J. Kent Holland

A contractor’s express warranty takes precedence over a project owner’s implied warranty of plans and specifications.   The contractor agreed to use materials provided by homeowner, as well as plans and specifications provided by homeowner, and gave an express warranty that his work would result in a roof that would not leak.  After a contractor installed the skylights and completed the roof, there was persistent leaking every time it rained.  Although the homeowner devised plans and specifications and provided materials for the construction of skylights and roof over his indoor swimming pool, thereby creating an implied warranty of design, a court held that the contractor  could not avoid liability by asserting a right to rely on the implied warranty because the his own express warranty took precedence.

In Graham Construction Company, Inc. v. Roscoe T. Hall, ( Ark. No. 04-769, 2005), a homeowner entered into a verbal contract with a general contractor, Graham, for the installation of a large skylight over an indoor swimming pool.  The homeowner, Roscoe Earl, told the contractor that he would supply the skylights and stainless steel borders.  He also consulted with two engineers on how to put on the roofing.  Based on their recommendations, the owner chose a six-millimeter Lexan plastic panel for the skylight. The owner also conducted research on the Lexan product and drafted his own set of installation procedures.  He then requested that the contractor use those procedures to install the skylight.  The contractor agreed to use the procedures, and he represented that he would install new roofing material and the new skylights, and that they would not leak.

Contractor completed the work, using the installation procedures provided by the homeowner.  Two weeks later the roof leaked in several places during the first rain.  Contractor made four to six attempts at repairing the roof, but it continued to leak with each rain.  Homeowner then filed suit to recover the amount paid to the contractor, plus incidental and consequential damages resulting from the defective roof.

The homeowner testified at trial that the contractor “guaranteed me it [the roof] would not leak.”  The contractor testified that although he told the homeowner the roof would not leak, he did not guarantee that it would not leak as a result of the skylights and materials being supplied by the homeowner.

Contractor’s expert witness at the trial testified that the skylights were installed improperly “every which way it could be installed improperly.”  They were installed horizontally instead of vertically, which the expert stated was essential for allowing the water to run out.  He also stated that he saw gaps in the flashing and that the skylights were not the proper thickness to withstand the weather of the area.

The trial court found that the contractor gave an express warranty that the roof would not leak.  On the other hand, the trial court found that the homeowner had given the contractor an implied warranty of the adequacy and suitability of the materials, plans, and specifications that he supplied.   Judging the facts of the case and how these two warranties would be reconciled, the trial judge found that the contractor, as a “competent and experienced contractor” “should have been aware that the plans and specifications could not produce the proposed results.”  The judge further found that there was insufficient evidence to prove that the leaks resulted from the inadequacy of the plans provided by the homeowner.  For these reasons, the trial court decided the matter against the contractor.

Contractor appealed the decision, arguing that he was entitled to rely upon the implied warranty of the plans and specifications provided by the homeowner and that this relieved him of any liability.  He relied upon an earlier decision of the appellate court in Housing Authority of the City of Texarkana v. Johnson Construction Co., 573 S.W.2d 316.  That decision held that an owner who furnished faulty plans and specifications was liable to the contractor for resulting damages.  That decision stated that where the owner provides plans and specifications, the implied warranty is not nullified by any stipulation requiring the contractor to make on-site inspection or a requirement that the contractor examine and check the plans and specifications.  That decision went on to hold however, that “a competent and experienced contractor cannot rely upon submitted specifications and plans where he is fully aware, or should have been aware, that the plans and specifications cannot produce the proposed results.”

Applying this exception to the general rule that generally allows reliance upon an implied warranty of plans and specifications, the appellate court in this case of Graham Construction, concluded that Graham was a competent and experienced contractor and that that he installed the Lexan material for the skylights improperly.  The trial court’s rulings concerning this issue were therefore held to be correct.  In addition, the court stated that by operation of law, a builder-vendor gives implied warranties of habitability, sound workmanship, and proper construction.  “The implied warranty does not rest upon an agreement, but arises by operation of law and is intended to hold the builder-vendor to a standard of fairness.”  The court thus found that the contractor’s express warranty that the roof would not leak, coupled with his implied warranty of sound workmanship and proper construction take precedence over the homeowner’s implied warranty of his material, plans, and specifications.  For these reasons, the court affirmed the trial court decision against the contractor.

Comment: It is worth noting in this case that the contract that created the implied and express warranties at issue in this case was oral—not written.   Although it is certainly preferable to get a signed contract before doing work, the fact that work proceeds without a written contract does not negate basic principles of contract and common law that will apply to an agreement for construction (whether oral or written).    The fact that the court was addressing a situation involving a relatively unsophisticated homeowner versus a licensed, qualified contractor had a significant impact on the outcome.  Had this been a large commercial project where the project owner provided plans and specifications drafted by an independent design firm, the result may have been different – particularly with regard to the contractor’s ability to rely upon the owner’s implied warranty of design.  But the owner’s implied warranty does not excuse a contractor from performing competently and satisfying his own express and implied warranties.  In a situation like this one, the specifications for a large commercial job would probably have required the contractor to at least do a general review of plans, specifications, and documents for any patent ambiguities or defects before proceeding with construction.

About the author: Kent Holland is a construction lawyer  in Tysons Corner, Virginia, and is a risk management consultant for environmental and design professional liability insurance and contracts.   He is also publisher of ConstructionRisk.com Report.  He may be reached at Kent@ConstructionRisk.com.  This article is published in ConstructionRisk.com Report, Vol. 8, No. 2.