The Builder's Burden of Defective Construction-part Ii
| Publication year | 1984 |
| Pages | 2234 |
| Citation | Vol. 13 No. 12 Pg. 2234 |
1984, December, Pg. 2234. The Builder's Burden of Defective Construction-Part II
Part I of this article, printed in the November issue at page 2021, examined the consumer protection bases of the "implied warranty of habitability" and the subsequent arguments made against extending the warranty to commercial purchasers. Those courts which have denied such extension of the warranty argue primarily that business purchasers do not require the same protection consumers do in buying a home. They claim that, since a commercial purchaser is more sophisticated than the consumer, there need be no retreat from the rule of caveat emptor.
Most courts do rely in part upon consumer protection as a reason for extending the implied warranty to purchasers of new residences. However, consumer protection is only one of the many justifications on which courts base implied warranty protection. Part II of this article now examines those justifications which support the extension of the implied warranty to the business setting.(fn1)
A number of courts reasoned that building contractors have assumed a role similar to that of a manufacturer and seller of goods. When viewed as a seller of goods, the builder-vendor may be held accountable, by analogy, for implied sales warranties and strict tort liability. Sales warranties and strict tort liability equally protect the consumer and the commercial purchaser, regardless of either's sophistication or knowledge.(fn2)
Laws governing the sale of real property have developed along different lines from those governing the sale of commercial goods. Traditionally, courts have applied the doctrine of caveat emptor and imposed the burden of risk on buyers of real property.(fn3) However, the sale of a chattel carries with it implied warranties of merchantability and fitness for a particular purpose.(fn4) One commentator has called any distinction between real and personal property a "merely fortuitous by-product of the separate historical development of legal thinking in the two areas."(fn5)
The distinction between real and personal property has been increasingly viewed as anomalous.(fn6) Adopting the doctrine of implied warranty, the Arkansas State Supreme Court stated:
[T]here is nothing really surprising in the modern trend. The contrast between the rules of law applicable to the sale of personal property and those applicable to the sale of real property was so great as to be indefensible. One who bought a chattel as simple as a walking stick or a kitchen mop was entitled to get his money back if the article was not of merchantable quality. But the purchaser of a $50,000 home ordinarily had no remedy even if the foundation proved to be so defective that the structure collapsed into a heap of rubble.(fn7)
The irony which accompanies caveat emptor in the real estate setting is even more pronounced in sales of costly commercial buildings. The implied warranties of merchantability and fitness for a particular purpose under the Uniform Commercial Code ("UCC") are designed to protect a buyer of goods from bearing the burden of loss where merchandise, even though not violating a promise expressly guaranteed, does not conform to normal commercial standards or meet the buyer's particular purpose.(fn8) Extension of the implied warranty to commercial purchasers would further eliminate the anomalous distinction between real and personal property and may help to guarantee that builders conform to normal trade standards in their construction.
Courts have also used strict liability reasoning as a basis for the residential implied warranty. Strict liability ensures that the cost of the injury or damage resulting from defective products is borne by the manufacturers that put such products on the market, rather than by the injured or damaged persons.(fn9) A number of courts have found that no distinctions can be made between the general manufacturing process and the production of buildings.These courts consequently conclude that strict liability should be carried over into the realty field.(fn10) By analogy, the application of strict liability in the construction of buildings further supports the argument that caveat emptor should be abandoned and that builder-vendors should warrant that buildings they construct will be of reasonable workmanship.(fn11)
Courts have also built the doctrine of implied warranty on the policy that the builder, and not the purchaser, is in the best position to bear any burden of defective construction. This reasoning is very similar to consumer protection and, at times, the ideas overlap. However, the arguments in favor of placing the burden of defective construction on the builder-vendor can exist and stand independently of consumer protection, despite the fact that the consumer purchaser might be a more sophisticated buyer than the typical consumer.
As noted in Part I of this article, opponents of extension argue that the builder-vendor and the commercial purchaser occupy positions substantially similar in bargaining power. Therefore, since the transaction is one "at arm's length," the rule of caveat emptor should still control. It may be true that a commercial purchaser has relatively more knowledge of and familiarity with building practices than the typical consumer. Still, the builder-vendor will always be in a "superior" position to that of even the commercial purchaser.
Caveat emptor is primarily based on the premise that the purchaser has means and...
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