c).
Chapter 59 does not apply to construction contracts for the repair or construction of (1) critical infrastructure facilities or (2) facilities directly related and necessary for the operation of critical infrastructure facilities . Identifier. Â§ 59.002 (b). The definition in subsection 59.001 (3) of “critical infrastructure facility” is broad and involves more than twenty different types of facilities in many industries, including oil and gas and chemical refineries and pipelines, petroleum storage tanks, oil or gas well heads and drilling sites, airports and certain installations involving LNG, natural gas compressors, telecommunications, railways, transportation fuel, large-scale steel and water.
Chapter 59 also does not apply to construction projects where the contractor is responsible for providing some, if not all, of the design documents used in the project. This includes projects executed under design-build or engineering, procurement and construction contracts. Identifier. Â§ 59.002 (c). The same applies when a contractor agrees to provide comments and advice on design documents through a work product signed and sealed under Title 6, Professional Code, and the work product of the contractor is incorporated into the design documents. Identifier.Â§ 59.002 (d).
Standard of Care for Design-Build and EPC Contracts
Chapter 59 establishes a specific standard of care for design services provided under Design-Build and EPC agreements referenced in Section 59.002 (c). The standard of care is the same as that required for architectural or engineering services under Tex. Civ. Prac. & Rem. Coded. Anne. Â§ 130.0021: Design services must be âperformed with the professional skill and care usually provided by competent architects or engineers practicing under the same or similar circumstances and with a professional licenseâ.
At first glance, it may seem that the changes made by the legislator are more favorable to contractors and professionals, to the detriment of owners who only occasionally exchange construction contracts. However, eliminating these legal gray areas allows owners and their lawyers to better understand their rights and obligations so that they can focus on compliance before a project begins. Aside from indemnification provisions, liability for design defects and standard of care for architects and engineers are two of the most negotiated provisions in modern construction contracts. This is probably the reason why the legislator decided to clarify these questions, in order to make it easier for all parties concerned to negotiate construction contracts and to better understand their rights and responsibilities.