Litigation/Mar 10, 2016

Correction of Work Clause Does Not Limit Builder Warranties

On March 4, 2016, the Michigan Supreme Court – by refusing to grant leave – essentially affirmed a Michigan Court of Appeals opinion that refused to limit a “Correction of Work” clause to the 18-month period as stated in the contract. Spring Harbor Club Condo Ass’n v Wright, unpublished opinion per curiam of the Court of Appeals, issued June 23, 2015 (Docket No. 321507).

At issue in Spring Harbor was a construction contract that provided no express time limit on the builder’s standard warranty that the work would be good quality, free from defects and in conformity with the contract. The same contract, however, also contained a “Correction of Work” clause, providing that the builder “shall remedy any defects due to faulty materials, equipment or workmanship which appear within a period of eighteen (18) months from the date of the Final Certificate of Occupancy.”

The builder unsuccessfully argued that the 18-month correction period limited the time during which an owner could assert a warranty claim. The Court, however, sided with the owner, who argued that the warranty time period was not limited to 18 months, but rather the general 6-year statute of limitations period for breach of contract claims. In forming its opinion, the Court distinguished between the contract’s warranty, which contained no limitations, and the obligation to correct defective work, which was limited to 18 months, but subject to extension “pursuant to other guarantees made in the contract.”

The take-away point can be found in the Court’s words: “The contract is not as clear as might be hoped.” Contracts must be carefully and concisely drafted to capture the parties’ intent. This case makes clear that an unlimited warranty will not be limited by a correction of work clause.

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