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.