The Spearin Doctrine
February 20, 2024
In this Surety Today Blog post we will explore the Spearin Doctrine. This doctrine can come in handy as a potential surety defense under the proper circumstances and it is something for the surety to be aware of when the surety steps into a takeover situation where its principal may be subject to the Spearin Doctrine in a design-build scenario. The doctrine may also give rise to or support an affirmative claim that the surety may wish to consider or evaluate.
In United States v. Spearin, 248 U.S. 132, 136, 39 S.Ct. 59, 63 L.Ed. 166 (1918), the Supreme Court held that “if the contractor is bound to build according to plans and specifications prepared by the owner, the contractor will not be responsible for the consequences of defects in the plans and specifications.” See also White v. Edsall Constr. Co., Inc., 296 F.3d 1081, 1084–85 (Fed. Cir. 2002); Hercules, Inc. v. United States, 24 F.3d 188, 197 (Fed. Cir. 1994); Ordnance Research, Inc. v. United States, 221 Ct. Cl. 641, 670, 609 F.2d 462 (1979); Hol–Gar Mfg. Corp. v. United States, 175 Ct. Cl. 518, 525, 360 F.2d 634 (1966). In the Spearin case, George B. Spearin (“Spearin”) agreed to construct a drydock at the Brooklyn Navy Yard under a contract with the United States. The government’s detailed plans and specifications required the site to be excavated and a six-foot brick sewer line that intersected the site to be relocate and reconstructed. After the sewer line was rebuilt in its new location, heavy rains caused internal water pressures in the line to build up which broke the line in several places and flooded the excavation. A contract clause made Spearin responsible for the work on the project until completion and final acceptance. Accordingly, the government ordered Spearin to clean up the site and reconstruct the damaged sewer line at Spearin’s expense. Spearin sued the government for the damage incurred in repairing the sewer line.
Justice Brandeis for the Supreme Court, stated in the decision that “if the contractor is bound to build according to plans and specifications prepared by the owner, the contractor will not be responsible for the consequences of defects in the plans and specifications …. [T]he insertion of the articles prescribing the character, dimensions and location of the sewer imported a warranty that if the specifications were complied with, the sewer would be adequate.” Id. at 137, 39 S.Ct. 59. Moreover, the Court held that the implied warranty is not overcome by the general clauses requiring the contractor to examine the site, to check-up the plans, and to assume responsibility for the work until completion and acceptance. The obligation to examine the site did not impose upon the contractor the duty of making a diligent inquiry into the history of the locality, with a view to determining, at his peril, whether the sewer specifically prescribed by the government would prove adequate. The duty to check plans did not impose the obligation to pass upon their adequacy to accomplish the purpose. The Supreme Court ruled that the government was liable for breach of its “implied warranty” of the adequacy of the plans and specifications and affirmed an award to Spearin of its damages.
From this case, the Spearin doctrine arose and has generally been adopted in most states in both private and government construction. 3 Bruner & O’Connor Construction Law § 9:93. The doctrine has been applied in a variety of circumstances including but not limited to: (1) noncompactible soils; (2) structural defects; (3) fire damage; (4) dredging difficulties; (5) highway concrete; (6) sewer design/water infiltration; (7) roof leaks; (8) survey errors; (9) concrete design mix; (10) sealant; and (11) excavation quantity error. Id. The owner’s implied warranty has also been held to flow down to obligate a general contractor to its subcontractors in the same manner as the owner is to the general contractor. See APAC Carolina, Inc. v. Town of Allendale, S.C., 41 F.3d 157 (4th Cir. 1994); Metric Constructors, Inc. v. Haucker Siddeley Power Engineering, Inc., 468 S.E.2d 435 (N.C. App. 1996); Bradford Builders, Inc. v. Sears, Roebuck & Co., 270 F.2d 649 (5th Cir. 1959); Wood-Hopkins Contracting Co. v. Masonry Contractors, Inc., 235 So.2d 548; 6 A.L.R.3d 1394, S. Bernstein, Construction Contractor’s Liability to Contractee for Defects or Insufficiency of Work Attributable to the Latter’s Plans and Specifications and B. Hum, Design/Build: Damages – Who Pays?, 1998 ABA TIPS/FSLC Mid-Winter Meeting – Show Me the Money: Construction Damages.
In evaluating the applicability of the Spearin doctrine and whether the contractor’s reliance on the information provided is justified, courts have looked to the following factors: (1) whether the contractor could reasonably discover the defective information, i.e. whether it was patent or latent; (2) the materiality of the misrepresentation; (3) whether the exculpatory language was general or specific; (4) whether the contractor was required to follow the specifications; and (5) whether the implied warranty was expressly disclaimed or waived by the contractor. See e.g. Joseph F. Trionfo & Sons, Inc. v. Board of Education of Harford Co., 41 Md. App. 103 (1979); Rhone Poulenc Rorer Pharmaceuticals, Inc. v. Spectrum Glass Products, Inc., 112 F.3d 695 (3rd Cir. 1997); Mayville-Portland School District No. 10 v. C. L. Linfoot Co., 261 N.W.2d 907 (N.D. 1978).
A. Effect of Exculpatory Clauses
As noted above, the Supreme Court observed in Spearin that the owner’s responsibility to provide correct plans “is not overcome by the usual clauses requiring builders to visit the site, to check the plans, and to inform themselves of the requirements of the work.” Spearin, 248 U.S. at 136, 39 S.Ct. 59. In a Maryland case applying the Spearin doctrine, Raymond Intern., Inc. v. Baltimore County, 45 Md. App. 247 (1980), the appellate court followed the limitation of the disclaimer provisions in a contract. In Raymond International, a county retained an engineer to prepare bid and contract documents for repairs to a bridge. The documents included specifications, drawings, informational drawings, an addenda, an invitation to bid and other general provisions. The contractor submitted its bid based upon its review of the documents. After partially performing the work required, it was discovered that the specifications and information provided by the county’s engineer was inaccurate, which caused damage to the contractor. The Raymond International court framed the issue as whether the contractor was justified in relying on information supplied by the county and its engineer or whether it was required to verify independently the information upon which it based its bid. 45 Md. App. at 253-54. The county relied upon the exculpatory language in the contract documents, which provided among other things that the data and information had “not been verified,” that conditions may have changed, that the data was provided for “general informational purposes only and do not purport to represent existing field conditions.” The bidders were also advised by the county documents that “it shall be the Contractor’s sole responsibility to verify by actual field measurements inspections and tests and data which may be of significance to him in the preparation of his bid,” and bidders “must make a personal examination of the location and nature of the proposed work.” Id. Indeed, the bidders were required to declare in their bids that they carefully examined the documents and have to their satisfaction examined the locality of the proposed work. Id. at 253. In spite of this language, the Court held that the County’s specifications were defective and that the contractor could not have reasonably discovered the defect. Id.
B. “Design Specifications” and “Performance Specifications”
One of the critical factors in determining whether the Spearin doctrine applies is determining whether the specifications at issue are “design specifications” or “performance specifications.” See John Cibinic, Jr. et al., Administration of Government Contracts 276–86 (4th ed. 2006). This distinction is crucial to the implied warranty doctrine in Spearin. As the Supreme Court explained, the implied warranty only applies if the contractor is bound to build according to plans and specifications prepared by the owner. A design specification binds the contractor to build according to specific instructions dictated by the owner. See White, 296 F.3d at 1084. In contrast, a performance specification merely lays out the objective without specifying the method of obtaining the objective. A design specification lays out the actual method of performance and describes in precise detail the materials to be employed and the manner in which the work is to be performed. The contractor has no discretion to deviate from the design specifications, but is required “to follow them as one would a road map.” Blake Const. Co., Inc. v. United States, 987 F.2d 743, 745 (Fed. Cir. 1993) (quoting J.L. Simmons Co. v. United States, 188 Ct. Cl. 684, 412 F.2d 1360, 1362 (1969)).
Distinguishing design from performance specifications is not always easy, and, indeed, a contract may have more than one type, but the case law has established some parameters. See Penguin Indus., Inc. v. United States, 209 Ct. Cl. 121, 125, 530 F.2d 934 (1976); Caddell Const. Co., Inc. v. U.S., 78 Fed. Cl. 406 (2007). The relevant inquiry concerns the quality and quantity of the obligations that the specifications impose. Travelers Cas. & Sur. of Am. v. United States, 74 Fed. Cl. 75, 89–90 (2006)(citing Mega Constr. Co., Inc. v. United States, 29 Fed. Cl. 396, 418 (1993)). Thus, “detailed measurements, tolerances, materials, i.e., elaborate instructions on how to perform the contract” constitute design specifications. Stuyvesant Dredging Co. v. United States, 11 Cl. Ct. 853, 860 (1987)). When the specifications are described in precise detail and permit the contractor no discretion, they are design specification. Dillingham Constr., N.A., Inc. v. United States, 33 Fed. Cl. 495, 500 (1995). In contrast, where the specifications set forth simply an objective or standard and leave the means of attaining that objective or standard to the contractor, they are “performance” specifications. Id. at 500–01; see Penguin Indus., Inc., 209 Ct. Cl. at 125, 530 F.2d 934 (performance specifications leave the performance process to the contractor’s “own judgment, experience and know-how”). The Spearin implied warranty doctrine does not extend to performance specifications. White, 296 F.3d at 1084.
C. Latent v. Patent Defective Designs
Contractors have a duty to inquire as to inconsistent specifications which include patent, that is, obvious or glaring, defects. In Space Corp. v. United States, 200 Ct. Cl. 1, 470 F.2d 536, 538 (1972), the court stated “when a contractor is faced with an obvious omission, inconsistency or discrepancy of significance, he is obligated to bring the situation to the government’s attention if he intends subsequently to resolve the issue in his own favor.” See E.L. Hamm & Assocs., Inc. v. England, 379 F.3d 1334, 1339 (Fed. Cir. 2004) (“To demonstrate that it was misled, the contractor-claimant must show both that it relied on the defect and that the defect was not an obvious omission, inconsistency or discrepancy of significance-in other words, a patent defect-that would have made such reliance unreasonable.”); NVT Techs., Inc. v. United States, 370 F.3d 1153, 1162 (Fed. Cir. 2004) (“If the ambiguity is patent, it triggers a duty to inquire. A patent ambiguity is one that is ‘obvious, gross, [or] glaring, so that plaintiff contractor had a duty to inquire about it at the start.’ ” (quoting H & M Moving, Inc. v. United States, 204 Ct. Cl. 696, 499 F.2d 660, 671 (1974))). If the erroneous nature of a defective specification is not glaring or obvious, however, the contractor may recover if it has been misled by the specification. AAB Joint Venture v. U.S., 75 Fed. Cl. 414, 430-31 (2007).
In Travelers Cas. & Sur. of Am. v. United States, 74 Fed. Cl. 75, 89–90 (2006), the court noted that the Spearin doctrine will not apply where a contractor is subject to a “duty to investigate or inquire about a patent ambiguity, inconsistency, or mistake when the contractor recognized or should have recognized an error in the specifications or drawings.” White, 296 F.3d at 1085; see Woodcrest Constr. Co. v. United States, 187 Ct. Cl. 249, 260, 408 F.2d 406 (1969); Jefferson Constr. Co. v. United States, 176 Ct. Cl. 1363, 1368–69, 364 F.2d 420 (1966); PBI Elec. Corp. v. United States, 17 Cl. Ct. 128, 132–33, 135 (1989). The Travelers court stated that while the construction of the road at issue was subject to the owner’s design specifications and the implied Spearin warranty, missing information in the plans about the slope of the road created a patent ambiguity that triggered a duty to inquire. Because the contractor failed to timely seek information to resolve the patent ambiguity, the Spearin doctrine did not apply and the contractor was not permitted to recover the costs of correcting the road.
D. Burden of Proof
In order to prove a breach of the Spearin implied warranty, the party alleging the breach has the burden to prove the existence and breach of the warranty, and the harm that resulted. Hercules, 24 F.3d at 197. Although design specifications are meant to give a contractor a very detailed guide on how to complete a project, they “need not be paragons of perfection” but must be “reasonably accurate.” Travelers, 74 Fed.Cl. at 89 (citations omitted). The standard that must be met under the implied warranty is that the specifications will result in a satisfactory, acceptable or adequate result; short of that, the specifications are defective and the contractor is entitled to an equitable adjustment. See Franklin Pavkov, 279 F.3d at 994; Stuyvesant, 834 F.2d at 1582; Hol-Gar, 360 F.2d at 638. A showing of impracticability or impossibility is not required in order to be awarded damages for defective specifications. See, Ordnance Research, Inc. v. United States, 221 Ct. Cl. 641, 670, 609 F.2d 462 (“[S]pecifications having major safety defects are fully as much in breach of the implied warranty as defects in the feasibility, practicability, or commercial possibility of performance as specified.”); Appeals of Columbia Eng’g Corp., ASBCA No. 32139, 89-2 BCA ¶ 21689, 1989 WL 27594 (distinguishing between doctrine of commercial impracticability or impossibility, which is applicable to performance specifications, and the implied warranty of specifications, which is applicable to design specifications); Frank J. Baltz & Daniel S. Herzfeld, Impracticable Specifications, 34 Procurement Lawyer 3, 5 (Winter 1999) (“Generally, a contractor should use the doctrine of commercial impracticability when the appeal involves ‘performance specifications,’ but should use the Spearin doctrine when the appeal involves ‘design specifications.’”).
A defective specification has been held to be one that is “so faulty as to prevent or unreasonably delay completion of the contract performance.” Wunderlich v. United States, 173 Ct. Cl. 180, 351 F.2d 956, 964 (1965). Furthermore, the owner’s documents must be “substantially deficient or unworkable” in order to be considered a breach of the contract. Id. If there are many errors or omissions in the specifications, the owner breached the contract if “the cumulative effect or extent of these errors was either unreasonable or abnormal” taking into account the scope and complexity of the project. Id. It has further been observed that “[t]he test for recovery based on inaccurate specifications is whether the contractor was misled by these errors in the specifications.” Robins Maintenance, 265 F.3d at 1257.
Of course, the implied warranty of specifications is generally voided if the contractor does not follow those specifications. Mega Constr. Co. v. United States, 29 Fed. Cl. 396, 418 (1993) (citing Al Johnson Constr. Co. v. United States, 854 F.2d 467, 469-70 (Fed. Cir. 1988)). As the court in Space Corp., supra., observed even if a specification is defective, however, contractors must be reasonable in their conduct during construction. Al Johnson Constr. Co. v. United States, 854 F.2d 467, 470 (Fed. Cir. 1988); Gulf Western Precision Eng’g Co. v. United States, 211 Ct. Cl. 207, 218, 543 F.2d 125 (1976); Sterling Millwrights, Inc. v. United States, 26 Cl. Ct. 49, 88 (1992).
If you have questions regarding the issues discussed in this post, please do not hesitate to contact Michael A. Stover, Esq. (410-659-1321/mstover@wcslaw.com), or any member of the Wright, Constable & Skeen, Surety and Fidelity practice group.