Source: https://www.faegrebd.com/en/insights/publications/2017/7/whats-in-your-warranty-a-guide-to-avoiding-warrantyrelated-surprises
Timestamp: 2019-04-25 07:07:06+00:00

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A warranty is meant to protect a purchaser from any faults or defects in goods or services purchased. But warranties are as different as the products and services that they protect. What’s more, because courts interpret warranties in widely different ways — as either a creature of tort, contract or a mixture of both ― there exists no “one size fits all” approach1. As such, it’s important for both owners and contractors to know what the warranty they are receiving or issuing is worth. What is and is not covered? What are the gaps in coverage that could lead to future disputes?
There are two general categories of warranties issued in typical construction projects: express and implied.
Recognize the express warranties included in your construction contract. Read the construction contract to identify warranties concerning the work, materials, equipment and any other special warranties. Most standard industry agreements contain express warranty provisions — for example, Section 3.5 of the AIA 201 2007 and Section 3.8 of the ConsensusDOCS 240.
For owners, it is important to consider whether the express or implied warranties issued by a contractor include any gaps in coverage. Similarly, for contractors, it is important to consider whether the warranties issued to it by its subcontractors and suppliers provide enough coverage in the event of a claim made by the owner. For example, does the length of the subcontractor’s warranty align with the length of the contractor’s warranty to the owner?
Also, it’s important to confirm what law governs any warranty disputes — is there a choice of law provision? Does the jurisdiction where your project is located require you to apply that state’s laws? For example, Iowa requires all in-state construction contracts to be governed by Iowa law — taking precedence over any choice-of-law provision.3 This will help you evaluate the applicable law to your warranty claims, as discussed further below.
What is the applicable statute of limitations for potential warranty-related claims?
What is the nature of damages that may flow from potential warranty-related claims?
Does the UCC govern any of your warranty claims? If so, which ones?
Asking these essential questions earlier on can help avoid unpleasant surprises when a warranty claim develops. Also, it’s important not to just focus on categorizing your warranty, but to work to understand how that type of warranty will be interpreted by a court or other fact-finder.
For a comprehensive discussion about warranties and warranty-related claims, see Sections § 9.3-9.9 of Bruner & O’Connor on Construction Law.
1 Philip L. Bruner & Patrick J. O’Connor, Jr., Bruner & O’Connor on Construction Law, § 9.3.
2 Philip L. Bruner & Patrick J. O’Connor, Jr., Bruner & O’Connor on Construction Law, § 9.7.
3 Philip L. Bruner & Patrick J. O’Connor, Jr., Bruner & O’Connor on Construction Law, § 9.5.
4 Iowa Code § 537A.6(3).
5 Philip L. Bruner & Patrick J. O’Connor, Jr., Bruner & O’Connor on Construction Law, § 9.8.
6 Philip L. Bruner & Patrick J. O’Connor, Jr., Bruner & O’Connor on Construction Law, § 9.1.
7 Philip L. Bruner & Patrick J. O’Connor, Jr., Bruner & O’Connor on Construction Law, § 9.2.
8 Philip L. Bruner & Patrick J. O’Connor, Jr., Bruner & O’Connor on Construction Law, § 9.1.
9 Philip L. Bruner & Patrick J. O’Connor, Jr., Bruner & O’Connor on Construction Law, § 9.9.

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