Deconstructing warranties in the construction industry.

• Author: Coln, Laura B.
• Position: Florida

The legal concept of warranty has been amusingly described as "a freak hybrid born of the illicit intercourse of tort and contract." (1) Less whimsically, when reduced to its essentials, a warranty is a quality standard that a seller is required to maintain. (2) The doctrine of warranty has its origins in the common law development of tort and contract, and originated as a mechanism to deal with misrepresentations in the sale of goods. (3) Prosser and Keeton explain: Early in the 19th century, the slow growth of a business practice by which reputable sellers stood behind their goods, and a changing social view point toward the seller's responsibility, led to the development of "implied" warranties of quality, which were attached by the law to certain types of sales, and which in effect made the seller an insurer of his goods. (4)

Over time, the United States construction industry has grown to rely upon implied warranties to accompany and protect transactions. Bruner and O'Connor, in their construction law treatise, summarize the increased need for construction industry warranties:

For over a century American jurisprudence has supplemented the express terms of construction contracts with such implied duties and warranties as were deemed necessary to effectuate the intentions of the parties apparent in both the expressed terms and the obvious but unexpressed assumptions, circumstances and interdependent relationships upon which the parties relied in entering into the contracts. (5)

As a result, today's construction law practitioners find themselves trying to determine what different construction-related warranties might exist, what they mean and how to bring or defend breach of warranty causes of action. Two main warranty doctrines exist: express and implied, but additional discrete warranty theories and exceptions exist under those umbrellas. A working knowledge of the most common construction-related warranties, what warranty periods mean, and the applicable limitations period under Florida law is a valuable part of a construction lawyer's arsenal.

Express Warranties

Construction projects are typically blanketed with express warranties, which appear at first blush to be extremely straightforward in their use and purpose. (6) For example, general contractors and subcontractors typically expressly warrant that their work will be free from defects and conform to the contract documents. Initial determinations, however, need to be made in some situations regarding whether an express warranty was, in fact, conferred. In Weimar v. Yacht Club Point Estates, Inc., 223 So. 2d 100, 102 (Fla. 4th DCA 1969), for example, the homeowner sued the flooring subcontractor for damages arising from defective installation of vinyl and hardwood flooring in a new home after the flooring became discolored and loose. The homeowner relied upon an express warranty that the flooring was of merchantable quality. This was based on the fact that the homeowner had merely inquired of the flooring subcontractor whether it was feasible to lay hardwood and vinyl flooring throughout the house. (7) Not surprisingly, the appellate court affirmed the trial court's denial of leave to file a fourth amended complaint for failure to state a cause of action. (8) In Weimar, the Fourth District Court of Appeal defined express warranty as "a statement or representation made by the seller of goods, contemporaneously with, and as a part of the contract of sale, though collateral to the express object of it, having reference to the character, quality or title of the goods, and by which he promises or undertakes to insure that certain facts are or shall be as he then represents them." (9)

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The court went on to discuss five essential allegations for pleading a cause of action based on warranty:

1. Facts in respect to sale of the product or other circumstances giving rise to warranty, express or implied, identifying the type of warranties accompanying the pertinent transactions involved.

2. Reliance upon the representations by the seller or skill and judgment of the seller where the action is based upon express warranty or warranty of fitness for a particular purpose.

3. Circumstances of the injury as caused by the breach of warranty.

4. Notice of breach of warranty.

5. Injuries sustained and damages. (10)

Intertwined with the aforementioned breach of warranty elements are also the essential allegations that the warranties were part of the bargain and that the buyer and seller were in privity. For example, in a contract between a purchaser and developer, warranties cannot be validly conferred at a later time, such as at closing on the sale of the property. (11) Moreover, a failure to establish privity between the recipient and warrantor can be fatal to a breach of warranty cause of action. (12)

Inevitably, express warranties will not contemplate every contingency and exception in the law. For example, in Wood-Hopkins Contracting Co. v. Masonry Contractors, Inc., 235 So. 2d 548, 552 (Fla. 1st DCA. 1970), a subcontractor was excused from its express warranty to provide good quality construction materials because it was obligated by the project specifications to provide one particular brand of brick. The subcontract stated: "Unless otherwise specified all materials shall be new and both workmanship and materials shall be of good quality." (13) The bricks clearly contained a latent defect which caused water intrusion, but the First District Court of Appeal found that because the subcontractor was required by the specifications to furnish a certain distinctive type of brick, produced by a single manufacturer, it was held harmless from its promise to furnish materials "of good quality." (14)

Another exception to the letter of an express warranty occurs when the seller makes statements or takes actions, upon which the buyer relies, contrary to the spirit and letter of the warranty. When sellers orally agree to warrant conditions different from or contrary to those contained in their express warranties, they may be found to have modified and expanded the warranties. Consider the case of New Nautical Coatings, Inc. v. Scoggin, 731 So. 2d 145, 146-47 (Fla. 4th DCA 1999), which, although involving the UCC, is instructive in the construction context. In that case, a manufacturer of primers and antifouling paints for coating boat bottoms (to prevent barnacle growth) twice orally approved the application of its product to the bottom of a boat that was not properly sandblasted down to the steel, as the express warranty required. (15) The appellate court held that the manufacturer's oral statements that it would warranty its products (despite the purchaser's nonconforming installation technique of the products) "modified and expanded" the written express warranty. (16) Accordingly, the Fourth District Court of Appeal affirmed the trial court's finding that the boat coating manufacturer breached its express warranty. The problem of modifying and expanding construction warranties is ripe for construction cases, where subcontractors and materialmen commonly install and provide various materials (e.g., waterproofing membrane, ceramic tile roofing) through methods that may not meet the letter of manufacturer or contractor's warranty requirements, but which were supervised and/or approved by the manufacturer/warrantor during construction. Thus, the factual situations surrounding express warranties for construction must be examined for exceptions whereby a seller/warrantor compromised its warranty, either through contract or its actions.

Implied Warranties

The First District Court of Appeal related the following history of the use of implied warranties when it stated:

Implied warranties were recognized in English courts by the early 19th century. Suits for breach of warranty were first brought in tort as actions on the case for deceit, the breach...