George Eppsteiner and Daniel Katzenbach – August 9, 2013
Most would assume that a warranty lasts for as long as the warranty’s terms. In North Carolina, a recent Court of Appeals decision has made clear that an extended warranty, absent evidence of fraudulent, willful, or wanton conduct, is limited to a six year term for contractors and product manufacturers for new construction, irrespective of the express terms of the warranty. Christie v. Hartley Construction, Inc., COA12-1385 (N.C. Ct. App., July 16, 2013).
In Christie, the Plaintiffs were owners of a newly constructed home where the certificate of occupancy was issued in March 2005. The homeowners’ lawsuit alleged that a waterproofing product of GrailCoat, which was installed in the home, led to the cracking of the home’s walls and compromised the structural integrity of the home. The homeowners alleged that the waterproofing product was warranted by GrailCoat for as many as 20-50 years and sued the contractor and manufacturer for monetary damages.
However, the North Carolina Court of Appeals in Christie states that while a product warranty may be in excess of six years, a party cannot bring a lawsuit for damages (money) after six years from the substantial completion of a real property improvement. The Court in Christie references North Carolina General Statute, 1-50(a)(5) which states:
“No action to recover damages based upon or arising out of the defective or unsafe condition of an improvement to real property shall be brought more than six years from the later of the specific last act or omission of the defendant giving rise to the cause of action or substantial completion of the improvement.”
The Christie Court makes clear that the statute above (commonly known as the Statute of Repose) absolutely prevents a lawsuit for money damages if the lawsuit has been brought more than six years after the substantial completion of the project. “If the action is not brought within the specified period, the plaintiff literally has no cause of action…a wrong for which the law affords no redress.” Since the homeowners did not file their lawsuit until October 2011, more than six years after the certificate of occupancy was issued (March 2005), the homeowners could not file a lawsuit for money damages against the product manufacturer or the contractor after March 2011.
A couple important points to keep in mind after this Christie decision. First, the Court did not absolutely prevent a lawsuit when a warranty over six years is involved; only lawsuits for monetary damages are barred. Therefore, a homeowner could allege specific performance (the contractor or manufacturer must actually perform the act to satisfy the warranty) of a lengthy warranty after the six year statute of repose and may be able to pursue this relief in a lawsuit. Also, the above six year limitation against contractors and manufacturers related to real property construction does not apply to fraudulent, willful, or wanton conduct, and therefore contractors and manufacturers would not be protected if there is any evidence of intentional wrongdoing. However, the significant take-away from this case is that even when a long-term warranty exists, the warranty may be extremely limited in the North Carolina courthouse.