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Warranties in Construction Litigation Disputes


The risk of construction litigation often begins with limited initial contracts consisting of a proposal for work that is signed by both parties.  These are enforceable contracts; the parties agree on the scope of the work that will be completed and the price.  However, there generally are not clauses which address breach of contract issues as there are in most business litigation matters.  This does not mean that those remedies do not exist, they are just enforced according to the statutory and common law of North Carolina.  So what is the recourse for a breach of a proposal/contract in North Carolina?

Certain warranties, unless disclaimed, will be part of any agreement for a contractor to provide services to a property owner.  Some of these warranties cannot be disclaimed at all.  Some of the warranties in play are as follows:

  1. Warranty of Merchantability:  the product must be fit for its ordinary purpose and usage.
  2. Warranty of Workmanship: the construction must be completed in a workmanlike manner and is sufficiently free of major defects.
  3. Warranty of Fitness for a Particular Purpose: If a buyer has relied on the seller’s skill and judgment to furnish suitable goods so that the product is used in a specific manner, they are entitled to rely upon that skill and judgment.
  4. Warranty of Habitability (for residences):  The residence must be livable.
  5. Warranty to not Delay Other Parties on the Project, this is owed to people that are below you on the construction food chain; for example an owner owes it to the general contractor, but the general contractor owes it to his subcontractors, and first tier subcontractors owe it to second tier subcontractors etc.

Other warranties can be included in the contract.  For example, a contractor who warrants that he will work on the project continually could be responsible for that promise.  A property owner may have relied on the promise of steady work to select that contractor over others.

Remember that if there is a dispute regarding the quality of the construction, the contractor is generally entitled to “cure” by correcting the problem or defect.  Generally, the performance must be significantly below an acceptable standard before the owner can terminate the worker, not pay them, and proceed to cure using another contractor.  These cases are often determined by who blinked first; that is, who is responsible for the first uncured material breach.

Contractors and homeowners, understand your cure rights and what warranties will be included in your proposal/contracts.  If you are having a dispute regarding a construction contract, contact Maginnis Law, PLLC to speak with a Raleigh attorney practicing in construction litigation.  Maginnis Law, PLLC is a Raleigh business litigation firm with civil lawyers practicing in Cary, Apex, Clayton, Holly Springs and other parts of the Triangle.  Contact the firm at 919.526.0450 for an initial consultation with a civil attorney or visit our website at www.maginnislaw.com for more information.

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