The U.S. Court of Appeals for the Fifth Circuit recently reminded the legal community that liability for breach of the implied warranty of workmanlike performance (WWLP) is strict, and damages can end up being much more than anticipated.
Contracts of ship repairers fall under admiralty jurisdiction and are therefore subject to doctrines of general maritime law. The implied warranty of workmanlike performance is one of those doctrines. Born out of a 1962 U.S. Supreme Court decision, this doctrine is "one of the most ambiguous and controversial concepts in all of admiralty law." § 5:15. Warranty of workmanlike performance, 1 Admiralty & Mar. Law § 5:15 (6th ed.)
The WWLP is implied into most maritime service and repair contracts, and it is not necessary for it to be in writing to have full force and effect. Thus, unless specifically excluded by agreement, all maritime service contracts will include an implied warranty of workmanlike performance. To recover damages under this doctrine, an injured party need only show that the work performed was not done in a diligent, workmanlike manner, and that damages were suffered as a result.
In an April 2021 summary judgment discussion of Continental Insurance Company v. Bollinger Quick Repair, LLC, the Fifth Circuit made it a point to highlight just how extensive damages under the warranty of workmanlike performance can be.
In this case, the Plaintiff's insurance company was arguing that the measure of damages under the warranty of workmanlike performance and maritime negligence are different. Defendant Bollinger Quick Repair argued the opposite – that the measure of damages are the same under both theories of liability. Bollinger believed that Continental Insurance's recovery should be limited to the original repair costs since under general maritime law, the proper measure of damages in a negligence action "is to place the injured person as nearly as possible in the condition he would have occupied had the wrong not occurred." Cont'l Ins. Co. v. Bollinger Quick Repair, LLC, No. CV 18-2810, 2021 WL 1313406, at *2 (E.D. La. Apr. 8, 2021) (quoting Gaines Towing & Transp., Inc. v. Atlantia Tanker Corp., 191 F.3d 633, 635 (5th Cir. 1999).
The Fifth Circuit rejected Bollinger's argument, stating that a party that breaches the warranty of workmanlike performance is liable for all foreseeable losses caused by the breach, including loss of use of the vessel, property damage, reasonable attorneys' fees and litigation expenses. Id.
Even more alarming is that in the past, the Fifth Circuit has held that privity of contract is not essential. Implied warranties of workmanlike performance may extend to parties who are not in a direct contractual relationship. See Todd Shipyards Corp. v. Turbine Serv., Inc., 674 F.2d 401, 417 (5th Cir. 1982). However, the WWLP is not just a contract doctrine – it could play a part in personal injury cases and property damage cases.
Accordingly, because liability under this maritime doctrine can be severe, ship repairers and maritime servicing companies should remember to be wary of the WWLP, as it is an implied warranty that could have unanticipated consequences and a great amount of damages.