The Risky Business of Warranties

March 27, 2017

Owners and contractors beware! The warranty you get may not be what you bargained for.

Many construction contracts, including widely used industry form contracts, contain two distinct warranties, a general warranty and a call-back warranty.  For example, the general warranty contained in the American Institute of Architects, AIA Document A201 – 2007, General Conditions of the Contract of Construction, provides 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. Work, materials, or equipment not conforming to these requirements may be considered defective.

Notably, the standard AIA general warranty is not limited in time.

The call-back warranty, on the other hand, traditionally requires the contractor to promptly correct work found not to be in accordance with the requirements of the contract for a period of one year.  In other words, if the work is defective and the owner timely notifies the contractor of the defect, the contractor must return to the job and fix the work.  If the contractor does not correct the work in a reasonable time, the owner can repair the defective work and seek the cost of the repairs from the contractor.

The call-back warranty is often misinterpreted as a limit on the general warranty. However, the call-back warranty is generally interpreted as an additional warranty, not a one-year time limit on the general warranty.  As a result, the contractor is still liable for defective work covered under the general warranty beyond the one-year call-back period.

Identifying the relationship between a general warranty, a call-back warranty and any other warranties is essential to effectively negotiating a construction contract. To avoid unanticipated consequences, owners and contractors should take care to clearly understand warranty provisions before signing!