Defective Construction Work Claims In Texas
by Jason R. Kennedy
Defective work claims in commercial construction tend to be complicated because of the subject matter and the number of parties that are typically involved. The first of the many difficult questions that a project owner must answer are who can it sue, and what causes of action are available?
A defective work claim can arise out of a failure to follow plans and specifications, defects in workmanship, or defects in products or materials. The causes of action available to the owner can include breach of contract, breach of express or implied warranties, and negligence, depending on where the owner and defendant are in the construction chain and whether there is privity of contract between them. Construction defects can also arise from design errors by the owner’s design professionals, but defective design claims are outside the scope of this article.
Of course, the owner’s first and most direct route to recover its damages is by way of a breach of contract claim against the general contractor. If the defect was caused by a failure to follow plans and specifications, such failure is a breach of contract. In addition, a defect in workmanship is also a breach of contract. Most construction contracts expressly provide that the contractor has a duty to perform the work in a good and workmanlike manner, and if a contract does not do so, Texas law will imply such a duty. Whether an owner can sue the general contractor for breach of contract for defective construction materials or products will depend upon the language of the contract. Almost all construction contracts today do include a duty to supply materials that are free from defects. If the general contract lacks such provision, however, an owner’s only recourse may be against the seller, distributor or manufacturer of the materials under a negligence theory or UCC implied warranties.
Construction contracts also often include express warranties, and may refer to the duties to perform in a good and workmanlike manner and to provide materials that are free from defects as “warranties.” Of course, whether such obligations are a “contractual duty” or a “warranty” is a distinction without a difference, since express warranties are creatures of contract and the breach of any express warranty is, in essence, a breach of contract. Many express warranties attempt to limit the time within which claims must be brought, but any contract clause attempting to limit such time to less than two years is void under Texas law.
The general contractor, if faced with having to answer alone for all damages, almost always adds numerous subcontractors and suppliers to the suit and seeks participation from them in any settlement or judgment. Nevertheless, a wise project owner will bring direct claims against subcontractors and suppliers who may be responsible for the construction defects, rather than rely on the general contractor to bring in responsible parties, or depend on the general contractor’s or its insurance carrier’s ability or willingness to pay damages. A cause of action for breach of contract is not typically available for such purpose, but negligence may be. That said, in construction defect cases, the economic loss rule has been applied to preclude tort claims when: (1) The tort claims are brought to recover economic losses when those losses are the subject matter of a contract (and both plaintiff and defendant are in the same contractual chain), or (2) The tort claims are brought to recover economic losses against the manufacturer or seller of a defective product where the defect damages only the product and does not cause “personal injury” or damage to “other property.”
However, where a subcontractor’s sub-standard work or a seller/manufacturer’s defective product lead to injury to other parts of the project other than the subcontractor’s own work or to the product itself—e.g., where the subcontractor’s defective window installation or the seller/manufacturer’s defective windows themselves allow water to intrude and damage the interior of the project—then an owner may be able to claim damages in negligence directly against the subcontractor or seller/manufacturer. However, different Courts of Appeals have come to different conclusions in similar cases, and so the outcome is uncertain.
Finally, in cases involving defective products, all parties in the construction contract chain may assert claims against the seller, distributor, and manufacturer pursuant to the UCC implied warranties of merchantability and fitness for particular purpose provided by the Texas Business & Commerce Code, as privity of contract is not required for such claims. However, a project owner should bear in mind that such warranties can be disclaimed.
Jason R. Kennedy is a partner at Thomas, Feldman & Wilshusen, L.L.P. in Dallas and can be reached at email@example.com.