Bricker & Eckler LLP: Standard One-Year Warranty: Fact or Fiction?

Holman, Gillis & Shevelow on Construction Documents
Standard One-Year Warranty: Fact or Fiction?

Reprinted from April 2008 Brickerconstructionlaw.com

Ninety-fifth in a series—Each issue of this newsletter discusses important terms found in typical construction documents. This month, Chris McCloskey looks at the “standard one-year warranty” in the AIA A201-1997 General Conditions. A common misconception by many in the construction industry is that contractors are not responsible for repairing work after the “standard one-year warranty” has run its course. We previously covered this topic in our November 2006 issue, but we are writing about it again as the topic is frequently brought up by owners, contractors, and others in the construction industry.

It is often heard from contractors, as well as owners, that “a contractor is not responsible for repairing work on a project outside of a year after the work is complete,” because the project is no longer covered by the contractor’s “standard one-year warranty.” Is that true? Although a contractor could certainly include language in a construction contract that expressly provides for a one-year limitation period on workmanship claims, there is not otherwise a “standard one-year warranty” applicable to the construction industry.

For example, in Ohio, there is no statute setting forth a one-year warranty period. In fact, the statutory law in Ohio provides for a 15-year statute of limitations on written contracts and a 10-year statute of repose for injury and property damage arising out of construction work. Thus, under Ohio statutory law, claims may be brought against contractors up to 10 or even 15 years after the work is performed, depending on the applicability of the respective statute. (For more on the applicable statutes see So How Long Is My Warranty Good For? The Effect of Statutes of Limitations & Repose in our November 2006 issue of BrickerConstructionLaw.com.)

What the Contract Says

One of the sources for the misconception about the one-year period is likely the AIA Document A201 – 1997, General Conditions of the Contract for Construction Projects and specifically, Section 12.2.2.1 of that document, which states:

In addition to the Contractor’s obligations under Section 3.5, if, within one year after the date of Substantial Completion of the Work . . . any of the Work is found to be not in accordance with the requirements of the Contract Documents, the Contractor shall correct it promptly after receipt of written notice from the Owner. . . .” [emphasis added]

Indeed, this provision is often pointed to by owners and contractors alike as providing a one-year limitation period for correcting defective work. When this provision is read in conjunction with section 3.5.1 and 12.5, however, the intent of the A201 document is clearly not to provide a one-year limitation period.

First, section 12.2.2.1 states that the one-year requirement is “in addition to the Contractor’s obligations under Section 3.5 . . . .” Thus, the obligations are cumulative. Second, Section 3.5.1, entitled “Warranty,” states:

The Contractor warrants to the Owner and Architect that materials and equipment furnished under the Contract will be of good quality and new unless otherwise required or permitted by the Contract Documents, that the work will be free from defects not inherent in the quality required or permitted, and that the Work will conform to the requirements of the Contract Documents. Work not conforming to these requirements, including substitutions not properly approved and authorized, may be considered defective.

It’s important to note that there is no language in section 3.5 that establishes any sort of limitation period. Further, section 12.2.5 states that “[n]othing contained in this section 12.2 shall be construed to establish a period of limitation with respect to other obligations which the Contractor might have under the Contract Documents.”

As a result, the “warranty” obligations expressed in section 3.5.1 are not limited by any timeframe, except, as noted above, the applicable statute of repose or statute of limitations. That means that a claim for defective work under section 3.5.1 can be brought at any point during that timeframe, regardless of the “one-year” language contained in section 12.2.2.1.

What the Courts Say

This exact issue was addressed by the court in Mount Calvary Baptist Church v. Williams Construction Company, 2007 La. App. Unpub. LEXIS 39. In that case, the owner asserted a claim against the contractor for a defective roof, among other items. The contractor, however, argued that the owner’s claim was barred because it was brought more than one year after the date of substantial completion for the project and that the contract provides for no remedy after one year.

The AIA A201 – 1997 document was designated as the general conditions for the project in that case, and the contractor pointed to section 12.2.2.1 in support of its argument. Using the analysis discussed above, however, the court in Mount Calvary rejected the contractor’s argument and ruled in favor of the owner. The court found:

According to these provisions, the one-year period for correction of work is in addition to those relating to the contractor’s warranty under Subparagraph 3.5.1, which is a separate obligation. Because Mount Calvary asserts that the installation of the roof was defective, its claims clearly come within the warranty provision of Subparagraph 3.5.1 and therefore, are not subject to the one-year limitation of Subparagraph 12.2.2.1. As such, based on the testimony and documentary evidence admitted at trial, we find that Mount Calvary instituted its claim in conformity with the contract terms.

Id. at *11-12.

Lesson: There Is No “Standard One-Year Warranty”

Thus, the lesson to take from this column is that there is not a “standard one-year warranty” applicable to construction projects. The applicable warranty is going to be the warranty provided for in the construction contract.

If the construction contract, however, contains express language limiting the contractor’s obligations to the one-year period after the completion of the project, then that provision will be a defense for the contractor against an owner asserting a claim outside of that one-year period. But if the construction contract incorporates an unmodified version of the AIA A201 – 1997 general conditions, the applicable warranty will not be limited to one year.