#28: Excusing the Failure to Meet a Performance Spec
A few months back I blogged about design and performance specs, and noted that difficulties in meeting a performance spec can be excused when implementing it is impossible or commercially impracticable (i.e., impossible to achieve or achievable only at excessive cost). In such a case, the contract documents call for a result that cannot reasonably be expected of the contractor under the parameters given.
The problem can arise whenever the designing engineer fails to appreciate how his specs are interrelated, and calls for two things that are in tension with each other. To take a simple example, if a given design for a turf field requires permeability of X inches per hour (a performance spec) but also requires the underlying base stone to contain a high minimum percentage of small particles (a design spec), the net result will be that the air voids needed for good drainage will be filled with too many fines to achieve the required permeability.
Many contracts require the contractor to call to the architect’s or engineer’s attention any inconsistencies of this sort that the contractor happens to notice. Unless the tension is glaring, however, a contractor will typically not spot the problem at bid time. Even if subcontractor bids have been solicited for portions of the overall specs in advance of the contractor’s own bid, chances are they will not have been solicited very far in advance, and the most experienced specialty subcontractor could fail to notice a latent problem―particularly where other specs imposing some physical constraints on the options available to implement a given performance requirement happen to be buried in another spec section.
Some courts hold that the constraints imposed by those other specs can excuse a performance spec simply by unduly restraining the contractor’s choice of means and methods to achieve it. That was the case, for instance, in Niagara County v. R & D Engineering, P.C., 298 A.D.2d 971, 973 (2002), a suit by a Water District against Goulds Pumps for furnishing pumps with “excessive vibration” contrary to the maximum levels required in the specs. Because the contract documents included “at least seven pages of the ‘details of construction’ for the pumps and their motors,” the Court found that “the vibration specification was not a performance specification, inasmuch as it cannot be said that Goulds was ‘free to choose the materials, methods and design necessary to meet the objective or standard of performance.’"
Other courts hold that “when a contract contains a mix of both design and performance specifications, the contractor may defend on an implied warranty theory if the design specifications are defective to the degree that adherence to them results in an article that fails to satisfy a stated performance specification." R.J. Crowley, Inc. v. U.S., 1990 U.S. App. LEXIS. 21618 (Fed. Cir. 1990).
Still other courts hold that meeting a performance spec is excused if meeting related design specs renders the performance spec commercially impracticable. An example is Waldinger Corp. v. CRS Group Engineers, Inc. Clark Dietz Div., 775 F.2d 781, 789 (7th Cir. 1985) (“We conclude that Ashbrook's inability to supply a filter press that would both satisfy Dietz's mechanical specifications and perform as required is sufficient to establish that performance of its contract with Waldinger was commercially impracticable.”).
Whichever of these approaches is taken, the basic concept is the same. If design specs foreclose a contractor’s options to the point that meeting a performance spec becomes impossible or impracticable, failure to meet the performance spec will be excused.
The risk to the contractor is that commercial impracticability, like beauty, is in the eye if the beholder. A contract is commercially impracticable when performance would cause "extreme and unreasonable difficulty, expense, injury, or loss to one of the parties." Restatement (Second) of Contracts § 261 cmt. d (1981). One judge or jury may have a different view than another of what is “extreme and unreasonable.”