Tag: Construction Defects

Design Defect Bill Passes Texas House, Goes to Governor Abbott

by Patrick Mulry

May 24, 2021

On May 13, the Texas House passed the legislation commonly referred to as the “design defect bill.” The vote in the House was 113-27, again indicating broad bipartisan support for this fundamental change in Texas law.

The design defect bill now goes to Governor Abbott for further action. He has the option to sign it, veto it, or allow it to become law without signature. Given that the bill passed by wide margins in both chambers, Gov. Abbott is expected to sign the bill.

If the design defect bill becomes law, it will go into effect on September 1, 2021. As with other recent changes in construction law-related legislation, application of the law to contracts and subcontracts is not retroactive, but is based upon the date into which the prime contract was entered.

As noted previously, the design defect bill represents a major change in Texas law that should have substantial positive effects for contractors which, under current law, may have exposure to damages caused by a design defect not caused by the contractor and for which the contractor otherwise has no recourse against the responsible design professional.

In advance of the effective date of the law, contractors should consult with counsel for important revisions to their prime contracts, as well as for revisions to subcontract agreements to ensure that all contract forms afford contractors and subcontractors the protections to which they will now be entitled.

Design Defect Bill Passes Texas Senate

by Patrick Mulry

April 12, 2021

The legislation commonly referred to as the “design defect bill” passed the Texas Senate on Thursday, April 8. The vote on Senate Bill 219 was 29-1, indicating that this fundamental change in Texas law has broad bipartisan support. The bill has been forwarded to the House and is expected to be voted on and passed in the next few weeks and then signed into law by Gov. Abbott later this spring.

The heart of the design defect bill is that a contractor cannot be held responsible for the consequences of defects in, and may not warranty the accuracy, adequacy, sufficiency, or suitability of plans, specifications, or other design or bid documents provided to the contractor by the person with whom the contractor entered into a construction contract (or another person on behalf of the contracting person, typically the owner or owner’s representative). Exempted from the protections afforded by the bill are projects designated as critical infrastructure facilities and projects performed under a design-build contract. Also exempted from the bill are design-build portions of work (for example, swimming pools or fire protection systems) that are part of a larger project which is not itself a design-build project.

This bill represents a major change in Texas law that should have substantial positive effects for contractors which, under current law, may have exposure to damages caused by a design defect not caused by the contractor and for which the contractor otherwise has no recourse against the responsible design professional.

Additionally, the design defect bill contains a mandatory prohibition of waiver which prevents the owner from contracting around this protection for the contractor. In return, the bill requires the contractor, which includes all tiers of contractors and subcontractors, to notify the owner if the contractor learns of a defect in the design documents, or of a design defect that the contractor should reasonably have discovered using ordinary diligence before or during construction. Such notice must be given within a reasonable time of learning of the design defect. The language of the bill is thematically similar to the notice concept already embodied in sections 3.2.2 and 3.2.3 of the AIA A201 general conditions, so it does not impose a requirement that should be unfamiliar to most contractors of size.

If passed, the bill will go into effect on September 1, 2021. As we have seen with other construction-related legislation over the past several decades, this bill will not apply retroactively, but instead will apply only to contracts entered into on or after September 1, 2021. Application of the law to subcontracts is based not on the subcontract date, but upon the date into which the prime contract was entered.

Should the design defect bill become law, contractors will want to consult with counsel for important revisions to their prime contracts, as well as for revisions to subcontract agreements to ensure that all contract forms are in compliance with the new law.

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Property Owners Afforded Extra Protection from Claims of Independent Contractors

December 10, 2019

The Supreme Court of Texas has extended protections for property owners to claims for negligent hiring.

The case involved an oil field worker who died from injuries he sustained while working on a drill site. His estate sued Endeavor Energy Resources, property owner, claiming Endeavor negligently hired the injured person’s employer. Endeavor argued Chapter 95 of the Texas Civil Practice and Remedies Code barred the claims. Chapter 95 protects property owners from liability for injuries to independent contractors who modify improvements to real property assuming the property owner does not actually know about the dangerous condition which caused the injury.

The Texas Supreme Court ruled in favor of Endeavor by extending it Chapter 95 protections. In doing so, the Court recognized negligent hiring involves two instances of negligence: the hiring itself and the negligent act. The Court concluded the negligent act alleged in this instance “arose from the use” of an improvement to real property and therefore Endeavor should be protected by the statute. Consequently, the Court reversed the court of appeals and broadened Chapter 95’s purview to exclude claims for negligent hiring against property owners.

This case is important for property owners as it limits the causes of action that can be asserted against them by parties injured on their property. Further, it shows the Court’s commitment to preserving the broad protection afforded by this statute.

http://www.txcourts.gov/media/1444025/170925.pdf

Failure to investigate contractor’s performance may prevent an owner from later recovering damages for latent defects

October 17, 2017

A construction project’s owner sued the general contractor for breach of contract after the four-year limitations period expired. The owner claimed that it had discovered issues with the contractor’s work, including improperly installed interior doors at exterior locations and the use of incorrect flooring materials. The owner argued that the “discovery rule” tolled the limitations period and allowed it to bring the claims as “latent defects.”

The court declined to apply the discovery rule, pointing to evidence suggesting that the owner knew or should have known about each issue. It emphasized that contracting parties must exercise reasonable diligence in ensuring the performance of a contractor complies with the contract documents. Reasonable steps include, for example, asking the contractor for information needed to verify its compliance with the plans, specifications, and other contract documents.

While the underlying facts of every claim will be different, it is important to recognize that a construction “defect” will not necessarily be considered a latent defect just because the owner did not have actual knowledge of the defect. If it is determined that the owner could have discovered the defect through the exercise of reasonable diligence, the defect will not be considered latent. Of course, what constitutes “reasonable diligence” (or the lack thereof) will depend upon the factual circumstances of each project and claim.

B. Mahler Interests, L.P. v. DMAC Construction, Inc. , 503 S.W.3d 43 (Tex. App.—Houston [14th Dist.] 2016, no pet.).