What Happened To The One Year Guarantee? Rather, Did it Ever Exist?

What Happened To The
One Year Guarantee? Rather,
Did it Ever Exist?

William C. Last, Jr.
Attorney at Law

It is a common belief amongst contractors that there is a one-year guarantee for all construction work. Aside from the parties to a construction contract agreeing to a one-year guarantee, there is no legal basis for such a belief. Even if the contract provides for such a one- year guarantee, the courts have disregarded such limitations.

Before discussing the length of a guarantee, it is important to note that a guarantee is different from a warranty. The term "warranty" is used in context of a contractor representing that the workmanship and materials will be as promised. A guarantee is simply a promise to correct defective workmanship or materials. A typical guarantee clause states: "The Contractor shall remedy any defects due to faulty materials or workmanship and pay for any damage to other work resulting therefrom, which shall appear within a period of one year from the date of final payment."

For example, the American Institute of Architects form A-201, General Conditions of Contract For Construction (A-201) includes, at article 3, three express warranties: (1) the work will be free from defects, (2) the work will conform to the requirements of the contract documents, and (3) the materials and equipment supplied pursuant to the contract documents will be of good quality and new unless specified otherwise. The A-201, at article 12, includes the express guarantee that the contractor will correct, within one year from the date of substantial completion, any deficient workmanship and materials.

Since a number of nationally recognized construction industry form contracts have included such one-year guarantees, there is a perception that a contractor is only responsible for repairing defective workmanship for that limited period. As a result of the explosion of construction defect claims the misconception surrounding such guarantee provisions has decreased.

Quite simply, if a contractor fails to provide the workmanship and/or materials in accordance with those described in the contract he has breached the contract. The fact that a contractor includes a one-year guarantee in the contract does not mean that the time for suing for damages resulting from such a breach of contract expires after one year.

As a result, the statutory time period for filing a lawsuit (statute of limitations) between contracting parties realistically establishes the warranty period for defective workmanship. The statute of limitations for filing a breach of contract, based on a written contract, is four years from the date of the breach of contract. If there is an oral contract, the time limit is two years. Generally, the time for filing the lawsuit begins when the owner sustains damages. Thus, at a minimum, a contractor remains legally responsible to the owner for defective workmanship for at least those periods. It should be noted that the time periods for filing lawsuits between non-contracting parties are different. Since a discussion of those difference is beyond the scope of this article, any questions concerning those difference should be addressed to a knowledgeable attorney.

If the other contracting party sues on a negligence theory the time for filing a lawsuit can be delayed if the defect is a latent defect. Once again, a discussion of the accrual of such a cause of action is beyond the scope of this article. Irrespective, there are limits on filing such latent defect claims. Generally, an action on a latent defect must be filed within ten years from "substantial completion of the project" (See generally Code of Civil Procedure section 337.1). This limitation also applies to breach of contract actions. Thus, even if there is a one year guarantee in the contract, a contractor could be liable for up to ten years from "substantial completion of the project."

Even the time period for disgruntled owner to file a complaint with the Contractors State License Board is subject to such extended periods if there is a latent defect. A complaint can be filed for up to four years for a patent defect and up to ten years for latent "structural" defects Business & Profession Code section 7091(a)(b)).

Conclusion

Even if there is a one-year guarantee in your construction contract, your liability for defective workmanship and materials is not limited by that clause. However, if the other contracting party does not ask you to correct any known defective workmanship during that period he may be limiting the amount of damages he is able to recover.

Since a guarantee provision gives a contractor the opportunity to correct its own defective workmanship, if you are informed of the such defective workmanship during the guarantee period, you should inspect the condition. If you believe that the complaint is unwarranted or not your responsibility, you should document the condition and so inform the other party in writing. If you are responsible for the defective workmanship, generally, you should correct it. If you fail to do so, in all likelihood, you will be unable to assert that the corrective work the owner claims was greater than required.

This article, copyrighted 2004, was written by William C. Last, Jr. Mr. Last is an attorney who has been specializing in Construction Law for over 25 years. In addition to belonging to a number of construction trade associations, Mr. Last holds a California "A"and "B" license. He can be contacted at 415-764-1990 or 650-425-7679 (e-mail: wclast@lastlawfirm.com). A number of his past articles can be found on his website (lhfconstructlaw.com). This bulletin is published periodically to provide general information about current legal issues. The articles are not intended to be a substitute for the advice of an attorney as to a specific problem. If you have a specific legal question or need legal advice, you should contact an attorney.