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Missouri Okays Modified Total Cost Method In Spearin Claim

Monday, May 01, 2017 02:49 am

 

Reversing an earlier ruling, a Missouri Court of Appeals will allow a jury to determine whether a school district breached the parties' construction contract by providing defective plans and specifications. Significantly, the court ruled for the first time that a Spearin claim "is an acceptable vehicle for bringing a cause of action in Missouri."

The Spearin Doctrine (U.S. v. Spearin, 248 U.S. 132, 136-38 (1918)) holds that a governmental entity-owner impliedly warrants that the plans/specs it provides to a contractor on a construction project are adequate for contract performance.

Here, general contractor Penzel Construction Company (Penzel) relied on that principle when, representing its electrical subcontractor via a pass-through agreement, it claimed that a Jackson, Missouri school district's inadequate and incorrect electrical design caused a sixteen-month delay and monetary damages. Penzel Construction Co., Inc. v. Jackson R-2 School District, 2017 Mo. App. (E.D. No. ED103878 Feb. 14, 2017).

The govt. warrants what it represents

The appeals court first reasoned that Spearin aligns with Missouri precedent set in Ideker, Inc. v. Mo. State Highway Comm'n,654 S.W.2d 617 (Mo. App. W.D. 1983). There, a highway construction contractor discovered that completing its work by relying on the Missouri State Highway Commission's project plans/specs would be impossible without expending significantly more hours and money than required if the plans/specs had been adequate. Id. at 619-620. The contractor prevailed on a contract breach claim brought "in the nature of" a warranty breach.

The Ideker court stated: "[W]here a governmental entity makes a positive representation of a material fact relied upon by a contractor in calculating its bid, which turns out to be false or incorrect after work is commenced and occasions additional expense, ... the governmental entity should bear the added cost rather than the contractor because the former is the beneficiary of necessary but unbargained for work resulting from its positive representation of a material fact which turned out to be false or incorrect." Id. at 621.

Throughout its analysis of the instant case, the Penzel court emphasized Ideker's underlying philosophy: "the notion that we should try to place parties in the same position they would be in if the contract agreed upon was performed without a breach." Id. The instant court remarked that, if a contractor makes a bid in reliance on the government's representations---positive or implied---that contractor shouldn't be punished (and the government shouldn't receive a windfall) if those representations are faulty.

4-plus-4-prong test for Spearin

Because a Spearin claim is essentially a contract breach claim, to bring such an action, there first must be: (1) a contract, (2) a plaintiff's performance pursuant to that contract, (3) a defendant's breach of that contract, and (4) damages suffered by the plaintiff.

Next, to rise to the level of a Spearin-typeclaim, there must be: (1) a dispute between a governmental entity and a contractor (or a sub via a pass-through agreement), (2) that arises from a construction contract, (3) under which the governmental entity furnished deficient plans/specs for the contractor's (or sub's) performance---and (4) these deficiencies caused additional costs for the contractor (or sub).

Expert not required, but allowed, to speak to defects

The instant case rested on two of the above factors: whether the district actually breached the contract (i.e., provided defective plans/specs) and whether Penzel suffered damages it could prove with reasonable certainty.

Regarding the first question, Penzel alleged that the district's plans/specs were defective because they incorporated: an inadequate wiring design, a defective lighting design, incorrect kitchen drawings, outdated products, an incorrect number of water heaters requiring wiring, work that was non-compliant with building codes, and an incorrect depiction of site work to be performed by other subs.

The district contended that Penzel failed to provide sufficient evidence of these allegations because: the testified opinions it provided "lacked an adequate factual basis," the testimony wasn't "expert" testimony, and the testimony wasn't sufficient to su[...]

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