CONSTRUCTION WARRANTIES

Construction warranties are so frequently expected by owners and general contractors, as to be essentially required. For this reason alone, it is good business practice to offer them on your construction projects.

But there is another reason. After work is completed, you should do whatever is legally necessary to prevent further claims. Isn’t that the whole point?  Who doesn’t want to be able to walk away from a finished project without having to look behind your shoulder? There is certainly no guarantee you will not be called back or sued for damages, but you can certainly draft the warranty agreement in such a way as to help eliminate that prospect.  NationalLienLaw is quite proud of their warranty forms, as it has been drafted by an experienced construction attorney so that the following protections are offered:

• Waives all implied warranties of merchantability, fitness for a particular purpose, habitability, and UCC implied warranties.

• The construction warranty is void unless the owner gives the contractor access to the property and the right to fix the problem before hiring someone else at a higher cost.

• The work is not guaranteed to be perfect, but only to be reasonable—defined in the warranty form as workmanship within industry tolerances.

• There is no liability for defective materials, equipment or appliances—the only remedy is to go against the warranty of the manufacturer or supplier.

• The construction warranty is void unless notification is given in writing, which states the particulars of the problem and gives an opportunity to rectify.

• Limits the amount of possible damages for defective work to 150% of the cost to repair. Since it is common today to sue for thousands of dollars above the cost to repair for consequential damages, this will help limit the exposure.

• Limits the time to bring a lawsuit and the amount of damages for defective workmanship or materials to the lower cost to repair or replace under warranty theory, as opposed to the higher tort or breach of contract theory. This is a significant protection if approved by a judge.

• Requires the owner to notify the contractor within 60 days of knowledge of a problem. To be covered, the physical signs of the problem must be observable and have started to cause damage before the one-year warranty period expires.
• It is the contractor’s option to either repair or replace.

• Work is to be done within a reasonable period of time during normal working hours, which can be extended based on weather, availability of materials, etc.

• The contractor is required to repair or replace only the specific part which is defective, and not other non-defective components or the surrounding area.

• Makes sure the one-year construction warranty starts as early as possible. In this case it would be the earlier of the acceptance through the building inspection department or occupancy of the owner. Eliminates the longer periods of when the project has been “accepted” or fully paid, since many times this is too vague, drags out the warranty, or even makes it an indefinite period.

• A responsible adult must be present to have authority and accept the corrective work.

• If the owner is required to purchase and install more valuable materials than originally provided in the contract in order to correct any defects, the owner may not recover the extra value of such better material.

• Important: The warranty form waives all damages other than the obligation to repair or replace, including: incidental, indirect, special, consequential, secondary, or punitive damages; loss of use; diminution in value; rental costs; moving costs; delay in occupancy; construction, mortgage, loan or line of credit interest charges; mortgage interest rate increases; lost profits or income; medical costs; damages for mental distress, aggravation, personal injury; or pain and suffering.

• There is no liability for defective products or materials, even if the contractor gives the owner or general contractor a copy of a brochure or product literature.

• If the owner or architect specifies a particular material, they will be responsible for any such product defects.

• There will be no liability for latent product defects, namely problems that are not readily observable at the time of installation or initial stages of occupancy.

• Important construction warranty exclusions as follows:

1. Damage or defects caused by the failure to maintain any item or keep it in good working order.

2. As a result of unforeseen site conditions occurring beyond contractor’s control.

3. Damage resulting from fire, freezing, storms, electrical malfunction or surge, lightening, earthquake, pest damage, acts of God, or other unforeseen causes or accidents.

4. Damage from alterations, misuse, or abuse by any person; ordinary wear and tear; or problems caused by lack of maintenance.

5. Warranty damage resulting from failure to observe any operation instructions furnished at the time of installation.

6. Any item furnished, installed, modified, altered or repaired by any other person other than contractor.

7. Any appliance, piece of equipment, material, or other item that is a consumer product under the Magnuson-Moss Warranty Act, 15 U.S. Code, ‘2301 et. seq.

8. The construction warranty is not valid unless the contract is paid in full.

9. Any loss, injury, or damage attributable to the subsidence or movement of land as a result of landslide, mud flow, flooding, water infiltration or damage, earth sinking or shifting, or expanding or contracting.

10. Bodily injury or property damage relating to pollutants or toxics.

11. Warranty conditions resulting from condensation on, expansion of, or contraction of materials.

12. Problems which arise in an attempt to match existing materials. There are limitations inherent in the matching of existing materials such as stucco, drywall, paint, wood, tile, flooring, concrete, and the like. Exact duplication in matching, texture, and color will not be guaranteed. Variations within industry  tolerances will be considered  acceptable.                                                                 

13. Pre-existing conditions of the structure or its components.

14. The contractor’s statements of opinion, comments, affirmation of value or functionality, product descriptions, or instruction for use, of the work or materials furnished, shall not be considered a construction warranty.

15. Problems associated with the owner or its agents (architect or engineer) failing to provide adequate design, plans, or specifications, or failing to exercise professional care.

16. Delays caused by factors beyond the control of the contractor. The owner warrants that work can be performed as called for by any owner-mandated schedule.

17. Delays due to the unavailability of material. The owner will warrant the commercial availability of any specified single source product.                                                       

18. Implied warranties derived from any course of dealing or usage in the trade.

19. If there are plans, specifications, or drawings by design professionals or the owner, those persons impliedly warrant the resulting structure and its components will be suitable for the particular purpose for which they were intended.  The same applies to substitute material approved by the owner.

20. The owner agrees to provide contractor, or it’s representative, access to the  premises and the first opportunity of repairing or replacing any defective items. If contractor is not given that opportunity, any expenses incurred by another contractor will be at owner’s expense.

Will the courts enforce all these protective warranty provisions and exclusions? There is certainly no guarantee. But if the warranty agreement is agreed upon and signed by the owner, it goes a long way in making such an argument. 

The construction warranty forms can be used by a general contractor or subcontractor. Each form is in both Word and PDF format. Comes with Non-unwarrantable conditions attachment and a 10-page law summary. You can buy the forms separately or there is a discount for the full package.

Because the warranty forms are in Word format, you can edit and customize to your needs.

Also comes with a “Non-unwarrantable conditions attachment.” This gives examples of some of the items not subject to the contractor warranty. This allows you to pick and choose the exclusions.