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DOES VIOLATION OF A BUILDING CODE CONSTITUTE A BREACH OF CONTRACT?

 

In modern law, the duties with which the contractor or design professional must conform to the building codes are typically outlined in the construction contract.  The construction contract will include a number of terms including the price, reference to the design plan and specifications, as well as a clause stating that the builder must perform the work in a “workmanlike manner”, by following building codes, and the following the standards of care in the construction industry.[1]

A contractor often warrants that his work will be performed in a workmanlike manner.[2]  “Workmanlike manner” has been defined as “doing the work in an ordinarily skilled manner as a skilled workman should do.”[3]  In order to determine if the structure was completed in a workmanlike manner, the courts will examine “established usage, procedures, and acceptable industry practices prevailing when such work was performed.”[4]  If a contractor does not perform his work in a workmanlike manner, besides the violation of the Registrar of Contractor standards, the contractor has more than likely breached the contract with the owner and will be liable for the damages that result. 

Arizona courts have found that failure to comply with an applicable building code implies that work is not performed in a workmanlike manner.[5]  For example, in Dillig v. Fisher a builder-vendor sold a house to a purchaser.  Immediately following the date when the purchaser occupied the house, the purchaser “began to encounter numerous problems with the construction of the house, the most significant of which pertained to an allegedly improperly constructed roof which permitted water to leak into the house.”[6]  The trial court awarded the purchaser damages for their costs to repair the roof.[7]

The builder-vendor appealed the trial court’s decision claiming that, because the house was habitable, the builder-vendor could not be found liable for damages.  The appellate court disagreed, stating that the builder was liable for damages as long as the purchaser proved that “the roof was not constructed in a workmanlike manner and that [the purchaser] was thereby damaged.”[8]  The court held that the purchaser had proven that the roof had not been constructed in a workmanlike manner in part because the construction method utilized “was contrary to the Uniform Building Code,” which was the code in force in the city where the home had been constructed.[9]  Therefore, the failure of the contractor to comply with building code requirements resulted in the construction not being workmanlike. 

In addition, construction contracts will often contain a clause stating “the contractor will carry out the work with reasonable skill, care, and diligence pursuant to all applicable standards and industry practices and in compliance to all relevant building regulations and statutory requirements.”  Also, a contract will often contain a clause where the builder warrants that the work performed is “free from defects and in compliance with the contract documents.”  However, even in circumstances where the contract may not directly state the builder’s obligations to comply with building codes, courts have concluded that compliance with codes governing construction work or services performed is an obligation implied in every construction contract.[10]  In fact, a code violation which reduces an owner’s use and enjoyment of his building or property that is not corrected in a timely manner may also be considered a material breach of the contract and grounds for termination with cause.[11]

Not only is a violation of various building codes considered a possible breach of contract, it also runs afoul of Arizona Statues, which would lead to other allegations of breach.  For example, as outlined in A.R.S. § 32-1154(A)(2), a “departure from or a disregard of plans or specifications or any building codes of the state or any political subdivision of the state in any material respect which is prejudicial to another without consent of the owner or the owner’s duly authorized representative and without the consent of the person entitled to have a particular construction project or operation completed in accordance with such plans and specifications of the code” is both considered grounds for revocation or suspension of the contractor’s license and another breach of the contract and grounds for the builder to be terminated with cause.[12]

As is often the situation involving breach of contract litigation, the contract itself will dictate whether the contractor complied with all building codes, permits, variations, and building circumstances.  Most contracts will also include an agreement that the contractor will supply its building in compliance with all local, city, state, and other code regulations involving health and safety.  Additionally, most contracts will include a clause stating that any derivations from these codes must be approved by the owner in writing before the contractor can proceed.  Under these circumstances, most contracts contain these provisions which allow for a breach of the contract if the contractor does not meet these obligations.

[1] Stephanie Wilson, Business Law Deskbook, Advanced Topics in Business Law, Brent Olsen and Lisa Thompson eds., 9A Arizona Practice Series § 38:8 (2012).

[2] Kubby v, Crescent Steel, 105 Ariz. 459, 460, 466P.2d 753, 754 (1970).

[3] J. W. Hancock Enterprises, Inc. v. Registrar of Contractors, 126 Ariz. 511, 514, 617 P.2d 19, 22 (1980).

[4] Id.

[5] See, e.g., Dillig v. Fisher, 142 Ariz. 47, 688 P.2d 693 (App. 1984).

[6] Id. at 48, 688 P.2d at 694.

[7] Id. at 49, 688 P.2d at 695.

[8] Id. at 50, 688 P.2d 696-97.

[9] Id. at 50-51, 688 P.2d at 696-97.

[10] Philip Bruner and Patrick O’Conner, 5 Bruner and O’Conner on Construction Law, § 18:10 (2015); citing Tips v. Hartland Developers, Inc., 961S.W. 2d 618 (Tx. Ct. App. 1998) (design-builder impliedly assumed the duty that the project complied with all municipal building codes so that the owner could receive a certificate of occupancy); Baltimore Neighborhoods, Inc. v. Rommel Builders, Inc., 3 F. Supp. 2d 661 (D. Md. 1998).

[11] Id.; citing Attardo v. Petosa, 240 A.D.2d 607, 659 N.Y.S.2d 294 (New York 1997), abrogated on other grounds by, Brushton-Moria Cent. School Dist. v. Fred H. Thomas Assoc., P.C., 91 N.Y.2d 256, 692 N.E.2d 551 (New York 1998) (construction of a home below standard outlined in the code caused city to refuse to issue certificate of occupancy was determined to be a substantial variance in performance and a material breach of the contract); see also 5 Bruner and O’Conner at § 18:25.

[12] Philip Bruner and Patrick O’Conner, 5 Bruner and O’Conner on Construction Law, § 18:30 (2015).

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