Last week, I gave an overview of the claims typically raised in a construction defect case. This week we look at the defenses that a defendant in a construction defect case can raise. Typically, there are three categories of defenses a defendant in a construction defect case may be able to raise:
- Statutory; and
- Common Law.
1. Contractual Defenses.
In my last post, I discussed how plaintiffs in construction defect cases should look to the contract documents when evaluating what claims to bring in a construction defect case. The same contract documents that give rise to a construction defect case can provide defenses to construction defect claims. Three common contract clauses that can be used in defending a breach of contract claim in a construction defect case are:
- Express waiver of warranty;
- Integration; and
Waiver of Warranties.
Many states, including Pennsylvania, recognize an owner can waive the implied warranty of habitability and workmanship by contract. For the waiver to be valid, courts usually require that the waiver be clear and unambiguous. Pennsylvania courts go a step further and require that the waiver specifically reference latent defects.
Plaintiffs in construction defect cases will sometime allege that they were fraudulently induced by the contractor based upon oral representations concerning the quality of construction. These representations do not appear in the contract documents. Integration clauses are clauses in contracts that state that terms in the written document represent the entire agreement and that no representations not contained in writing in the document are not part of the parties agreement. When these clauses exist in the contract, courts have dismissed claims that owners were fraudulently induced by a contractor’s oral representations which do not appear in the written agreement.
A contract may also contain a release of claims against the contractor or developer. If properly worded, the release may be enforceable against claims brought by a plaintiff in a construction defect case.
2. Statutory Defenses.
The Statute of Limitations.
Every state has a statute of limitations that bars claims brought a certain period of time after the injury giving rise to the claim occurs (or a claimant first learns of the injury). The length of time varies depending on the claim alleged. If a plaintiff in a construction defect case brings its claim outside the statute of limitations, the court can dismiss plaintiff’s case. Because the statute of limitations begins to run from the date the plaintiff first knows or should have known about the damage, it is important to discover early on in the litigation when that occurred.
The Statute of Repose.
Most states also have something known as statutes of repose. Statutes of repose bar all claims construction defect claims brought a certain period of time after the building was completed regardless of when the plaintiff learns of the defect. In Pennsylvania, the statute of repose is twelve years Therefore, suppose a plaintiff first learns of a construction defect in December 2012, but the building was completed in 1995. If she filed her construction defect case in January 2013 she would be within the statute of limitation for whatever claim she brings, however, the statute of repose may bar her claim, notwithstanding the statute of limitations, because the building was completed more than 12 years before her claim.
3. Common Law Defenses.
The Spearin Doctrine.
The Spearin Doctrine is one of the best defenses to a construction defect case for a contractor but is also one that is usually not raised. We have written about the Spearin Doctrine on this blog before. The doctrine gets its name from a 1918 United States Supreme Court decision United States v. Spearin, 248 U.S. 132 (1918), which held that a contractor will not be liable to an owner for loss or damage that results solely from defects in the plan, design or specifications provided to the contractor. Effectively, Spearin created a doctrine where the owner impliedly warrants that the plans and specifications if followed will result in a function system. Essentially, Spearin holds that if a contractor is required to build according to plans and specifications prepared by the owner (or the owners representative) then the contractor will not be responsible for the consequences of defects in the plan. In other words, if the contractor builds it as he was told to by the architect and the design does not work, he is not liable for those defects.
Even without a defense barring plaintiff’s claim, defendants in a construction defect case can often mitigate the damages plaintiff is entitled to recover under the dual theories of economic waste and betterment. Generally, the measure of damages in a construction defect case is the cost of completing or correcting the defective work. However, when the cost of completing or correcting the work is disproportionate to the probable loss in value to the injured party then damages will be measured by the difference between the market price that the property would have had without the defects and the market price of the property with the defects. This is known as economic waste.
Betterment prevents an owner from receiving a windfall when repairing or replacing defective construction. Under the theory of betterment, an owner cannot recover the cost of any enhancement or improvement of the replacement work. In other words, the owner can only recover the cost of what he originally bargained for.
Next week, we will look at insurance coverage issues in construction defect cases.