Executive Summary: One of contractors’ most reliable defenses, the Spearin Doctrine, has been upheld in a Missouri Court. Certainly, for Missourians, this is a good thing, and to the extent, others may be able to reference this case or use a similar approach in claims, is a win for the construction industry.
The bottom line. A recent Court of Appeals decision [Penzel Constr. Co. v. Jackson R-2 School District, No. ED103878 (Mo. Ct. App. Feb. 14, 2017)] adopted the use of the Spearin Doctrine and the Total Cost Method for proof of damages.
This decision is important because it explicitly sets a precedent of recovery using this method; prior to this decision, the state of Missouri had neither accepted nor rejected this method. Now your attorney has a great tool in his/her toolbox for your defense, or offense!
What is the Spearin Doctrine? From the American Bar Association (www.americanbar.org) [QR]
“The Spearin doctrine’s roots and name come from a 1918 United States Supreme Court decision, United States v. Spearin, 248 U.S. 132 (1918), which held that a contractor will not be liable to an owner for loss or damage that results solely from defects in the plan, design, or specifications provided to the contractor.”
“Spearin holds that if acontractor is required to build according to plans and specifications preparedby the owner (or the owner’s representative), then the contractor will not beresponsible for the consequences of defects in the plan.”
How can I use this defense? The Spearin Doctrine, in my personal experience, has been claimed because, but the site conditions did not permit said method of construction by the contractor. The owner, therefore, took responsibility for our inability to build the job.
In Penzel’s case, the “Plans were defective in a number of materials ways, including”
- Inadequate switching and wiring design
- Failure to call for emergency ballasts,
- Incorporating a defective gymnasium lighting design
- Omission in showing of water heater and circulating pumps wiring
- Calls for outdated products
- Noncompliance with building codes
- Incorrect depiction of site electrical work
And, in this case, the Owner was responsible because (s)he provided drawings not free from significant defects. Penzel proved this through expert witnesses.
Collecting money. This case also established a precedent in a method of collecting money. There are several methods used in cost recovery. One of the weakest is the Total Cost Method (TCM).
TOTAL COST METHOD
Claim to Owner = Total Cost – Bid
However, the Modified Total Cost Method was an approved as a method of cost recovery by the Missouri Court:
MODIFIED TOTAL COST METHOD
Claim to Owner = Total Cost – Bid – Contractor’s Error
How do I use this information? Using this information is to know that this defense is available when the Contract Documents have been provided and they are preventing you from building efficiently. Plans with significant defects, that cost you money and or time, can translate into payment to your company. If you’re in Missouri and your attorney doesn’t know of this case, that’s your new ex-attorney. This case is a big deal, it’s a very big deal! [QR]
My Story. Just last month I was in a case where we were preparing a Modified Total Cost Method Claim. These claims are relatively easy to prepare as you can find the total cost and the amount bid. The reduction taken by the contractor can be much more gray, but it is vital in the negotiation for the contractor to take responsibility for their own errors. A mediator will not take well to a contractor who puts 100% of the blame (and the cost of the claim) onto the Owner or Engineer (even though you may be right!).