September 2014 - American Subcontractors Association of the

“The Voice of the Industry”
SEPTEMBER, 2014
Long Term Express Warranties
North Carolina Ruling
May Shorten Lifespan
ASAC & Whitehurst Strategic Partners
Announce
New “Member Only” Benefits Program
See Page Five
By: Jonathan Massell, Nexsen Pruet
A recent holding by the North Carolina
Court of Appeals is threatening to render
many long-term express warranties ineffective.
In a divided opinion in Christie v. Hartley Construction,
Inc., the court held that the six-year North Carolina statue
of repose for improvements to real property trumps the
bargained-for duration terms of an express warranty. In
other words, owners may think recently purchased products are covered by express 20-year warranties, when, in
reality, the warranty could effectively expire in only six
years.
This is essentially what happened to the plaintiffs in
Christie.
The Background
In 2004, the Christies contracted to have a house custom
built in Chapel Hill. For the exterior, the builder applied a
waterproof cladding system manufactured by GrailCoat
WorldWide. GrailCoat's website provided a 20-year express warranty on the product.
In March 2005, construction was completed and the certificate of occupancy was issued.
However, after the Christies moved into their new house,
the GrailCoat system failed to effectively waterproof the
home's structural components.
NEWS FROM ASA
Effective immediately, federal contractors and
subcontractors for construction, and other
goods and services, with an estimated value over $500,000 will
have to disclose labor law violations within the last three years
with their offers or bids and every six months thereafter if they
are awarded the contract or subcontract.
Executive Order 13,673, signed by President Obama on July 31,
covers 14 federal statutes and equivalent state laws, including
those addressing wage and hour, safety and health, family and
medical leave, civil rights protections, and collective bargaining.
In addition to reporting requirements, the Executive Order establishes paycheck transparency rules, including requiring contractors to “provide all individuals performing work under the
contract for whom they are required to maintain wage records
… with information concerning that individual’s hours worked,
overtime hours, pay, and any additions made to or deductions
made from pay.”
In October 2011, the Christies sued the product manufacturer seeking monetary damages for breach of express
warranty among other causes of action, alleging that
GrailCoat's waterproof cladding system was defective and
caused extensive water damage to their home. Despite
GrailCoat's 20-year express warranty, the suit for monetary damages was dismissed on the grounds that the sixyear statute of repose had expired.
See Details @ www.asacarolinas.com
(Continued on page 3)
ASAC—The Heartbeat of the Construction Industry—The Driving Force for Change
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MIDLANDS CHAPTER
CHARLESTON CHAPTER
A & Z PRINTING
Columbia SC
Deborah Thomas, President
Construction Printing
Sponsored by: Haley Ray,
Haley Ray Pavement Marking
***
SITEWORK SUPPLIERS
N. Charleston SC
Ronna Chandler, President
Kem Chandler, Sec./General Manager
Supplier
Sponsored by: Hugh Wilson, J-J Inc.
***
PRECISION PLUMBING
OF SANDY RUN INC.
Swansea SC
April A. Coleman, President
Plumbing Contractor
Sponsored by: Haley Ray,
Haley Ray Pavement Marking
L-J INC.
Columbia SC
Hugh Wilson, Vice President
David Jordan, President
Heavy/Highway Construction
Sponsored by: Kem Chandler
Sitework Suppliers
***
CONTRACTOR SURETY GROUP
Charleston SC
Mathew Clarke, Director
Surety Bonds for Contractors
Sponsored by: Jay Foreman,
Colony Construction Company
***
HANES GEO COMPONENTS
Savannah GA
Micah Rahn, Erosion Control & Geosynthetic Specialist
Jodi Deem, Operations Manager
Supplier: Geotextile, Siltfence,
Erosion Control
Sponsored by: John Burbage, Austin Constr. Company
2014 ASAC Event Calendar
09.18.14 ASAC Charleston Skeet Shoot
09.23.14 ASAC Midlands Meeting— Chuck McDonald, Robinson McFadden & Moore PC, What This Construction
Lawyer Thinks Every Subcontractor Needs to Know
About Commercial General Liability Insurance
10.14.14 ASAC Triangle Meeting—Brian Schoolman,
Safran Law Offices, A Practical Guide of How to
Use the Current NC Lien Laws
10.24.14 ASAC Midlands Golf Tournament—Windermere Club
10.27.14 ASAC Charleston Meeting—Jim Tuten, Energy
Innovations Center’s Project Manager, Clemson
University Wind Turbine Testing Facility
10.31.14 Deadline for “Repeat Ad Discounts” & edits to
complimentary directory company listings
2015 ASAC Membership Directory
11.11.14 ASAC Triangle Meeting—TA Loving
12.09.14 ASAC Midlands Holiday Social
12.09.14 ASAC Triangle Breakfast Meeting— Perry Safran,
Safran Law Offices, Year End Legal Update
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01.08.15
01.13.15
01.26.15
01.27.15
02.??15
03.06.15
03.26.15
04.27.15
05.21.15
05.??.15
05.??.15
06.22.15
07.23.15
ASAC Board of Directors Meeting
ASAC Triangle Meeting
ASAC Charleston Meeting—John Grab,
Nexton Project
ASAC Midlands Chapter Meeting James Knight, SCLLR
ASAC Midlands Oyster Roast
ASAC Charleston Chapter Oyster Roast
Truluck Island
ASA National Sub-Excel—
Renaissance Seattle
ASAC Charleston Meeting
ASAC Board of Directors Meeting
ASAC Charleston Golf Tournament
ASAC Midlands Skeet Shoot
ASAC Charleston Awards Banquet
ASAC Convention & Trade Show
Hilton Asheville Biltmore Park Hotel
(Continued from page 1) Long Term Express Warranties
The Impact on Long-Term Express Warranties
A statute of repose and a statute of limitations are similar in
that both statutory mechanisms denote a specific time period
in which a plaintiff must file suit before the cause of action expires. However, they are very different in regards to what actually triggers the running of the statutory clock. A statute of limitations does not begin running until a person is injured or becomes aware that he has a claim. In contrast, a statute of repose commences as soon as a specific event occurs; for instance, substantial completion of a construction project. This
distinction can have a harsh effect on parties that are unable to
discover the existence of a claim until after the repose period
expires. Absent extenuating circumstances, such as evidence of
fraud, the injured party is forever barred from filing suit once
the repose period has elapsed.
The ambiguity of the holding in Roemer contributes to an
equally ambiguous holding in Christie. Although the basis of
both holdings is unclear, the immediate legal implications of
Christie are readily apparent.
The statute of repose will trump the bargained-for duration
terms of an express warranty that deliberately permits recovery of monetary damages after the repose period expires.
Because of the general risks involved in a construction project and the enormous potential costs of remedying defects - it is
always best for parties to enter into carefully drafted contractual agreements that reflect the risk tolerance of each party in
the contract.
Although the Christies' suit for monetary damages was dismissed, the court suggested that the statute of repose would
not preclude the Christies from seeking specific performance as
a remedy. For this alternative solution, the court uses its equitable powers to compel a party to take specific action in accordance with contractual obligations.
An express warranty is a common contractual element in many
sales agreements. The warranty typically sets forth a number of
guarantees concerning performance, longevity, and quality for
a specific duration of time. Warranties vary in their scope of
coverage - some are confined to mere replacement of a defective product, while others cover the consequential damages
that can result if the warranty is breached.
However, this was not a feasible option for this specific case.
First, the Christies alleged that GrailCoat's cladding system was
inherently defective and replacing a defective product with the
same defective product would hardly solve the problem. Second, GrailCoat's cladding system is actually prohibited by the
North Carolina Building Code. As a result, the Christies were
essentially left without any practical remedy.
When a manufacturer expressly warrants its product will last 20
years, the warranty is often built into the pricing of the product
itself and the long-term coverage becomes an important consideration in the purchaser's decision to use that specific product.
Prior to Christie, several court decisions indicated that an express long-term warranty permitting damages would be enforceable, regardless of the expiration of the statute of repose.
However, the Christie court seems to indicate that its holding is
based upon prior "instructive" precedent; namely Roemer v.
Preferred Roofing.
Planning Considerations for Real Property Improvements
Although there is always the possibility that the Christie decision could be reversed in the North Carolina Supreme Court
(the case is currently under review) or the Legislature could
amend the statute of repose, companies and individuals are
wise to plan accordingly under the assumption that Christie will
remain the law.
In Roemer, the plaintiffs sued for damages arising from breach
of a lifetime warranty. Similar to Christie, the court held that
the plaintiff's remedy for breach of warranty after the statute
of repose had expired was limited to specific performance.
However, it is unclear whether the Roemer court based its
holding on a literal interpretation of the phrase "(n)o action to
recover damages" in the statute of repose, or whether it was
based on the actual language of the warranty at issue. The general consensus among legal scholars as well as the dissent in
Christie is that the warranty in Roemer expressly provided that
specific performance was the sole available remedy.
First, keep an eye on the calendar and don't let claims lapse. If
you purchased an improvement to real property that is covered
by a long-term express warranty, understand that the coverage
may only be effective for six years.
Pay special attention to the improvement during that six-year
timeframe - and remember, the clock starts after the vendor/
contractor's last act or omission, or substantial completion of
the improvement. If you think you have a valid breach of warranty claim, be sure to investigate further and file a complaint
before the six-year statutory deadline.
If the holding in Roemer was based upon the limiting language
of the warranty at issue, rather than the language of the statute of repose, then the Christie court erred in relying on Roemer as "instructive" precedent, because the warranty in
Christie expressly included coverage for damages. Whether the
Christie court incorrectly expanded Roemer beyond its facts will
only be answered, if at all, by the North Carolina Supreme
Court, which is currently reviewing Christie.
Second, when it comes to bargaining, don't overpay for hollow
extended warranty coverage. If a vendor offers a long-term
express warranty on its product, be aware that any promises of
coverage six years after the date of substantial completion may
be illusory.
(Continued on page 4)
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(Continued from page 3) Long Term Express Warranties
Although the Christie court implicitly held that the expiration of
the statute of repose would not bar a claim seeking specific performance, this remedy is often inadequate, especially where
breach of warranty results from a product design flaw. In such
situations, the last thing a property owner wants to do is replace
a shoddy product with the exact same shoddy product. Therefore,
if you purchase a particular product where you know that specific
performance will be an inadequate remedy; do not pay for more
than six years of express warranty coverage.
Third, if you are currently covered by a long-term express warranty and more than six years has elapsed, understand the limitations of your coverage. If the warranty is breached and specific
performance is not a suitable remedy, don't waste your money
filing suit. On the other hand, if specific performance is a feasible
option, make certain your attorney pleads for specific performance to avoid having your suit dismissed for failure to state a
claim upon which relief can be granted.
Lastly, be mindful of jurisdiction. If your project is in North Carolina and the party providing the express warranty is also based in
North Carolina, North Carolina is probably the only jurisdiction
where you can bring suit for breach of warranty.
1940 Road
However, if your project is in North Carolina and the party
providing the express warranty is based out of South Carolina - or vice versa - you may be able to file your claim in a
South Carolina court. Assuming the relevant contract does
not contain a choice of law provision, your success will hinge
upon whether the South Carolina court would apply South
Carolina law.
In South Carolina, the statute of repose does not expire until
eight years after the date of substantial completion for an
improvement to real property. Perhaps more importantly,
however, is that long-term express warranties are not
trumped by the South Carolina statute of repose. In short,
to be certain your long-term express warranty will be honored, take steps to ensure that South Carolina – rather than
North Carolina - law will apply if a claim is brought forth.
In the aftermath of Christie, the law surrounding this issue
in North Carolina will remain uncertain for quite some time.
Until additional case law or legislation emerges, the best
advice is to proceed with caution when dealing with extended warranty contracts.
Jonathan Massell, Associate, Nexsen Pruet, PLLC
701 Green Valley Rd., #100, Greensboro, NC, 27408
T: 336.387.5159, F: 336.273.5357
JMassell@nexsenpruet.com
www.nexsenpruet.com
General Site Contractor
Gulf Stream Construction Company, Inc.
3820 Faber Place, Suite 200
North Charleston, South Carolina 29405
843-572-4363
www.gulfstreamconstruction.com
Celebrating 48 Years of Excellence
1966 - 2014
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www.newsouthsupply.com
Follow us on Twitter at http://twitter.com/NewSouthSupply
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YOUR TRAINING PLANNER
The American Subcontractors Association of the Carolinas is dedicated to providing
cost-effective training opportunities
that meet the needs of our members to help enhance the skills, build knowledge,
and restore competencies of their members.
American Subcontractors Association of the Carolinas has partnered with
Lorman Education Services to provide construction-related continuing education and
management training offered in North and South Carolina.
Members receive a 15% discount on all orders.
You may register online or call Lorman at 866-352-9539.
Please use Priority Code 16100 and Discount Code W3079484 when registering.
Visit www.lorman.com for Lorman Education Program schedules.
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CAROLINA SUBCONTRACTOR
ASAC MISSION STATEMENT— To promote the value of ASA; to become a leader in the construction industry by
representing the interest of the membership by developing laws & legislation and by setting a standard of support,
quality and service to our customers & communities.
Visit the ASA of the Carolinas (ASAC) web site at www.asacarolinas.com and the ASA National (ASA) web site at
www.asaonline.com where you will find members listed by trade, construction law updates, contractor references on
the BPI, lien lists, legislative updates, meeting schedules, contract information and more!
CAROLINA SUBCONTRACTOR
Published for the information of its members and others active in the construction industry in the Carolinas.
Pertinent articles are invited and may be revised to meet space limitations. Advertisements occasionally appearing
in this publication do not indicate endorsement of any product or service by ASAC.
Some articles may have copyright restrictions and should not be reprinted without written permission from originator.
Marty Swain…...President
Haley Ray.....1st Vice President
Mike Young…..Secretary
Sarah Windham .....Treasurer
Rick Paden…..Asst. Treasurer
Cindy Schulz....Honorary Chairman of the Board
Linda Burkett…...Executive Director
Sharon Catoe…..Administrative Asst.
Phone: (803 or 877) 285-3356
Fax: (803) 285-3357 Email: asac@asacarolinas.com Web Site: www.asacarolinas.com
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