A warranty is a guarantee that is made by the seller of goods or products, regarding the good or product. Through a warranty, the seller makes an assurance about the quality of the goods, products or services that the seller provides. A warranty is generally useful to a buyer because if the product fails to perform in the way that the buyer was led to believe that it would, the seller could be held legally accountable.

Generally speaking, there are two types of warranties, each offering varying levels of protections and rights.

  1. Express Warranties: Express warranties are created by the overt words and/or actions of a seller. An express warranty can be created by:
    • A promise by the seller regarding a product;
    • A description of the product; and/or
    • A model of the product.
  2. Implied Warranties: An implied warranty is created by the law. Implied warranties automatically apply when the seller offers some product for sale, regardless of whether the seller says anything about the way in which the product will perform. Two of the most common implied warranties are for merchantability, and fitness for a particular use.
  3. Implied Warranty of Merchantability: The implied warranty of merchantability guarantees that the product is fit to be used in a way that the product is supposed to be used. When a seller sells a product, the implied warranty of merchantability guarantees that:
    • The product is fit and suitable, and as such can be used for the ordinary purposes that buyers would intend to use it;
    • The quality of the product is adequate or sufficient; and
    • The product conforms to any promises that are made by the manufacturer, which are generally located on the product’s container and/or label.
  4. Implied Warranty of Fitness for a Particular Use: When a buyer discloses to the seller that they want to use a product in a specific way, and the seller gives them the product, the seller is warranting that the product that they provided is fit for the use the buyer had in mind. The implied warranty of fitness for particular use applies when:
    • The seller knows that the buyer will be using a product or good for a particular purpose; and
    • The seller knows that the buyer is relying on the seller’s expertise and knowledge in terms of the product’s ability to be used in the way that the seller would like to use it.

What Are Construction Contracts? What Are Implied Warranties In Construction Contracts?

A construction contract is a specific type of contract, or agreement, between parties promising to complete a construction project. Upon entering into a contract, both parties are obligated to perform according to the terms of the contract that they both agreed to. If one party breaches the contract, the non-breaching party may be able to sue for damages, which is a sum of money that is used to compensate a party for the loss suffered as a result of the breach of contract.

When the owner of a property and a contractor enter into a construction contract, it is possible that a variety of disputes may arise from that contract. This is especially true if a contractor engages in construction fraud, which can include performing substandard repairs or cheating another party that is involved in the construction project, such as the client.

The options for resolving disputes involving a construction contract are generally defined by the terms of the contract. The contract itself outlines the duties and obligations of both the contractor and the property owner. Under most circumstances, the construction contract will provide for remedies if one of the parties does not perform their duties as promised.

In addition to any express warranties that the homebuyer and contractor have specifically included in the contract, there are still some warranties that are implied into a construction contract by law. These are referred to as implied warranties of quality in new home sales.

The majority of states have recognized an implied warranty of quality. These states have identified two main types of implied warranties, which are further discussed below.

What Is Implied Warranty Of Habitability? What Is Implied Warranty Of Skillful Construction?

An implied warranty of habitability is a specific warranty that is implied by law in all residential leases. This warranty states that the premises are both fit and habitable for human habitation, and that the premises will remain fit and habitable throughout the duration of the lease.

Conditions that may violate this warranty vary according to the state and jurisdiction in which the premises are located. An example of this would be how a landlord can violate this warranty by failing to provide access to drinkable water and hot water. However, it is important to note that the tenant has the responsibility to repair any uninhabitable condition that was actually caused by the tenant, and not the landlord.

In terms of implied warranties in construction contracts, the implied warranty of habitability guarantees that the house will not have any significant defects that would render the house uninhabitable when construction is complete.

Whether an implied warranty of habitability can be waived largely depends on the circumstances of each specific transaction. Generally speaking, the implied warranty of habitability cannot be waived. Additionally, lease provisions that are inconsistent with the right to live in a habitable premise can be voided by a court. As such, renting an apartment ‘as is’ may violate this warranty.

Implied warranty of skillful construction addresses the manner in which the construction work is performed. Under this specific warranty, the contractor is legally obligated to fix any problems that may present themselves.

To reiterate, implied warranties are not necessarily clearly articulated. However, they do present a considerably justifiable against poor construction and/or maintenance of structures that would significantly limit the structure’s habitability.

What Should I Know About Breach Of Warranty? What Should I Know About Breach Of Construction Contract?

The law implies warranties only when the merchant or seller commonly deals in the sale of the products or goods that are being sold. As such, implied warranties do not apply to an individual who sells a product once. An example of this would be how a warranty is implied when an automotive store sells a car tire, because the automotive store deals with car tires regularly.

As such, a warranty is not implied when a person sells their own used appliance, unless they deal in the sales of used appliances routinely. Determining whether a breach of warranty has occurred can be complex, and is generally fact specific. If you are experiencing issues with a breach of warranty, you should consult with a local lawyer in order to determine whether any course of action is available to you.

In terms of construction contracts specifically, there are two different methods to calculate damages. The court will determine which method should be used based on the facts of each specific case.

The cost-to-complete method of calculating damages requires the breaching party to pay damages, and/or replace or complete the project as agreed upon by the parties. Courts generally prefer this method when the breach party’s performance has been defective or incomplete.

The diminution-in-value method requires the breaching party to pay for the difference in the value between the project as it stands, and the project as specified in the contract. This method is generally only used when substantial performance of the contract has occurred.

Do I Need An Attorney For Implied Warranty Issues?

If you are involved in a real estate transaction and are experiencing issues associated with implied warranty, you should consult with an area contract attorney. An experienced and local real estate lawyer can help you understand your rights and legal options according to your state’s specific laws, and will also be able to represent you in court, as needed.