GT & MC, INC. v. Texas City Refining, Inc.
822 S.W.2d 252 | Texas Court of Appeals, 1st District (Houston) | 1991
What This Case Means for Subcontractors
GT & MC designed and built an oil storage tank with a floating roof guaranteed to withstand 125 mph winds and 10 inches of rain in 24 hours. During Hurricane Alicia, the roof failed and oil spilled even though wind and rain stayed within the design limits. The court ruled that while the contract limited damages for workmanship defects to repair or replacement, it did not limit damages for breaking the express warranty about design performance, so the owner could recover full consequential damages including lost oil.
Key Takeaways
- •Damage limitation clauses that cap repairs and replacements do NOT automatically protect you from liability for breach of express warranties about design specifications or performance guarantees.
- •If your contract includes specific performance guarantees (like wind speed ratings or capacity limits), those warranties are treated separately from general workmanship warranties and may not be subject to damage caps.
- •To protect yourself, clearly distinguish between design warranty disclaimers and workmanship warranty disclaimers in your contract language, and explicitly state which remedies apply to each.
Remedies for breach of express warranty related to design requirements were neither limited nor disclaimed.
Frequently Asked Question
If my contract limits damages to repair or replacement, am I protected from paying for losses caused by my design failing to meet specifications?
No. Damage limitation clauses typically only protect you for defects in workmanship and materials. If you made an express warranty about how your design would perform (like load capacity or weather resistance), breaching that warranty can expose you to full consequential damages even if repair/replacement damages are capped. Make sure your contract clearly disclaims design warranties or separately limits those damages.
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