The Rumble in the Jungle -- Letters of Credit, Bonding and Default Insurance: Hedging Bets in a Roller-Coaster Market


“The Rumble in the Jungle…” -

The favored method of developing and delivering completed construction projects in the United States has long been the design-bid-build method. Under this “traditional” method generally, the owner separately engages a design professional to furnish detailed plans and specifications for the purpose of securing hard bids from contractors, then separately contracts for the work. One of the primary legal doctrines of the “design-bid-build” delivery system is known as the Spearin doctrine, which provides “the contractor will not be responsible for the consequences of defects in the plans and specifications …”

On the other hand, absent an agreement to the contrary, a basic tenet of design profession law is that the designer’s obligation to the owner is not held to perfection, but rather to the standard of care in the industry for designers on similarly situated projects in the location. As a result, “it is not uncommon for the contractor to insist that the root of the problem is a design error, while the designer insists that the problem is caused by a construction deficiency.”

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