Limited Home Warranty Waived Implied Warranty of Habitability

Jones v. Centex Homes, 189 Ohio App. 3d 668 (2010).

The Joneses entered into a sales agreement with Centex Homes for the construction of a new home.  The agreement included a Limited Home Warranty provision covering defects in materials and workmanship.  The provision also contained a clause purporting to waive any and all express or implied warranties of habitability or fitness. 

Under the law in most states, a new homebuilder impliedly warrants to a purchaser that the home is structurally safe and free from defects.  In some states, it is incredibly difficult if not impossible to disclaim this warranty.  However, both the trial court and court of appeals in this Ohio case found that the buyers contractually waived their claims by virtue of the Limited Home Warranty. 

The court of appeals seemed to place great emphasis on the fact that the Joneses were in their 30s and 40s and made the conscious decision to enter into this agreement without the aid of an attorney.  The court relied on basic contract principles of freedom of contract and the presumption that a party reads what he signs.  The court also noted that although the Limited Home Warranty provision was not emphasized in the contract, it was also not hidden or in small font.  Because the language was clear and unambiguous and because the parties voluntarily entered into the agreement, the court upheld the waiver as the homebuyers’ exclusive remedy.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter.

SC Court of Appeals Reduces Punitive Damages Award in Construction Case

Hollis v. Stonington Dev. LLC, No. 4869, 2011 S.C. Ct. App. LEXIS 215 (Aug. 17, 2011).

Two families sued a development company for damages to their jointly owned property.  The Plaintiffs’ land includes two man made ponds built by family members over 50 years ago.  Stonington purchased land upstream from the property to build a residential subdivision.  The Plaintiffs alleged that as a result of the project, they experienced severe flooding, were hindered from accessing their homes, and their ponds were raised four feet due to sediment deposits.  The cost to restore the Plaintiffs’ property was estimated at $250,000.

The Plaintiffs further claimed that the Defendant Stonington violated state and local laws concerning erosion control and runoff, disregarded engineer recommendations, and misled them about its remediation plans.

At trial, the jury returned a verdict for the Plaintiffs in the amount of $400,000 in actual damages and $3.5 million in punitive damages.  Punitive damages are awarded when the conduct of the defendant is particularly egregious.  Stonington appealed this verdict to the SC Court of Appeals, where the punitive damages amount was reduced to $2 million.

The appellate court noted that it has the authority to set an upper limit range for punitive damages while still giving deference to the jury’s determination.  In determining whether a punitive damage award is excessive, courts look to the degree of reprehensibility of the defendant’s conduct, the ratio of compensatory damages awarded, and a comparison of the punitive damages awarded for similar misconduct.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter.   

Back Charges Must be Reasonable

Younger-Holmes Electrical Contractors, Inc. v. BE&K Building Group, LLC,
2010 U.S. Dist. Lexis 128559 (D. Okla. Dec. 3, 2010).

In this case, BE&K (GC) hired Younger-Holmes (Sub) to provide electrical work on a medical center construction project.  Sub fell behind schedule in performing its contracted duties, so GC provided it with notification of default and three days time to cure.  GC eventually hired another subcontractor to work with Sub to finish the project on time.

Sub later filed suit against GC after receiving $277,000 in back charges for the supplemental subcontractor. Sub claimed GC breached the parties’ contract by failing to act reasonably and in good faith in declaring default and back-charging Sub.

The court determined that GC’s actions in issuing the default letter were proper because Sub failed to provide adequate manpower to keep up with the construction schedule and finish the job on time.  GC was only required by the subcontract to grant two days to cure after issuing the default letter, but GC actually gave Sub additional time before calling in the supplemental subcontractor.

However, the court did find that GC acted in bad faith in regard to the back charges.  The court found that $82,000 of the $277,000 charges were unreasonable and often inexplicable.  Some of these charges included charges for miscellaneous fees, personal items, equipment not expendable on the job, first-class airfare, and per diem charges for in state workers.  In addition, many charges were unexplained or duplicated.  Because GC had a duty of good faith and fair dealing based on its contract with Sub, it impliedly owed Sub a duty to minimize costs.

This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice.  Seek a competent attorney for advice on any legal matter.