Owen Newman and Justin Li of Duane Morris examine the difference that choice of law can make when designs turn out to be defective or deficient and exposure starts to cascade. Comparison between the United States and the UK, which start from different premises, is instructive.
Key Points
- Choice-of-law provisions affect who bears the financial consequences of defective design, making them a critical risk-allocation tool in construction contracts.
- U.S. law generally imposes an implied warranty on owners for the adequacy of owner-furnished designs.
- English law applies a reasonable-care standard to owner-designer relationships unless the contract expressly provides otherwise; an implied obligation to build fit-for-purpose may arise in owner-contractor relationships.
- The article examines how landmark cases, including Spearin in the United States and MT Højgaard in England, shape default design liability rules and contractual risk allocation.
- For owners, contractors, and design professionals, understanding the interaction between governing law and contract drafting is essential to avoiding unexpected exposure from defective design.
The fallout from a defective or deficient design can spiral quickly, driving not just design cost but schedule delay, lost productivity, and rework, and choice of law can make a significant difference in who bears that cascading exposure. U.S. law starts with the default position that the owner owes its contractor an implied warranty that the design it furnishes is fit for purpose, while the owner’s own recourse against the design professional who created that design is far more limited.
In the UK, however, neither relationship carries a warranty by default: the owner’s exposure to its contractor and its recourse against the designer both rest on the same reasonable-care standard, absent specific drafting to the contrary. That divergence plays out across two relationships: owner to contractor and owner to design professional. Understanding how each system allocates risk by default, rather than assuming either one is simply “tougher” or “friendlier,” is what actually protects a client negotiating across these systems.
The American Default: An Asymmetry That Exists Outside the Contract
American design liability features a structural asymmetry: the owner faces warranty-based liability to its contractor for defective design under the Spearin doctrine, while the owner’s recourse against the designer is limited to a narrower breach-of-contract claim, measured against a fault-based standard of care. That asymmetry exists as a matter of common law doctrine, not contract language. It is a default position, not an immovable one; it can be realigned by contract, though standard forms often maintain or deepen it rather than cure it.
The doctrine traces to United States v. Spearin, 248 U.S. 132 (1918), which held that a contractor bound to build according to owner-furnished plans is not responsible for the consequences of defects in those plans. The Court explained that detailed specifications import a warranty that if the specifications are complied with, the result will be adequate, a warranty not overcome by general clauses requiring the contractor to examine the site, check the plans, or assume responsibility for the work until completion.
Spearin originated in federal government contracts but has since been adopted, in whole or in part, by many state courts in private construction. Unless the contract is with the U.S. government, its application is a matter of state law, and treatment varies widely. Some jurisdictions apply the doctrine broadly; others reject or materially modify it, making the choice of a specific state’s law a deliberate decision, not a procedural formality.
Overcoming Spearin’s default allocation requires specific, purposeful contract language. General disclaimers or a bare obligation to review the plans are typically insufficient, as courts require clear evidence of intent to shift design risk (see White v. Edsall Constr. Co., Inc., 296 F.3d 1081 (Fed. Cir. 2002)).
Owners and counsel have developed strategies to work around Spearin’s default allocation: disclaimer clauses, design-assist arrangements, and performance-specification structures that shift design risk back onto the contractor. But in a traditional design-bid-build project, the owner separately retains a design professional whose recourse runs on an entirely different track from Spearin, and that divergence is the source of the American asymmetry.
The designer does not warrant results, only that it performed to the standard of care set out in its agreement with the owner. In most states, the owner’s primary claim against its architect is breach of contract, measured against care ordinarily provided by architects practicing in the same or similar locality under similar circumstances, the formulation in AIA Document B101, echoed by courts as the default measure of an architect’s duty (C.H. Guernsey & Co. v. United States, 65 Fed. Cl. 582 (2005)). That is a materially lower bar than an implied warranty.
Liability caps deepen the asymmetry. AIA B101 contains a mutual waiver of consequential damages, and parties routinely cap recovery at the design fee or a fixed amount. Even where an owner proves a breach of the standard of care, recovery is bounded by a figure far below total project cost, while a defective design can escalate into change orders, delay claims, and consequential damages far exceeding the cap.
The owner thus bears warranty-based, uncapped exposure to the contractor under Spearin, while its recovery against the architect is fault-based and capped. Owners seeking recovery from their designer on a comparable scale have limited options outside the four corners of the contract.
Tort claims against a designer are barred by the economic loss doctrine in most jurisdictions, including Nevada (Terracon Consultants W., Inc. v. Mandalay Resort Grp., 125 Nev. 66 (2009)), Indiana (Indianapolis-Marion Cnty. Pub. Libr. v. Charlier Clark & Linard, P.C., 929 N.E.2d 722 (2010)), Arizona, Illinois, Hawaii, and Maryland.
A minority, Pennsylvania (Bilt-Rite Contractors, Inc. v. The Architectural Studio, 581 Pa. 454 (2005), adopting Restatement (Second) of Torts § 552), West Virginia, and Montana, permit negligent misrepresentation claims.
A second avenue is gross negligence, but courts set a high bar: in Soja v. Keystone Trozze, LLC, 106 A.D.3d 1168 (N.Y. App. Div. 2013), the Court articulated the standard for gross negligence as conduct that evinces a reckless disregard for the rights of others or smacks of intentional wrongdoing. Both are long shots: available in some states and not others, turning on facts that are hard to establish, and no substitute for addressing the cap in the contract itself.
The English Default: No Warranty Either Way, Until the Parties Draft One In
English law starts from a different premise entirely. It is not that England has solved the American asymmetry; it is that English law does not generate that asymmetry by default.
Where a contractor builds to a design supplied by or on behalf of the employer, English courts hold that no fitness-for-purpose obligation is implied upon the contractor. As the court explained in Tesco Stores Ltd v Costain Construction Limited [2003] EWHC 1487 (TCC) at paragraph 180, there is no such implied term where the contractor builds to a specification already devised by or on behalf of the employer.
The architect-employer relationship starts from the same fault-based floor. As Keating on Construction Contracts puts it at [14-074]–[14-075], the usual standard of duty is that of reasonable care as an express or implied term in contract. A fitness-for-purpose obligation has to be earned through the contract’s terms or the specific facts of the engagement.
English courts have found that fitness-for-purpose obligation in several recognizable patterns: design-and-build structures (IBA v EMI & BICC (1980) 14 BLR 1); contracts layering a performance requirement on top of a build-to-specification obligation (MT Højgaard A/S v E.ON Climate and Renewables UK [2017] UKSC 59); express incorporation of fitness-for-purpose terms (Associated British Ports v Hydro Soil Services NV [2006] EWHC 1187); and specification language imposing strict compliance (Costain Ltd v Charles Haswell & Partners Ltd [2009] EWHC 3140 (TCC)).
Each turns on its own facts, per Greaves & Co. (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095. In other words, a fit-for-purpose obligation can be implied upon the contractor if “(i) the employer makes known to the contractor the particular purpose for which the building is required; (ii) the work is of a kind which the contractor holds itself out as performing; and (iii) the employer relies on the contractor’s skill and judgment.” (Chitty on Contracts, at [40-078])
FIDIC and NEC track the same default at the standard-form level: the FIDIC Red Book leaves employer-supplied design risks entirely with the employer, whereas the Yellow and Silver Books impose a strict fitness-for-purpose obligation wherever the contractor assumes design responsibility under Sub-Clauses 4.1 and 5.1.
If unamended, Sub-Clause 1.15 defaults to cap the contractor’s liability to the full accepted contract amount, i.e., the agreed-upon price for the execution of the works and remedying defects. NEC4’s Option X15, by contrast, defaults the contractor’s design liability to reasonable skill and care. Option X18 provides mechanisms to cap liabilities, including the exclusion of indirect losses, damage to existing property and design defects.
To align with the English common law professional indemnity standard, parties must explicitly opt into secondary Option X15. Absent specific contractual language or special circumstances justifying an implied term, both sides of the English relationship, employer to contractor and employer to architect, sit on the same reasonable-care footing by default. That symmetry contrasts sharply with the American asymmetry between the owner’s warranty-based Spearin exposure and its fault-based, capped remedy against the designer.
Where the Systems Actually Meet
The two systems meet where sophisticated parties draft around their defaults. MT Højgaard shows English courts will hold a contractor liable in contract when the contract’s own terms point that way. American drafting achieves something similar in reverse: performance specifications and design-assist structures can shift risk onto contractors that Spearin would otherwise protect, provided the drafting is specific and purposeful rather than a general disclaimer. Both systems let contract language override the starting default.
The Practical Point
Neither system is inherently better for an owner, contractor, or designer. The real question for counsel negotiating a cross-border contract is whether the drafters understand its implications and have drafted to the risk allocation they actually want. A solution that works under English law will not necessarily transplant into an American contract, and vice versa.
The risk is not that either system leaves a gap; it is that the two defaults differ substantially, and a party who assumes one while operating under the other can be caught by surprise. A choice-of-law clause is not boilerplate; on design liability, it defines the entire risk structure.
For owners, the practical stakes are in state selection. Spearin’s application is a matter of state law, and states are far from uniform. Some adopt it broadly, some reject it, some materially modify it, and many differ on whether a contract can validly shift or waive that exposure. Choosing state law deliberately, rather than by default, is the owner’s real point of leverage.
Contractors face a different exposure: how the specification itself is drafted. American law protects reliance on a design specification but not a performance specification (see PCL Constr. Servs., Inc. v. United States, 47 Fed. Cl. 745 (2000)); English law reaches a similar result through MT Højgaard, where performance criteria layered on a prescribed design shift risk onto the contractor. Contractors on either side of the Atlantic should read specification language for exactly this distinction before pricing a job.
For designers, the exposure is less about the standard of care than where it’s litigated, specifically jurisdictional volatility in caps and carveouts. Reasonable care is the baseline in both systems, but American liability caps, consequential-damages waivers, and gross-negligence carveouts vary state by state, meaning a cap that holds in one state may not hold in another. English law’s simpler default does not create that same variability.
Reprinted with permission of Construction Law. All rights reserved.
