The Problem with One Year Warranties
Craig Martin | Construction Contract Advisor
June 8, 2015
Contractors often ask if they should include a one year warranty in their subcontracts. I tell them that they can, but it may be more effective to include a one-year correction period. If a contractor does include a warranty in the contract, it may actually extend the time in which a contractor may be sued. I recommend instead a Correction Period.
Typical Construction Warranties
Form construction contracts, like the AIA forms, often times contain warranty language. The AIA A201, General Conditions, contains a warranty section that covers materials, but it does not address how long the work is warranted:
The Contractor warrants to the Owner and Architect that materials and equipment furnished under the Contract will be of good quality and new unless the Contract Documents require or permit otherwise. The Contractor further warrants that the Work will conform to the requirements of the Contract Documents and will be free from defects, except for those inherent in the quality of the Work the Contract Documents require or permit.
Instead, the AIA A201, section 13.7, limits the time by which claims must be brought to 10 years or the applicable statute of limitations.
13.7 TIME LIMITS ON CLAIMS
The Owner and Contractor shall commence all claims and causes of action, whether in contract, tort, breach of warranty or otherwise, against the other arising out of or related to the Contract in accordance with the requirements of the final dispute resolution method selected in the Agreement within the time period specified by applicable law, but in any case not more than 10 years after the date of Substantial Completion of the Work.
The Correction Period
Instead of providing a warranty, consider a Correction Period. You can set a time from during which you will return to the project to correct any problems. The AIA A201 contains a correction provision which requires the contractor to correct work that was not done in accordance with the contract.
12.2.2 AFTER SUBSTANTIAL COMPLETION
18.104.22.168 In addition to the Contractor’s obligations under Section 3.5, if, within one year after the date of Substantial Completion of the Work . . . any of the Work is found to be not in accordance with the requirements of the Contract Documents, the Contractor shall correct it promptly after receipt of written notice from the Owner to do so
The Dangers of an Extended Warranty
In Nebraska, the basic statute of limitations on construction projects is four years. But, when a contractor provides a warranty, the statute of limitations may not begin to run until the warranty has expired. So, if a contractor offers a one year warranty, the owner may have 5 years in which to sue, not four years as provided by statute of limitations.
Take Away: Perhaps you should consider whether to include a warranty in your contract. Would it be better to include a call back correction period and simply warrant that the work will be done in accordance with the plans?
The content of this article is intended to provide general information and as a guide to the subject matter only. Please contact an Advise & Consult, Inc. expert for advice on your specific circumstances.