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Where a homebuilder, Centex Homes, entered into a sales agreement to construct a new home, it included a paragraph stating that it would provide its standard Limited Home Warranty covering defects in materials and workmanship and that “Purchaser’s agree that there are no other warranties either expressed or implied and hereby waive and relinquish any and all implied warranties of habitability and fitness and agree to rely solely on Seller’s Limited Home Warranty.”   Buyers of a couple of the homes filed suit against Centex alleging breach of contract, breach of express and limited warranties, negligence, and failure to perform in a workmanlike manner – based on allegations that the metal floor members were magnetized and this interfered with televisions, telephones and computers.  The trial court granted summary judgment, which was affirmed on appeal, because the buyers had contractually agreed to waive any claims for property damage other than claims covered under the Limited Home Warranty and therefore could only proceed on a claim for breach of the Limited Home Warranty.

Arguments that state law does not allow for waiver of the implied duty to construct a home in a workmanlike manner were rejected by the court which concluded that the law of a majority of jurisdictions have adopted the view that waiver of the implied warranty is permissible.  Such a waiver was not contrary to public policy or unconscionable, said the court.  And, the language, although not made any more conspicuous than other language of the contract, was at least the same size and not hidden.  The cover of the limited warranty itself was explicit in clearly stating that in the Limited Home Warranty was the exclusive remedy for defective workmanship.  This language, according to the court, as well as the contract language, “is clear and unambiguous and not susceptible to differing interpretations.”

The buyers also argued that they should be relieved of consequences of their agreement to the waiver of implied warranties because of their relative inexperience in home purchases, and the fact that they did not have an attorney review the documents.  One of the buyers also argued they felt some pressure to move into the neighborhood for the schools and to be close to a relative.  In rejecting this argument, the court noted that the buyers were in their 30s and 40s and that it was their own choice not to have counsel assist them.  The court noted “a party … is presumed to have read what he signed and cannot defeat the contract by claiming he did not read it.”  Moreover, the court quoted case law that “parties have complete freedom to enter into a contract…. Thus, in the absence of an ‘overwhelming public policy concern, the concept of freedom of contract is considered to be fundamental to our society.”

On the argument by the buyers that “the limited warranty failed in its ‘essential purpose’ by not providing for the repair of the magnetized joists in their homes” the court stated this argument erroneously relied upon a doctrine found in the Uniform Commercial Code (UCC) which has no applicability to alleged defects in a house which are a non-UCC breach of warranty claim.

Jones v. Centex Homes, 189 Ohio App.3d 668 (Ohio 2010).

Comment:  This decision is instructive in numerous ways concerning the importance of effective use of contract language to allocate risk and limit potential remedies and liabilities.   As noted by the court, when writing contract language to limit remedies it is important that the language be clear and unambiguous.  The court was not concerned that the language was not in larger text or more boldly pointed out in the body of the contract.  However, depending upon your jurisdiction, that might be a factor considered by a court.  The use of UCC type warranty arguments by the plaintiffs in this case is more than a nuisance.  I am finding more contracts by sophisticated project owners including UCC type warranty language both for construction contracts and design professional agreements.  Such language has no place in these contracts and should be stricken during the contract negotiation.  As explained by the court in this case, construction of projects is not intended to be covered by the UCC or legal principles akin to UCC type warranties.  Contractors and designers should be wary of including language in their contracts that would suggest applicability of UCC type warranties.   As stated by the court in this case, “freedom of contract is considered to be fundamental to our society” and if parties to a contract either agree to certain types of warranties or agree to waive any otherwise applicable warranties, courts generally should enforce the contract.  So, be careful what you agree to in the contract!

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 13, No.8 (Aug 2011).