For a contractor or a sub that’s getting ready to start on a new construction project, understanding the terms of the contract (meaning, the actual contract language) is crucial. Without a thorough understanding of what you’re contract says, it would be impossible to not only manage your responsibilities on the project, but also, to manage your risks as well.
There’s often more than meets the eye when it comes to construction agreements. Even if it isn’t specifically written into the contract, there are certain “implied warranties” for construction businesses. Of these implied warranties, the warranty of good workmanship (also known simply as a “workmanship warranty”) might be the most important one.
What Is a Warranty?
Let’s start with the basics. A warranty is any representation made by one party that another can and will rely on. Simply put, it’s a promise that something will be done a certain way.
Some common warranties found in construction contracts are:
- a warranty of habitability;
- warranty of plans and specifications;
- warranty not to delay/hinder other parties on the project;
- of course, the warranty of good workmanship.
What Are the 2 Main Types of Warranty Found in Construction (and Everywhere)?
Any and all warranties will fall into 1 of 2 categories:
- Express warranties, meaning that the warranty is written directly into your contract;
- Implied warranties, meaning that the law provides contracts with certain protections regardless if it’s included in your contract or not.
At a minimum, some form of implied warranty exists in every construction contract. You can disclaim some of these through contract terms, but the rest of the implied warranties, such as the warranty of good workmanship, are part of your construction contract no matter what.
What Is a Warranty of Good Workmanship?
Standard of Performance
Every contractor impliedly warrants that his work will be built in a good and workmanlike manner and that it will be sufficiently free of any major defects. But what exactly does that mean? The phrase refers to the acceptable standard of quality for the work you are contracted to perform. The implied warranty of workmanship governs how the actual performance of the contract will be evaluated.
Certainly, this doesn’t guarantee a perfect result. Instead, it just establishes a baseline of expected performance.
Does a Warranty of Good Workmanship Apply to Building Materials?
The workmanship warranty applies to the installation of building materials such as the installation of a window. However, it won’t apply to the window itself.
The sale of goods is governed by UCC regulations as opposed to general contract law. For that reason, goods/materials are covered by their own warranties of merchantability and fitness for a particular use. A contractor will not be liable for the consequences of latent defects in materials, as long as they purchased them from a reputable vendor and there’s no evidence of negligence.
One-Year Correction Period vs. Workmanship Warranty
Most standard construction contracts make a distinction between a “one-year correction period” and a “warranty of good workmanship.” A warranty of good workmanship is an obligation to perform at a certain level of quality. Alternatively, a one-year correction period is when a party has the obligation to fix the defective work. Though similar, there are two key differences – the burden of proof and the time allowed for making a claim.
The Importance of “Burden of Proof”
The more important of the two differences is the burden of proving why the work failed. If a contract includes a one-year correction period and contracted work fails for whatever reason, that contractor is on the hook, no questions asked. However, after the one-year period passes and the work fails, that corrective period is done and passed. The customer may need to prove that they breached the warranty of good workmanship in order to force the contractor to fix the work. In other words, the minimum standard for work was not reached.
Time for Making a Claim
The second difference is when the customer can file a claim in court. Let’s say the state has a five-year statute of limitations. If the contractor refuses to repair within the one-year correction period, their customer can file a lawsuit five years after the one-year period has ended. As for the breach of warranty claims (i.e. a claim based on workmanship warranty), the customer will have five years from the date the work “fails”. That failure might occur long after the correction period has passed.
Here’s an important question that comes up often in construction:
The Bottom Line on Good Workmanship Warranties
Reading your construction contract or subcontractor agreement is important, but it isn’t always enough. Contractors and subs must also have at least a general idea of what warranties exist in their work. Those who take the time to understand how these warranties work will have an advantage when it comes to managing risks on their projects.
And that’s what it’s all about – minimizing risk and maximizing profit.