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By Duane Craig
July 10, 2017
From Pennsylvania to New South Wales, and beyond, contractors face challenges with warranties. Your best bet is to prevent the need for warranty work, and make sure you aren’t signing up for more warranty work than you should.
Typical construction contracts require the contractor to deliver the correct quality in materials, workmanship, and equipment. The “correct” quality gets spelled out in the project’s specifications. Unfortunately, many people forget to, or don’t want to read the specifications, so inappropriate items get substituted. Substitutions without approvals lead to rework, either when it’s caught, or later when the owner notices.
Then, too, it’s not unusual for the specifications only to call for something that is free from defects, or new, or of good quality. That leaves a lot of leeway for what might pass as acceptable.
Really? It’s Acceptable?
Just consider the phrase “free from defects,” when used for lumber. Is a knot a defect? How many knots are acceptable? What is the moisture requirement?
In most cases, the supply chain on lumber does a pretty good job of delivering quality lumber acceptable for most construction purposes. So, few contractors pay attention to lumber quality and simply use waste as the indicator of when lumber quality is dropping.
And, until a few years ago when the drywall moisture and mold issues came on the scene, no one gave any thought as to whether the product they were installing had too much moisture or too much sulphur. But, many contractors got caught in a legal nightmare for something many of them thought was unfairly passed onto them.
You might have installed thousands of feet of cedar decking with no complaints. Along comes a job requiring pressure treated lumber for ground level, shaded decking. You hate working with PT because nine times out of ten if you don’t get it nailed off in a few days it has more twists and turns than a roller coaster. That’s a lot of waste.
So, you substitute with cedar, knowing full well it’ll be just as good. Wrong. Within a year you get hit with warranty work on the job because the cedar looks terrible, and the owner just found out it’s going to require too much work to keep it looking good. Premium pressure treated was specified, and if you didn’t get permission to substitute, you’re probably going to be replacing the decking.
The same problems can come back on you for work done by others. Hopefully, you vetted and hired subs who follow the specs and quickly honor warranty work. But if not, you’ll be dealing with all the calls, and the costs.
When it comes to substandard materials, your best defense is dealing with reputable suppliers and spot checking quality. But, you still must satisfy yourself that the materials you’re using fit the specs at the time they’re installed and far into the future.
Then, there are entire systems involved in building. Incorrectly installed stucco has recently made a lot of news in the Northeast, as did exterior insulation and finish systems decades ago. They are two very different cladding systems, and each has its own unique specifications. The problem was, the specifications didn’t work as expected in all places. Still, the contractors, even though they did the installation as described, were on the hook for the problems. What they built didn’t work the way it was supposed to.
The other primary way contractors face warranty work is when someone didn’t do something right. Whether they skipped a step, used the wrong process, or substituted materials, the net result is rework, lawsuit, or both.
You had a small window job you didn’t have people for so you subbed it out. The sub installed the window wrap from the top down, instead of from the bottom up. A few years later the sub is long gone, the windows are leaking and you’re getting the calls. More oversight would have helped. Maybe even just reviewing the installation procedures would have helped. Instead, you’ve got to replace rotten lumber and redo the job.
When you qualify subs, you need to assure yourself they’re in business for the long haul, and not just trying to make ends meet until something else comes along. Then, make sure they understand the specs and check up on them.
Because construction contracts come in many forms, the warranty clauses do as well. Very small differences in wording can increase your liability and make you responsible for someone else’s mistakes.
A construction contract is widely used to allocate the risk of a project, and you’ll find owners and contractors each “working the language” to put things in their favor. When it comes to warranties, owners will write contracts that don’t mention certain timeframes. For example, attorneys will advise owners to delete sections 12.2.2 and 12.2.6, the “call back” provisions, of the standard AIA contract and substitute a paragraph that does not include the standard “one year” warranty language. Depending on how the substitution is worded, the owner acquires more legal rights.
For contractors, this opens up issues with the length of time the warranty spans, and types of defects. For example, when marble panels fell off the BMA tower in Kansas City in 1985, the jury awarded damages to the owner even though the building was completed in the 1960s. The problem was the fasteners holding the panels. But since the building owner didn’t discover the latent defect until 1981, the lawsuit was allowed. The contract’s wording made the difference.
Other contractual warranty minefields include subcontracts, manufacturers’ warranties, extended warranties, surety bonds, and insurance. All in all, this area bears close scrutiny, and the time to carefully review and understand it is before signing.
There are more aspects to warranties than a lay person has the time or inclination to understand. It pays to have knowledgeable people review what you are agreeing to in contracts, and what your benefits are with insurance and bond.
Every reputable contractor who takes pride in their work wants whatever they build to last as long as practical. When you can influence the design to help guide it to materials and processes that stand the test of time, you can help yourself, and your client. When you build to the specifications and you hold partners accountable for their roles, you lower the risks of warranty issues. And when you understand your own risks, you can have the right response and the right plan for when things don’t work out.
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