Defects, Prime Contract, Warranty

Call-Back Periods in Call-Back Warranties – the Confusion Surrounding Their Effect on Other Warranties in Construction Contracts

Commercial construction contracts between owners and contractors, such as the form AIA Document A201 contract, often include various express warranties whereby the contractor warrants its work on the project to the owner. Among those express warranties are the more common warranties that: (i) the materials and equipment provided by the contractor will be new and of good quality; (ii) the contractor’s work will conform to the requirements of the contract; and (iii) the contractor’s work will be free from defects.

The AIA A201, for example, contains a typical warranty provision, which states:

The Contractor warrants to the Owner and Architect that materials and equipment furnished under the Contract will be of good quality and new unless the Contract Documents require or permit otherwise. The Contractor further warrants that the Work will conform to the requirements of the Contract Documents and will be free from defects, except for those inherent in the quality of the Work the Contract Documents require or permit. Work, materials, or equipment not conforming to these requirements may be considered defective.[1]

In addition to containing those common express warranties, a contract might also contain a separate warranty commonly known as a “call-back warranty.” A call-back warranty establishes a period of time after the substantial completion of a project within which an owner can call upon a contractor to correct nonconforming work. The length of the “call-back period” is typically one year but is ultimately determined by the language in the call-back warranty.

The AIA A201 also contains a typical call-back warranty, which states:

In addition to the Contractor’s obligations under Section 3.5, if, within one year after the date of Substantial Completion of the Work . . . , any of the Work is found to be not in accordance with the requirements of the Contract Documents, the Contractor shall correct it promptly after receipt of notice from the Owner to do so, unless the Owner has previously given the Contractor a written acceptance of such condition. The Owner shall give such notice promptly after discovery of the condition. During the one-year period for correction of Work, if the Owner fails to notify the Contractor and give the Contractor an opportunity to make the correction, the Owner waives the rights to require correction by the Contractor and to make a claim for breach of warranty. If the Contractor fails to correct nonconforming Work within a reasonable time during that period after receipt of notice from the Owner or Architect, the Owner may correct it in accordance with Section 2.5.[2]

The warranty effectively provides the owner with the right to require—as well as the obligation to allow—the contractor to correct the nonconforming work. Likewise, the contractor has an obligation to correct the work within a reasonable time and a right to correct the nonconforming work before the owner can exercise other remedies to correct the work.

Those rights and obligations, however, expire at the end of the call-back period. That limitation has led to some confusion about the effect of the call-back period on other warranties in the contract. Indeed, owners and contractors sometimes mistakenly assume that the call-back period applies to all of their warranties when it actually does not. The typical call-back warranty provides that the call-back warranty is “in addition” to warranties created elsewhere in the contract and in no way limits the timeline of other express warranties.[3] Further, like the AIA A201, a contract containing a typical call-back warranty may contain additional provisions expressly providing that nothing in the call-back warranty imposes a period of limitation with respect to the contractor’s other obligations under the contract.[4]

Clearly, the typical call-back warranty is intended to be separate from and in addition to the express warranties included in the contract. And unless otherwise expressly stated in the contract, those warranties are not limited by the call-back period specified in the call-back warranty.

 

 

[1] See AIA A201 § 3.5.1 (2017 ed.).
[2] Id. § 12.2.2.1.
[3] See id. (providing that the call-back warranty is “[i]n addition to the Contractor’s obligations under Section 3.5”).
[4] See id. § 12.2.5 (“Nothing contained in this Section 12.2 shall be construed to establish a period of limitation with respect to other obligations the Contractor has under the Contract Documents. Establishment of the one-year period for correction of Work as described in Section 12.2.2 relates only to the specific obligation of the Contractor to correct the Work, and has no relationship to the time within which the obligation to comply with the Contract Documents may be sought to be enforced, nor to the time within which proceedings may be commenced to establish the Contractor’s liability with respect to the Contractor’s obligations other than specifically to correct the Work.”).

 

 

 

 

 

 

 

Amanda Garza’s practice focuses on all types of construction and commercial litigation as well as lien, bond and other construction related claims. To read Amanda’s full bio, click here.