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Vinyl floors installed by contractor in the operating rooms of a new hospital suffered from bubbles and split seams, and created a rough and uneven surface.  For over a year the contractor attempted to correct the problems, and did so for beyond the one year warranty period.  When it became apparent to the hospital, however, that the problems were continuing and that the repairs by the contractor were failing to resolve the fundamental problems, the hospital retained another contractor to evaluate the problems and completely remove the vinyl, retreat the underlying concrete surface, and install all new flooring.  In response to the hospital’s claim against the original contractor to recover the cost of replacing the floors, the contractor argued that it owed no duty to the hospital because the one year warranty period had expired and also because the hospital failed to give it adequate notice of the intent to hire another contractor to replace the floors without giving the original contractor the opportunity to do that work itself.  A jury awarded over $300,000 to the hospital for breach of the express warranty.  This was affirmed on appeal, with the court holding the hospital acted reasonably in giving up on the contractor’s ability to remedy the problem and hiring a new contractor for the work without giving the original contractor “written notice” and an opportunity to do the total repair itself.  Berkshire Medical Center v. U.W. Marx, Inc., 644 F.3d 71 (1st Circuit, 2011).

In its appeal, the contractor argued that the floor replacement took care of problems that developed after the one-year warranty period , but that to the extent bubbles and seam separations were within the warranty, the warranty required that the contractor be given the opportunity itself to do the repair work.  The contractor also argued that the hospital waived any right to recovery because it failed to provide “written notice” to the contractor as required by the contract.  A key question to be resolved on appeal was whether the bubbles and splits should be reviewed as separate events or as a single episode.

At trial, the jury instructions allowed the jury to conclude, if warranted by the facts, that the splits and bubbles were a manifestation of the same underlying problem regardless of whether they occurred before or after the one-year warranty period.   It was reasonable, said the appellate court, to permit the jury to decide whether the problems were individual defects or manifestations of larger problems such that they were “symptoms of a disease”.  Having concluded the latter, it was also reasonable to allow the jury to decide that adequate notice of the problem was given by the hospital to the contractor within the one-year warranty period and that the work to replace the entire floor after the one-year period was still within the warranty requirements.

As explained by the court, “[Contractor] was placed on notice of it once a succession of bubbles and splits appeared and were called to its attention even if neither side then fully understood the full scope of the problem.”  Even if the hospital failed to give the notice, the court concluded that “any such failure was not likely a ‘material breach’ and, in any event, was ‘excused’ when [Contractor] accepted whatever notice was given and started to make the repairs.”

The court acknowledged that the language in the contract required the hospital to give the contractor a chance to remedy the problems itself before the hospital resorted to a replacement contractor.  The court explained:

[T]he agreement make[s] clear that the contractor is entitled to be told of and given a chance to remedy the defect by itself; nowhere does the agreement suggest that the contractor’s obligation is to let the owner choose some other contractor to implement some other remedy.  Nevertheless, the court concluded:  “But, while the contractor gets first crack, there has to be some end point. If the contractor refused to do anything, the owner could do the job itself and sue for the cost; the result cannot be otherwise if, after repeated efforts over an extended period….”   We think a reasonable jury could find, even if not compelled to do so, that Berkshire properly invoked the warranty. Two years and a number of spot repair efforts by Marx had not led to any solution; a hospital can hardly be expected to tolerate indefinitely unsafe conditions….

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As for giving Marx the option of doing the replacement job itself, Berkshire had little reason to think that Marx either could be trusted to do it or would have any interest in doing so. Replacing the entire floor in phases, while the hospital continued to perform surgeries in less blemished segments of the suite, was obviously a drastic and very expensive proposition. Marx never volunteered to do it and even now does not suggest that it would have done so if asked.

 For these and other reasons, the court affirmed the judgment against the contractor.

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. 14, No. 5 (May 2012).

Copyright 2012, ConstructionRisk.com, LLC