Wednesday, September 1, 2010

Enforceability of Limited Warranties by Contractor

Home Buyers Warranty / New Home Warranty
2-10 HBW Warranty found unconscionable

A recent Washington Court of Appeals case invalidated a Home Buyers Warranty offered by a home builder to a customer in Pierce County. The homeowners had purchased a 5 acre plot of land in Roy, Washington and hired Palmer Ridge Homes, LLC to build them a home. Palmer Ridge Homes had enrolled with a third party company called “Home Buyers Warranty” that basically provides limited insurance for the builder for construction defects if the contractor uses a standard “2-10 Home Buyers Warranty. This warranty requires arbitration and that claims be brought within one year of substantial completion.

The court observed that the homeowners

-did not receive the booklet to review before signing an enrollment application;
-they believed the 2-10 HBW warranty would afford them greater protection than offered by the construction contract (it was in fact less protection)
-there was no indication that the 2-10 HBW was explained to them;
-did not receive a copy of the booklet containing the warranty terms until after they had moved into their home;
-the provision waiving implied and express warranties was on page 7 of a 32 page booklet

The court found this to be patently unfair the homeowner, even though typically any party to a contract has a duty to read the contracts they sign.

What lessons can be construed from this? If you are a contractor, take the time to explain the terms of your warranty. It may be wise to have your customer initial the pages. Use larger font or bold text for important provisions such as warranties, indemnification obligations, and time limitations for bring claims.

If you are a homeowner, be sure you read what you sign before you sign it. If you feel like you have been wronged by your contractor, contact an attorney.

The case can be found at

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