The Spearin Doctrine (part 1 of 3)

Brooklyn Navy Yard is the home to one of our revered doctrines in construction law, the Spearin Doctrine. In this post we acknowledge the ongoing development of the Brooklyn Navy Yard, and review the facts and holding of this seminal case.  In two follow up posts we will examine some of the myth and reality of the Spearin doctrine.

The Brooklyn Navy Yard

On June 14, 2013, the New York Times ran a photo feature on what's happening with the Navy Yard.  

The Brooklyn Navy Yard dates to 1801, when an entrepreneurial shipbuilder named John Jackson sold his land on Wallabout Bay, in the East River, to the federal government. At the yard’s peak in World War II, 70,000 men and women worked there. But it never recovered from a severe postwar decline, and the government closed it in 1966. The city turned the site into an industrial park, and today it seems to be a model of eco-friendly adaptive reuse. Only Building 92, which houses an interactive museum and job center, is regularly open to the public, but tours by bus and bicycle allow visitors to see the campus. To get there, take a bus to Flushing Avenue, the F train to York Street or ride a bike — if you don’t have one, there are Citi Bike stations nearby.

Here's what it looked liked during Wold War II:

The Case  (United States v. Spearin, 248 U.S. 132 (U.S. 1918)

Justice Brandeis

Spearin contracted to build for $ 757,800 a dry-dock at the Brooklyn Navy Yard in accordance with plans and specifications which had been prepared by the Government. The site selected by it was intersected by a 6-foot brick sewer; and it was necessary to divert and relocate a section thereof before the work of constructing the drydock could begin. The plans and specifications provided that the contractor should do the work and prescribed the dimensions, material, and location of the section to be  [*134]  substituted. All the prescribed requirements were fully complied with by Spearin; and the substituted section was accepted by the Government as satisfactory. It was located about 37 to 50 feet from the proposed excavation for the dry-dock; but a large part of the new section was within the area set aside as space within which the contractor's operations were to be carried on. Both before and after the diversion of the 6-foot sewer, it connected, within the Navy Yard but outside the space reserved for work on the dry-dock, with a 7-foot sewer which emptied into Wallabout Basin.

About a year after this relocation of the 6-foot sewer there occurred a sudden and heavy downpour of rain coincident with a high tide. This forced the water up the sewer for a considerable distance to a depth of 2 feet or more. Internal pressure broke the 6-foot sewer as so relocated, at several places; and the excavation of the dry-dock was flooded. Upon investigation, it was discovered that there was a dam from 5 to 5 1/2 feet high in the 7-foot sewer; and that dam, by diverting to the 6-foot sewer the greater part of the water, had caused the internal pressure which broke it. Both sewers were a part of the city sewerage system; but the dam was not shown either on the city's plan, nor on the Government's plans and blue-prints, which were submitted to Spearin. On them the 7-foot sewer appeared as unobstructed. The Government officials concerned with the letting of the contract and construction of the dry-dock did not know of the existence of the dam. The site selected for the dry-dock was low ground; and during some years prior to making the contract sued on, the sewers had, from time to time, overflowed to the knowledge of these Government officials and others. But the fact had not been communicated to Spearin by anyone. He had, before entering into the contract, made a superficial examination of the premises and sought from the civil engineer's office at the Navy  [*135]  Yard information concerning the conditions and probable cost of the work; but he had made no special examination of the sewers nor special enquiry into the possibility of the work being flooded thereby; and had no information on the subject.

Promptly after the breaking of the sewer Spearin notified the Government that he considered the sewers under existing plans a menace to the work and that he would not resume operations unless the Government either made good or assumed responsibility for the damage that had already occurred and either made such changes in the sewer system as would remove the danger or assumed  [**61]  responsibility for the damage which might thereafter be occasioned by the insufficient capacity and the location and design of the existing sewers. The estimated cost of restoring the sewer was $ 3,875. But it was unsafe to both Spearin and the Government's property to proceed with the work with the 6-foot sewer in its then condition. The Government insisted that the responsibility for remedying existing conditions rested  [***169]  with the contractor. After fifteen months spent in investigation and fruitless correspondence, the Secretary of the Navy annulled the contract and took possession of the plant and materials on the site. Later the dry-dock, under radically changed and enlarged plans, was completed by other contractors, the Government having first discontinued the use of the 6-foot intersecting sewer and then reconstructed it by modifying size, shape and material so as to remove all danger of its breaking from internal pressure. Up to that time $ 210,939.18 had been expended by Spearin on the work; and he had received from the Government on account thereof $ 129,758.32. The court found that if he had been allowed to complete the contract he would have earned a profit of $ 60,000, and its judgment included that sum.

He goes on to discuss the background legal principles.

The general rules of law applicable to these facts are well  [*136]  settled. HN1 Where one agrees to do, for a fixed sum, a thing possible to be performed, he will not be excused or become entitled to additional compensation, because unforeseen difficulties are encountered. Day v. United States, 245 U.S. 159; Phoenix Bridge Co. v. United States, 211 U.S. 188. Thus one who undertakes to erect a structure upon a particular site, assumes ordinarily the risk of subsidence of the soil. Simpson v. United States, 172 U.S. 372; Dermott v. Jones, 2 Wall. 1. But if the contractor is bound to build according to plans and specifications prepared by the owner, the contractor will not be responsible for the consequences of defects in the plans and specifications. MacKnight Flintic Stone Co. v. The Mayor, 160 N.Y. 72; Filbert v. Philadelphia, 181 Pa. St. 530; Bentley v. State, 73 Wisconsin, 416. See Sundstrom v. New York, 213 N.Y. 68. This responsibility of the owner is not overcome by the usual clauses requiring builders to visit the site, to check the plans, and to inform themselves of the requirements of the work, as is shown by Christie v. United States, 237 U.S. 234; Hollerbach v. United States, 233 U.S. 165, and United States v. Utah &c. Stage Co., 199 U.S. 414, 424, where it was held that the contractor should be relieved, if he was misled by erroneous statements in the specifications.

And he applies these to the case before him.

In the case at bar, the sewer, as well as the other structures, was to be built in accordance with the plans and specifications furnished by the Government. The construction of the sewer constituted as much an integral part of the contract as did the construction of any part of the dry-dock proper. It was as necessary as any other work in the preparation for the foundation. It involved no separate contract and no separate consideration. The contention of the Government that the present case is to be distinguished from the Bentley Case, supra, and other similar cases, on the ground that the contract with reference to the sewer is purely collateral, is clearly without  [*137]  merit. The risk of the existing system proving adequate might have rested upon Spearin, if the contract for the dry-dock had not contained the provision for relocation of the 6-foot sewer. But the insertion of the articles prescribing the character, dimensions and location of the sewer imported a warranty that, if the specifications were complied with, the sewer would be adequate. This implied warranty is not overcome by the general clauses requiring the contractor, to examine the site, 1 to check up the plans, 2 and to assume responsibility for the work until completion and acceptance. 3 The obligation to examine the site did not impose upon him the duty of making a diligent enquiry into the history of the locality with a view to determining, at his peril, whether the sewer specifically prescribed by the Government  [***170]  would prove adequate. The duty to check plans did not impose the obligation to pass upon their adequacy to accomplish the purpose in view. And the provision concerning contractor's responsibility cannot be construed as abridging rights arising under specific provisions of the contract.

…The breach of warranty, followed by the Government's repudiation of all responsibility for the past and for making working conditions safe in the future, justified Spearin in refusing to resume the work. He was not obliged to restore the sewer and to proceed, at his peril, with the construction of the dry-dock. When the Government refused to assume the responsibility, he might have terminated the contract himself, Anvil Mining Co. v. Humble, 153 U.S. 540, 551-552; but he did not. When the Government annulled the contract without justification, it became liable for all damages resulting from its breach. 

The core holding here is clear enough.  When an owner prescribes the character, dimensions, and location of the work, and directs the contractor to follow those instructions, the owner, not the contractor, assumes the risk that the instructions are adequate and will achieve the desired result.  

Here are the obvious corollaries: 

1. If a house of cards built according to the owner's prescriptive instructions collapses, the contractor is not in breach and additional performance is excused unless the contractor receives a change order
2. If the plans have to be changed, the contractor is entitled to a change order for additional costs
3. If the owner refuses to issue a change order, the contractor is justified not to perform