Passing the Buck to Subcontractors
Commercial construction contracts are often an exercise in passing financial responsibility for construction defects down the chain. The owner wants the general contractor to be solely responsible, the general contractors wants the subcontractor to be solely responsible, and so on. In the context of products specified by the “higher” contracting party, the prevailing thought was that the Spearin Doctrine would govern. Under the Spearin Doctrine, the party that selected the product for installation was impliedly warrantying the suitability of that product (or other specification) for the project and could not pass responsibility for the failure of that product on to the “lower” contracting party that was actually installing the product.
In Lighting Retrofit International, LLC v. Constellation NewEnergy, Inc., 586 F.Supp.3d 452 (D. Md. 2022), the United States District Court in Maryland functionally eliminated Spearin where there is an express contractual warranty. In Lighting Retrofit, the contract required the subcontractor to install a specific type of highmast lighting fixture in a prison facility, and to warranty the fixture for a period of time after installation. While the subcontractor had some reservations about the fixture itself, it nonetheless signed the contract, including the express warranty language. Of course, the fixtures failed en masse and the general contractor pointed to the warranty language as requiring the subcontractor to foot the bill for replacement fixtures. The subcontractor pointed to Spearin, arguing that because the general contractor picked the fixture, it also impliedly warrantied the fixture as being suitable for the application. The Court found that Spearin does not apply where there is an express warranty and held that the subcontractor’s remedy if it was not comfortable with responsibility for a questionable fixture was to not sign the contract.
For general contractors, the message is clear – all of your subcontracts should include express warranties as to all work performed and products installed by your subcontractors. This is especially pertinent when the subcontractor is installing products that are untested or of questionable viability for the project. With sufficiently broad warranty language, a general contractor can effectively push a large portion of financial responsibility (if not practical responsibility) for pre-contract due diligence onto subcontractors.
On the other side of the coin, subcontractors need to be vigilant in pre-contract due diligence. General contractors are not going to stop the practice of pushing liability down, so subcontractors need to be comfortable that the work being performed and products being installed in a project are not going to fail simply because they are defective or not suitable for the project.
If you, as a subcontractor, have concerns about the plans or specifications provided by a general contractor, those concerns need to be resolved pre-contract, or you may find yourself financially liable for a general contractor’s lack of due diligence. Contact Aaron Neal or one of our other attorneys for more information.