South Carolina is one of a handful of states that recognizes an implied warranty that applies to design services. In South Carolina, certain warranties are implied into every design contract that is governed by South Carolina law. The South Carolina Supreme Court recognizes an implied warranty of “fitness of plans and specifications” where a design professional provides plans and specifications for use on a construction project. Of even greater concern, in Tommy L. Griffin Plumbing & Heating Co. v. Jordan, Jones & Goulding, Inc., the South Carolina Supreme Court potentially expanded this implied warranty when it found that an engineer who performed both design and construction administration services potentially warranted not only the design but also the “quality of construction.”
From a risk perspective, an implied warranty creates risk that is difficult to manage or prevent. In a professional negligence action, the design professional must show that his work comported with the standard of care – that standard may include a certain percentage of expected errors in the drawings and specification. However, providing services with due care will not necessarily prevent liability under an implied warranty theory because any error in the design may potentially violate the implied warranty.
The best method to limit liability from an implied contract term is to disclaim all implied warranties in the contract. There is no South Carolina case where the Court has addressed a disclaimer of the implied warranty of fitness of the plans and specifications. However, the cases involving the disclaimer of the implied warranties in the Uniform Commercial Code (which applies to the sale of goods) give guidance about what a court might consider an effective disclaimer.
A disclaimer must be conspicuous, written in clear language, and specifically name all warranties that are disclaimed. For example,
Engineer expressly disclaims all implied warranties in connection with Engineer’s services under this Agreement, including ANY implied warranty of fitness of the plans and specifications, any implied warranty regarding the quality of construction, the implied warranty of merchantability and the implied warranty of fitness for a particular purpose.
If you work on residential projects, you should ask your client to initial next to all disclaimers and limitations of liability so that there is no questions that the homeowner saw the disclaimer or limitation. If your client will not agree to such a disclaimer, you need to consider including a contingency against increased future liability.
If you have any questions concerning implied warranties, we would be glad to help you. The attorneys of Gibbes Burton are passionate about helping professionals and businesses to minimize risk and build success.