Part I: Introduction and An Owner’s Preliminary Considerations
A product warranty is a qualified promise made by a manufacturer that a defective product will be repaired or replaced if the product fails within a specified period of time. Warranties provide the comfort of knowing the extent to which the manufacturer stands behind the product, while allowing the manufacturer to frame its potential liability to some degree. For example, manufacturers virtually always limit a warranty to failures resulting from a manufacturing defect and deem the warranty void in instances where the product was not installed or handled per the manufacturer’s requirements. Such limitations present issues on construction projects, which are essentially a conglomeration of many goods and specialized services—any number of which could potentially contribute to or cause product failure. Product failure can have expensive consequences. Accordingly, project owners place great value on manufacturer warranties that minimize the risk of big-ticket material and equipment failure.
Owners stand to lose considerable product value or to face significant expense if, for example, a roofing warranty is voided due to an installer not conforming to the manufacturer’s warranty requirements. However, it cannot always be assumed that the installer is to blame. This is the first in a series of posts that will address the issues that arise when design specifications are inconsistent with or contradictory to warranty requirements on a typical design-bid-build (“DBB”) project. This series will briefly discuss best practices to avoid voiding manufacturer warranties and the potential consequences of a voided warranty.
In the typical DBB project, there are contractual rights and obligations created as between the owner and the architect and the owner and the contractor, but not as between the architect and the contractor. The owner engages the architect to develop a design that meets the owner’s needs. The owner then engages the contractor to construct the owner-provided design. Due to this dynamic, the owner is potentially responsible to the contractor for any deficiencies in the design. The owner subsequently may choose to seek recovery from the architect if there is some cognizable claim of breach of contract or professional negligence.
The owner should ensure that delivery of a warranty-compliant design is a material term of the architect’s contract. While this duty is arguably within the architect’s standard of care, express language reinforces the obligation and provides for a longer period of time to bring the claim under the statute of limitations. This is especially important where the architect’s design specifies the materials to be used. The law generally recognizes an owner’s implied warranty of plans and specifications. In short, as between the owner and the contractor, the owner warrants the accuracy of the plans and specifications that it provides to the contractor. Accordingly, the contractor is entitled to rely on owner-supplied plans and specifications. If the contractor follows the plans and specifications and the warranty is voided as a result, the contractor has an argument that it was the design that voided the warranty, not the contractor. If the design is shown to be inconsistent with or contradictory to warranty requirements and the contractor followed the design in good faith, the owner will not be entitled to recovery for resulting losses from the contractor. For this reason, is vitally important that the architect is familiar with the warranty requirements and tailors its design to meet such requirements. The owner is the only party that has the power to require this from the design professional and to enforce such a requirement.
This post was written by Timothy Berkebile.