Implied Warranties

One of the most difficult areas of construction law involves warranties. A warranty is like a guaranty because the person making a warranty assures the truthfulness or soundness of something (examples: good workman ship or compliance with plans and specs) or agrees to make good on that assurance if it later proves to be untrue (example: correction of deficiencies because of unworkmanlike performance).

Warranties may be either "express"-positive assurance made either orally or in writing-or "implied" which are presumed by law even without expressly stated assurances.

Because of the circumstances involved and the relationship between the parties, the law implies certain warranties. Under the laws of many states implied warranties of the habitability of a home built and sold by a developer is presumed. Habitability means that the home constructed is free of major defects or deficiencies, such as structural, that would make it unsafe or unfit for occupancy. Another specific instance of habitability, as defined by courts, is that the home have suitable water for domestic use.

The philosophy involved is that the builder-seller has superior knowledge of the details of construction and represents to the buyer that the home is livable.

These implied warranties apply when the builder is the seller of the residence built with the expectation that it would be sold-a builder-vendor. Where a contractor built a house for his own use and later, because of financial reversals, sold the home, the Colorado Court of Appeals ruled that there were no implied warranties of habitability. That situation was thus treated as a homeowner-to-homeowner sale under which the seller may only have been liable for defects if they were known to him but he failed to disclose them to the purchaser.

In the typical construction process where the owner engages design and engineering professionals and the contractor agrees to build in accordance with plans and specifications, the law would probably not imply any warranties of habitability or suitability for the building's intended use against the contractor. In that situation he would only be responsible to complete construction in accordance with plans and specifications for which he would not be responsible except as otherwise fixed by contract.

There appear to be methods by which builder-vendors may limit these implied warranties, but the extent to which those limitations may legally protect the builder are not entirely clear in Colorado or in other states.

Obviously, the best protection for the builder would be careful attention to detail with the realization that he may be responsible if the construction does not result in a home suitable for ordinary residential use.