SC Lawyer, March 2011, #1. Caveat Venditor: South Carolina's Implied Warranties and Tort Liability in Residential Construction.

• Author: By Joshua D. Spencer

South Carolina BAR Journal

2011.

SC Lawyer, March 2011, #1.

Caveat Venditor: South Carolina's Implied Warranties and Tort Liability in Residential Construction

South Carolina LawyerMarch 2011 Caveat Venditor: South Carolina's Implied Warranties and Tort Liability in Residential ConstructionBy Joshua D. SpencerJohn Taylor decides to build a house on a vacant lot he owns. Taylor is building the home for himself and his family, and he has no intention to sell the house in the future. Despite not having any experience in the construction industry or as a general contractor, Taylor decides he will oversee the construction himself. He contracts with Arnold Architecture to prepare plans and specifications for his home. Taylor directly enters into contracts with various subcontractors and suppliers for the labor, services and materials necessary to construct his home. All of the applicable permitting lists Taylor as the general contractor, as does the final certificate of occupancy.

Several years later, necessity requires that Taylor move to another city to care for his ailing mother. Accordingly, he puts his self-built home up for sale, eventually entering into a sales contract with Mary K. Gallagher. A standard form buyer's contract provided to Gallagher by her real estate agent states that the buyer has inspected the property and is buying the home "as is." Gallagher signs the contract and, through her real estate agent, offers it for acceptance to Taylor. Taylor accepts the offer, signs the contract and, shortly thereafter, the house is sold to Gallagher. After moving into the home, Gallagher discovers several construction defects. Gallagher then files suit against Taylor, alleging that Taylor acted as the general contractor during the construction of the home and that the construction was defective and negligently performed. While South Carolina law protects homebuyers vis-a-vis several warranty theories, as well as a negligence and breach of contract theories, South Carolina courts will likely not be sympathetic to Gallagher's claim.

Implied warranty of workmanship/workmanlike service

The implied warranty of workmanship, also known as the implied warranty of workmanlike service, was first recognized generally in Hill v. Polar Pantries, 219 S.C. 263, 374 S.E.2d 885 (1951), and later in the specific context of homebuilding in Rutledge v. Dodenhoff, 254 S.C. 407, 175 S.E.2d 792 (1970). In 2008, the Supreme Court of South Carolina addressed the extent of the implied warranty of workmanship in Smith v. Breedlove, 377 S.C. 415, 661 S.E.2d 67 (2008). In that case, Breedlove constructed a home on a lot he owned with the intention that the house would be a permanent home for his family. Id. at 418, 661 S.E.2d at 69. Instead of hiring a general contractor, Breedlove directly contracted with various subcontractors and suppliers. Id. Breedlove then moved to Atlanta to help attend to his son's health needs and, when maintaining two homes became cost-prohibitive, he sold the house he had built to Smith. Id. at 419, 661 S.E.2d at 69. Years later, Smith found defects in the house's construction and filed suit against Breedlove for negligence and breach of the implied warranty of workmanship. Id. at 419-20, 661 S.E.2d at 70. However, the Breedlove court held that no such warranty was breached-despite the fact that Breedlove may have been acting as his own general contractor-and clarified the implied warranty of workmanship and its application. Id. at 423-24, 661 S.E.2d at 71-72.

The implied warranty of workmanship arises when a builder contracts to construct a dwelling and, by implication, warrants that the dwelling will be constructed "in a careful, diligent, workmanlike manner." Id. at 422, 661 S.E.2d at 71. This warranty arises from the construction contract itself, and the duty it imposes extends from the builder to his buyer and any subsequent buyers, even without privity. Id. The court's rationale behind the implied warranty of workmanship is that the buyer and seller are not on an equal footing in the transaction, as the builder holds himself out as an expert in construction, and the buyer is forced to a large extent to rely on the skill of the builder. Id.

The implied warranty of workmanship's reach is limited in that it applies only to work done by builders who are "in the business of constructing homes" (e.g. licensed residential builders). Id. at 424, 661 S.E.2d at 72. The policy of protecting buyers from their reliance upon their builders' expertise was not implicated in Breedlove because Smith knew that Breedlove had built the house for himself (i.e., that he was not "in the business of constructing homes"). Id.

Summary of the Implied Warranty of Workmanship/Workmanlike Service

* Warrants that the home will be built with the quality one would reasonably expect for a careful, diligent workman * Arises from the contract for construction of a new home * Applicable only to a builder who "is in the business of constructing homes"

Implied warranty of habitability/fitness for a particular purpose/merchantability

In Rutledge v. Dodenhoff, 254 S.C. 407, 175 S.E.2d 792 (1970), the Supreme Court of South Carolina held that the doctrine of implied warranty of fitness for an intended use-that use being habitation-applied to the sale of homes. Id. at 414, 175 S.E.2d at 795. Of course, the normal intended purpose of a...