N.C. Supreme Court Poised to Decide Value of Long-Term Express Warranties on Construction Projects

Is a twenty-year product or construction warranty really good for twenty years? The North Carolina Supreme Court is poised to hear arguments in the case of Christie v. Hartley Construction, Inc. and the outcome will be important to owners, general contractors, subcontractors and product manufacturers. Last year, in an opinion that can be found here, the North Carolina Court of Appeals held that the State’s six-year statute of repose barred a lawsuit for damages arising from the breach of a twenty-year warranty where the lawsuit was filed more than six years after substantial completion of the construction. Christie v. Hartley Construction, Inc., 2013 N.C. App. LEXIS 759, 745 S.E.2d 60 (2013). 

The Statute of Repose: Barring Lawsuits Even Where the Statute of Limitations Has Not Run

Generally, the six-year statute of repose for construction projects acts as a complete bar to a lawsuit, and the six-year period is tied to when the construction work is finished rather than when a plaintiff’s rights are violated. Therefore, even if the statute of limitations has not run on a claim (e.g., three years after a breach of a contract has been committed), the statute of repose bars any lawsuit brought more than six years after the construction project has been substantially completed.

The Court of Appeals Rules That the Statute of Repose Defeats a Long-Term Warranty

In Christie, Hartley Construction used a waterproofing product painted onto exterior paneling during construction of the Christies’ residence. On its website, the product’s manufacturer GrailCoat made an express twenty-year warranty for the product. The Christies alleged that the product was defective, allowing water to leak into their home and causing significant damage. Because the Christies filed their complaint after the six-year statute of repose period had passed, the Court of Appeals held that their warranty claim was untimely, notwithstanding that the warranty purported to extend for twenty years. The Court of Appeals relied on Roemer v. Preferred Roofing, 190 N.C. App. 813, 660 S.E.2d 920 (2008), and ruled that the statute of repose barred the Christies from recovering damages from GrailCoat. Instead, the Christies’ only remedy would have been specific performance, which is an order from a court compelling a defendant to do something (rather than pay damages). It appears the Christies only sought damages, and not specific performance, which resulted in a complete dismissal of their claims. Presumably, if the Christies had sought specific performance, they could have obtained a court order requiring the defendants to correct the defective work and repair the damage to their house.

A Dissenting View Based on Freedom of Contract

The Christie opinion drew a dissent, which argued that the ruling in Roemer should be limited so that, if a party chooses to, it may waive the protection of the six-year statute of repose by making a long-term warranty. In the dissent’s view, allowing the shorter statute of repose to trump a longer extended warranty unnecessarily impaired the parties’ freedom to contract.

The Supreme Court Will Now Decide

The Supreme Court will have the final word and, regardless of the outcome, its decision will be important to all parties in the construction process, whether they are contractors, manufacturers, suppliers, or owners. While this case relates to a relatively small construction project, the implications of the decision will affect all construction projects, regardless of size or type. The Supreme Court’s decision will determine the actual value of long-term warranties on construction projects and materials that purport to extend beyond North Carolina’s six-year statute of repose.

 

Topics:  Construction Contracts, Contractors, General Contractors, Subcontractors, Warranties

Published In: Civil Procedure Updates, Civil Remedies Updates, General Business Updates, Construction Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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