Arizona Court of Appeals held that where homeowner signed a contract that waived its right to make claims against the Builder for breach of implied warranty of workmanship, the waiver was unenforceable. Arizona common law precludes such waiver because it is deemed to be contrary to public policy. Although the courts generally enforce the freedom-of-contract –- that principle applies primarily in contracts between commercial entities. In this case involving a homeowner, the court held “the new homeowner cannot waiver – and a builder cannot disclaim – the implied warranty of workmanship and habitability.” Zambrano v. M & RC II LLC, et al. 496 P.3d 789 (AZ 2021).
Zambrano initialed paragraph 15. Immediately below her initials and as part of paragraph 15, the agreement reiterated:
THE HOME BUILDER’S LIMITED WARRANTY REFERENCED ABOVE IS THE ONLY WARRANTY APPLICABLE TO THE PURCHASE OF THE PROPERTY. ALL OTHER EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, HABITABILITY AND WORKMANSHIP ARE HEREBY DISCLAIMED BY SELLER AND ITS AFFILIATES AND WAIVED BY BUYER, ANY IMPLIED WARRANTY THAT MAY EXIST DE[S]PITE THE ABOVE DISCLAIMER IS HEREBY LIMITED TO A ONE (1) YEAR PERIOD.
The separate, forty-page express warranty’s cover page also specifically disclaimed any implied warranties, saying:
WE make no housing merchant implied warranty of habitability or any other warranties, express or implied, in connection with the sales contract or the warrantied HOME, and all such warranties are excluded, except as expressly provided in this BUILDER’S LIMITED WARRANTY. There are no warranties which extend beyond the face of this BUILDER’S LIMITED WARRANTY.
In it decision, the court noted that courts in Arizona judicially eliminated the caveat emptor rule for newly built homes. In the cited case, the court held:
The caveat emptor rule as applied to new houses is an anachronism patently out of harmony with modern home buying practices. It does a disservice not only to the ordinary prudent purchaser but to the industry itself by lending encouragement to the unscrupulous, fly-by-night operator and purveyor of shoddy work.
In the decades since that decision was decided, the Arizonan courts have consistently enforced the implied warranty and even expanded it – holding that a subsequent buyer may enforce the implied warranty given by a builder/seller. Builder’s in Arizona “cannot rely on a disclaimer of the implied warranty, standing alone, to avoid the implied warranty.”
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 ConstructionRisk 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 Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk Report, Vol. 23, No. 8 (December 2021).
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