Clarifying Design Responsibility and Its Risk Allocation in Construction Contracts

Abstract

Disputes related to responsibility for design defects can cause significant financial costs and delays. Consequently, the allocation of risks pertaining to design responsibility is a hot-button issue in construction. This study aimed to assist owners and contractors in understanding contractual and legal allocation strategies for design responsibility and associated risks. The authors achieved this goal by following a two-stage approach. In Stage A, a substantive review was conducted of multiple standard-form contracts [such as those generated by the American Institute of Architects (AIA)]. In Stage B, a review was conducted of US federal and state judiciary precedents. These contractual and legal reviews outline the general rule of an owner’s implied warranty, known as the Spearin doctrine, and exceptions to the Spearin doctrine in the standard forms of contracts and legal precedents. The aforementioned exceptions to implied warranty include (1) contractual responsibility on the part of a contractor to review design documents; (2) the existence of performance specifications rather than or in addition to design specifications; and (3) the presence of an express warranty or disclaimer within a contract. This paper includes tabulated contractual and legal risk allocation concepts for design responsibility and a flowchart that was generated to guide construction stakeholders on the nuances of design risk allocation scenarios.