Construction warranties seem simple enough but often result in a great deal of confusion, particularly when it comes to understanding the amount of time a project owner has to file a lawsuit alleging the breach of such warranties.
The complication arises because an owner’s right to sue for breach of a warranty does not expire on the date the warranty expires.
A Common But Confusing Scenario
Assume a situation in which a contractor has completed construction of a residence on January 1, 2015. The contractor has been fully paid for the work and the owner appears happy with the work. Further assume that the construction contract included a standard two-year warranty on labor and materials.
Now fast forward five years to the year 2020 and the contractor is served with a lawsuit from the same owner who is alleging breach of construction warranties. How can this be? The warranties expired in 2017, right? It would appear that this should be a simple case for the contractor to defend and win. Unfortunately, it is not so simple.
A common misunderstanding in the construction industry lies in the distinction between the concept of a warranty period and the statute of limitations for filing a lawsuit.
Four-Year Statute of Limitations
The distinction was addressed in the leading case of Dubin v. Dow Corning Corp., 478 So.2d 71 (Fla. 2d DCA 1985). In that case, the court observed that the statute of limitations for the owner to file a lawsuit does not begin to run until the date on which the defect giving rise to the warranty claim is discovered or should have been discovered. Thus, given the four-year statute of limitations period to assert claims for breach of warranty, as long as the defect arose during the warranty period, the owner had four additional years from the date of discovery of the defect within which to file a lawsuit.
Circling back to the scenario described above, if the residence was completed on January 1, 2015, and a defect giving rise to a warranty claim is discovered on December 31, 2016, the time limitation for the owner to file a lawsuit will not expire until December 31, 2020! To make things more complicated, the time period for filing a lawsuit could be extended even further be if the defect is considered “latent” such that it is not readily observable.
In order to make sense of all of this, it is important for those issuing construction warranties to understand that a warranty period defines the length of time that a party, such as a contractor, guarantees the performance of its good or services. The warranty typically obligates the contractor to correct the work if a problem develops during the specified warranty period.
By contrast, the statute of limitations defines the length of time that the warranty holder has to file a lawsuit. This period is typically four years from the date the defect is discovered or should have been discovered.
Unfortunately for the contractor in our scenario above, the warranty period does not limit the time period within which an owner must file a lawsuit. Instead, the warranty period merely defines the length of time for which the contractor guarantees the performance of its goods or services.
If you should need assistance or have questions concerning construction warranties, please contact me at email@example.com or by phone at 239-344-1165.