Section 7 Implied Warranty Claims Asserted With Third-Party Warranty Claims and Arbitration Issues

• Library: Consumer Law and Practice 2010

Interesting procedural complications arise in cases involving both the implied warranty on newly built homes and third-party contractual warranties, such as existed in Crawford v. Whittaker Construction,Inc., 772 S.W.2d 819 (Mo. App. E.D. 1989), which is discussed in § 3.6 above. In the years after Smith v. Old Warson Development Co., 479 S.W.2d 795 (Mo. banc 1972), was decided - see § 3.6, supra - imposing the implied warranty on the builders of new homes, builders began offering home buyers third-party warranties, such as the HOW warranty offered in Crawford. In Crawford, the court held that the builder could not disclaim all warranties, including the implied warranty, and replace them with a third-party warranty paid for by the builder unless the disclaimer was truly bargained for rather than a boilerplate provision of the sale contract. The procedural complication that arises is that the third-party warranty contracts typically provide for arbitration of claims arising under the third-party warranty.

In Berhorst v. J.L. Mason of Missouri,Inc., 764 S.W.2d 659 (Mo. App. E.D. 1988), the home buyer was unsuccessful in avoiding the arbitration provision of the third-party warranty. The buyer filed suit against both the builder and the issuer of the third-party warranty. Unlike Crawford, decided a year later, Berhorst did not address the issue of whether the builder could disclaim the implied warranty and replace it with a third-party warranty. Rather, the issue was whether, as the trial court held, the builder had waived the right to arbitrate the buyer's claims under the third-party warranty. The third-party warranty contained a multi-step process for the home buyer to submit claims. In the early part of the process (the first two years), claims were to be filed with the builder, and if the buyer was not satisfied with the response, the buyer...