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Pulte Homes sued the engineering firm that performed certain engineering and testing services for a building site on which it built a home.  It alleged that the home developed structural problems after construction due to deficiencies in the engineer’s site work and testing.  After resolving defects asserted by the homeowner through arbitration proceedings, Pulte filed suit against the engineer seeking to recover the damages it incurred with the homeowner.  The theories of recovery, in addition to a basic negligence count, included a count based on the right to indemnity arising from breach of express or implied warranties. Pulte alleged that “S&ME expressly or impliedly warranted to Pulte that all work performed by them would be performed in a careful, diligent and workmanlike manner, and that any materials and/or services designed, supplied or sold by them for use on the project would be merchantable and fit for their intended or specific purpose.”  In reviewing the contract language, the court agreed that it “includes language arguably in the nature of an express warranty.”  Pulte Home Corp. v. S &ME, Inc., 2013 WL 4875077 (U.S. District Court, South Carolina, 2013).  For a sample contract clause to disavow and avoid all warranties, read the comment at the conclusion of this article.

Breach of Warranty

The engineer argued the state law does not permit a cause of action for breach of warranty against a service provider.  It is true that the courts in South Carolina had previously held that attorneys could not be sued for breach of express warranty to obtain a specific result.  But the court said that was not applicable here because the services at issue are not legal services.  “They are, instead, services relating to testing or preparation of land, a tangible things.  Thus, the services at issue here may be more like … those where a product or some tangible items is involved, such as … architectural plans or specifications.”    The court explained that existing case law only held that there could be no warranty of legal services to obtain a specific result but did not address warranties “of merchantability, workmanlike service, and/or fitness for a particular or intended purpose.” 

For these reasons, the court denied the engineer’s motion to dismiss the warranty claim.  The matter now will go to a jury to determine whether the engineer breached an express warranty.

Comment

Design Professionals should be careful in their contract language to avoid agreeing to warranties – particularly with language such as that referenced in this decision concerning “merchantability, workmanlike service, and/or fitness for a particular or intended purpose.”    It is important to limit the design professional’s responsibility to meeting the requisite professional standard of care.  When the client of the design firm is a general contractor, a design-builder, or a home-builder, those entities are more inclined to attempt to insert warranties into the design professional contract.  The designer needs to look beyond just the standard of care clause in its contract, and strike out all such express and implied warranty language.

Some design professional contracts I review contain so many blatant or hidden warranties buried throughout the fine print of the Agreement that I have found it necessary to create a catch all clause to attempt to disavow all warranties, just in case one slips through the cracks even after we have attempted to find and delete them all.   A clause that I use for this purpose is as follows:

“Standard of Care.  Notwithstanding any clause in this Agreement to the contrary, Consultant expressly disclaims all express or implied warranties and guarantees with respect to the performance of professional services, and it is agreed that the quality of such services shall be judged solely as to whether Consultant performed its services consistent with the professional skill and care ordinarily provided by firms practicing in the same or similar locality under the same or similar circumstances. Nothing in this Agreement shall be construed to establish a fiduciary relationship between the parties.”

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. 16, No. 3 (Mar 2014).

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