Contractor Warranties: What California Contractors Need to Know

Implied, express, or contractual – warranties are a critical part of contract law that ALL California contractors need to know to be successful.

Sure, one can say “I’m a contractor and not a lawyer!” and while that’s true, it’s also essential that you understand the basics of a contract, to make sure you don’t get burned by sketchy subcontractors or ruthless clients – both of which want to get the most value for the least money.

With that in mind, let’s take a look at warranties for contractors – what they are, what they do, and why you need to know them to be successful as a California contractor.

What Is A Construction Warranty?

In California, a warranty is a legally enforceable assurance provided by a contractor to a client regarding the quality, functionality, and durability of the work delivered.

Warranties in the construction domain serve to uphold professional standards, protect consumer rights, and provide a framework for action and remuneration in case of construction defects or non-compliance with specified standards.

It serves as a pledge that the delivered project will adhere to the specified standards, and should any issues arise within a stipulated period post-completion, the contractor will rectify them at no additional cost to the client.

In legal terms, a warranty refers to a guarantee or promise enshrined within a contract, under which the contractor assures the quality, performance, or condition of a particular subject matter to the client. Warranties also stipulate the consequences of construction defects, legally outlining what a contractor must do in the case of a construction defect.

What Does A Construction Warranty Do?

Warranties, at their very basic level, are legal protections that protect both the contractor and the client by outlining all of the responsibilities of both parties – and the consequences for violating the terms both parties agreed upon.

  • Contractual Assurance: A warranty is a contractual assurance wherein the contractor guarantees the quality and compliance of the job. This could range from the materials used, the workmanship quality, to the project adhering to local building codes and regulations.
  • Binding Obligation: Once a warranty is stipulated within a contract, it becomes a binding obligation, enforceable in court. The contractor is now legally bound to honor the warranty, failing which could result in legal repercussions.
  • Remedial Action: The primary purpose of a warranty is to provide a remedial course of action in case the delivered work doesn’t meet the specified standards. Warranties exist to protect the client, by outlining the specific steps a contractor must take to fix a contractual violation.
  • Risk Allocation: On the flip side, warranties also protect contractors by defining the extent to which contractors are liable for defects or issues arising post-construction.

Types of Construction Warranties

  • Express Warranty: This is a clearly articulated assurance provided by the contractor regarding specific aspects of the construction project. This is essentially any warranty or guarantee a contractor puts in a contract. It specifically and granularly outlines the things they promise to deliver to the client and the timeframe they’ll fix any problems that crop up.
  • Implied Warranty: Unlike express warranties, implied warranties are not explicitly stated but are implied in the very nature of construction. By taking on any construction job, a contractor is tacitly agreeing to these warranties. There are two types of implied warranties in the United States.
    • Workmanship Warranty: guarantees that any construction project will be built in a good or workmanlike manner, free of major defects. This includes both labor and materials.
    • Warranty of Habitability: guarantees that any construction project will be suitable for the purpose they are intended for and be safe to live in.
  • Statutory Warranty: These are warranties determined by the state. Statutory warranties do one thing: they specifically outline the amount of time that contractors are liable for any construction defects.

Common Construction Warranties In California

Warranties in California cover a spectrum of durations and construction aspects, and they can vary from industry to industry and home to home. Here’s some of the main ones you’ll come across in your career as a California contractor.

General Warranties

  • Mandatory Warranties: Contractors in California are obligated to provide warranties on their work, such as a 4-year warranty on installed items, a one-year warranty on the fit and finish of certain areas, and a guarantee against defects in compliance with building codes and manufacturer requirements​.
  • State Law: Notable legal codes include California Civil Code 900, which requires one-year expressed limited warranties for both new construction and remodeling projects, and the Right to Repair Act (California Civil Code 896, et seq.), which includes implied warranties into the one-year warranty requirement.
  • One-Year Warranties: These short-term warranties cover aspects like “fit and finish” of certain elements, “manufactured products,” compliance with “interunit noise transmission standards,” and irrigation, drainage, and landscaping systems​.
  • Two to Five-Year Warranties: These cover medium-sized problems, like untreated wood posts, dryer ducts, plumbing, sewer, electrical systems, exterior pathways, and paint and stains causing deterioration​.
  • Ten-Year Warranties: Ten-year warranties are all about foundational and structural elements. Ten-year warranties ensure long-term accountability on the construction elements most critical to human safety.

Notable Court Cases Involving Warranties

When it comes to contractor contracts, looking to existing court cases is a good way to learn about the system, so you can prepare yourself for even the worst-case scenario.

1. Moore v. Teed

Moore v. Teed was an interesting case about contractual fraud and construction defects, with a big emphasis on the legal application of Business and Professions Code §7160. In the case, a homeowner was suing a contractor for damages because the contractor severely overpromised… and underdelivered to the tune of $300,000.

This ruling gives homeowners more leverage over contractors who promise the world and don’t deliver. In the case, the court ruled that homeowners are entitled to the “image that the contractor promised” when selling their services. In other words, a contractor is liable for the promise of the project made by the contractor and is due damages equal to the promise made to the client – whether it’s in writing or not.

2. Howard Contracting, Inc. v. G.A. Macdonald Construction Co., Inc.

This landmark case made it to the California Supreme Court and set a precedent that allows subcontractors to recover damages for cost overruns caused by delays and disruptions – even if there’s stipulations in the prime contract barring such claims.

The civil ruling changed things for both subcontractors and contractors in California by giving subcontractors the option to sue for – and receive – damages for any out-of-pocket costs or expense overruns caused by delays. The key thing is that even if the prime contract states the prime contractor isn’t liable for damages, they are still liable for damages.

3. Aas v. Superior Court Of California

In this massive 2000 ruling, the California Supreme Court delineated the boundaries of negligence claims in construction defects scenarios. The court ruled that homeowners could not recover damages for construction defects that hadn’t caused property damage. It seems obvious, but before then, there was no legal precedent protecting contractors against

This ruling set a significant precedent on the scope of liability for contractors and developers, finally establishing precedent that homeowners can’t sue contractors for damages related to construction defects…. without actually suffering damages related to construction defects.

It’s wild that we even have to type that…but here we are. Thanks to this court ruling, contractors and the state of California must have saved millions in legal fees from baseless lawsuits.

California Contractors: Get To Know Your Contracts!

As you can see from these court cases, it’s critical for any contractor to know what’s in their contracts – and what’s excluded from them. Any contractor who is too lazy to learn at least the basics of contract law is a contractor who will find themselves in trouble at some point down the road.

We hope this guide serves as a good jumping-off point for your contracting business – now’s the time for you to dig deeper into your own personal situation to make sure you’re covering all your bases and setting yourself up for success as a California contractor.

Additional Reading

California State Licensing Board
Levelset – Warranty requirements for contractors in California​
Esquire REB – New Construction Warranties Provided By California Law​
Valley Contractors Exchange – New Construction Warranties
Stone Sallus – Construction Defect Claims in California: Understanding Your Options​
FreeAdvice – California Contractor Warranty Form
Smith Currie – New California Construction Laws for 2023

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