Risk Management for Architects and Engineers Part 3: Architects and Engineers Can Make Warranties Too!

Risk Management for Architects and Engineers Part 3: Architects and Engineers Can Make Warranties Too!

Ordinarily, under the common law standard of care, architects and engineers (“design professionals”) do not warrant that their work will be perfect or error-free (see September 7, 2015 post). However, design professionals can change that. On July 28, 2015, I had the pleasure of speaking to the Alabama Section of the American Society of Civil Engineers in Orange Beach, AL about express warranties and guarantees as part of my risk management seminar.

For instance, in Arkansas Rice Growers Co-op. Ass'n v. Alchemy Industries, Inc., 797 F.2d 565 (8th Cir. 1986), the contract required the designer to provide “the necessary engineering plant layout and equipment design and the onsite engineering supervision and start up engineering services necessary for the construction of a hull by-product facility capable of reducing a minimum of 7½ tons of rice hulls per hour to an ash and producing a minimum of 48 million BTU's per hour of steam at 200 pounds pressure (emphasis added).” The plant’s production never met the performance criteria set forth in the contract and a lawsuit was brought against the designer and developer. Because the contract specifically set forth certain performance criteria, the Court opined that the designer and developer “thus warranted that a plant constructed according to [the designer’s] design was capable of achieving the performance criteria (emphasis added).” Id. at 569. And since the plant didn’t perform as warranted, the designer and developer were held responsible.

Simply put, design professionals should think twice before contractually undertaking to meet certain performance criteria because doing so will likely be construed as an express warranty. Express warranties are contractual in nature, rather than tortious in nature (e.g., negligence). Accordingly, failure to achieve the performance criteria is a breach of contract, even if the design professional met the applicable standard of care. And as you will see in a later post, professional liability insurance policies typically exclude coverage for express warranties.

Alabama attorney and professional engineer Jacob W. Hill practices construction law, representing general contractors, subcontractors, material suppliers, developers, architects, engineers, and other parties to construction and development projects. Contact Jacob Hill for more information or a consultation regarding your project.

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