[co-author: David Gonzalez*]
On September 1, 2021, Texas SB 219 came into effect. This new law incorporates Chapter 59 into the Texas Business and Commerce Code. In short, when a customer provides plans or specifications containing design flaws to a contractor, Chapter 59 limits the contractor’s liability related to those design flaws. The law specifies:
A contractor is not responsible for the consequences of design defects and cannot guarantee the accuracy, sufficiency, sufficiency or adequacy of plans, specifications or other design documents provided to the contractor by anyone other than the agents. of the contractor, contractors, manufacturers, or suppliers, or his consultants, of any level. Tex. Bus. & Com. Code Ann. § 59.051.
This new law only applies “to a contract for the construction or repair of an improvement to a building”. Username. in § 59.002.
SB 219 departs from the long-established doctrine of the Texas Supreme Court in Lonergan v. San Antonio. In Lonergan, a house collapsed before final completion due to a defect in the plans given to the contractor by the owner. Lonergan v. San Antonio Loan & Tr. Co., 104 SW 1061, 1062 (1907). Following the collapse, the contractor abandoned the project and the owner sued the contractor. Username. The contractor argued that the collapse was not due to flaws in the building materials, but rather that the flaws in the original plans were to blame. Username.
Despite the contractor’s argument and the contractor’s lack of responsibility for creating the defects, the court ruled that the contractor was responsible for the defects and the collapse of the property. Username. at 1066. The court also ruled that the owner did not guarantee the plans simply by providing them. Username. at 1066. In assessing liability, the court held that “[l]The responsibility of the builder does not rest on a guarantee of the specifications, but on his non-performance of his contract of completion and delivery of the work. Username. at 1067. Following this logic, the court rejected any alternative theory of liability and held the contractor liable. Username. to 1069.
Lonergan and his descendants established that in order for an owner to be held liable for a breach of contract based on a design flaw in the original plans, a construction contract had to include explicit language attributing the risk to the owner. Username. to 1066. Without this language, an entrepreneur would generally be held liable. Prior to SB 219, Texas contractors were required to specifically assign fault to another party in order to avoid liability for any subsequent defect in a project’s original drawings.
As of September 1, contractors can now enter into contracts without the need for such express language, assuming that the design plans are provided by the client or his agent.
Notably, SB 219 also creates a new disclosure obligation for entrepreneurs. The law states that entrepreneurs must now:
[W]within a reasonable period of learning of a fault. . . in diets. . . disclose in writing to the person with whom the contractor is contracting the existence of any known defect in the plans, specifications or other design documents which are discovered by the contractor, or which should reasonably have been discovered by the contractor using ordinary diligence, before or during construction. Tex. Bus. & Com. Code Ann. § 59.051 (b).
Contractors who fail to make this disclosure may be held liable for the consequences of any default resulting from such failure. Username. § 59.051 (c).
SB 219 is not without exceptions. First, the new law does not apply to “a contract entered into by a person for the construction or repair of a critical infrastructure facility owned or operated by the person[oranyotherre-facilityownedbythepersonwhoisnecessaryfortheoperationanddirectlyrelatedtothecriticalinfrastructurefacility[outouteautreinstallationappartenantàlapersonnequiestnécessaireàl’exploitationetdirectementliéeàl’installationd’infrastructurecritiqueUsername. § 59.002 (b). Critical infrastructure facilities include, but are not limited to, petroleum or alumina refineries, power generation facilities, or chemical manufacturing facilities. Username. § 59.001 (3). A complete list of these facilities is set out in the law. Username.
Second, the law does not apply to the construction, repair, alteration or remodeling of an improvement in real estate if it was carried out under a design-build contract or under a design-build contract. ” an engineering, procurement and construction contract, when the part of the plans, specifications or other design documents for which the contractor is responsible under the contract is the part presumed to be defective. Username. § 59.002 (c).
Finally, the law does not apply to the part of a contract where “the contractor agrees to provide comments and advice on plans, specifications or other design documents” and such “contributions and advice are supplied as a signed and sealed work product of a person licensed or registered under Title 6 of the Professional Code ”, and this work product is incorporated into the plans and specifications used in construction. Username. § 59.002 (d). These people include licensed or registered engineers, architects or land surveyors.
SB 219 is a welcome change for Texas contractors who may have previously been held liable for design flaws. Even with this change, the importance of careful writing cannot be overstated. This new standard does not diminish the need to pay close attention to the terms of the control agreement, especially clauses that create or assign liability. With the added support of SB 219, Texas contractors will now be able to contract with confidence without fear of being held responsible for design flaws that may be discovered before or during construction.
* David Gonzalez (license pending)