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New Texas law limits contractor liability for design defects

On Behalf of | Dec 6, 2021 | Construction Contracts

Effective September 1, 2021, the Texas legislature established a new statute in the Business & Commerce Code that limits the liability risks for contractors who may find themselves following faulty plans or specifications for construction.

With some limitations, Chapter 59 holds that contractors who must build according to specific plans may not be responsible for defects that are the result of poor design decisions by the owner. This new ruling brings Texas law in line with most U.S. states, which generally consider defective plans to be a reasonable defense.

Liability limitations

The new bill protects contractors from a variety of liability concerns regarding defective instructions, including faulty construction plans, specifications or other design documents. The law applies to documents that a third party provides to a contractor who has no other contractual or agency-type relationship.

Liability protection exceptions

When contractors discover a design defect, they may still be liable if the repair or construction project involves facilities related to the operation of essential infrastructure. This may include:

  • Facilities involving natural gas compressors
  • Oil, gas and chemical refineries, pipelines and storage tanks
  • Wellheads and drilling sites
  • Airports, telecommunication sites and railroads
  • Steelmaking facilities
  • Utility-scale water provision

A contracting company may also be liable if it is responsible for providing design documents itself, or if a contractor has agreed to assist with design document oversight and improvement.

Guidance for potentially confusing liability conflicts

On the one hand, the changes under the new bill may seem to favor contractors. However, by establishing a clearer outline of the rights and obligations involved in owner/contractor agreements, the law may help both parties to head off potentially costly construction liability disputes.