Another important question I am often asked is what happens to a contractor who complies fully with all the local code provisions. Can the contractor breathe a sigh of relief with the knowledge that nothing negative involving the construction contract will occur? Unfortunately, this is not the situation. Even if a builder complies with all building codes, files the appropriate documentation with the applicable government agencies, passes all inspections, and obtains a certificate of occupancy, this does not guarantee that they would be free from litigation and claims of breach of contract.
Often defects will occur even though a contractor complied with all appropriate standards. Although a contractor may be certain that violation of a building code is enough for construction to be shown to be not workmanlike, compliance with a building code is not sufficient evidence to guarantee a finding that construction was performed in a workmanlike manner.
For example, in the Arizona Court of Appeals’ opinion Continental Townhouses East Unit One Ass’n v. Brockbank, the contractor requested two jury instructions that were not given by the trial court: 1) stating that since his contractor’s work passed the City of Mesa minimum workmanship standards, it was good and workmanlike; and 2) “compliance by a contractor with [a building code] discharges [a contractor’s] obligation for the safety of the occupants.” [1]
The Court of Appeals disagreed with the contractor’s argument that the desired instructions should have been provided to the jury, holding that the minimum workmanship standard contained within the building code “was only one of several elements which the jury could consider to determine workmanlike quality.”[2] Instead, the Brockbank Court held that to determine whether a project was performed in a workmanlike manner is “one of reasonableness in light of surrounding circumstances” along with other factors outside of the minimum obligations of the building code.[3]
In the last several years, Arizona has documented an increase of construction defect litigation. Often the allegation is that there was a breach in the “implied warranty” within the contract. In the context of the contract, the implied warranty of habitability is often the term used to show a breach of the warranty in the contract-although not outlined by specific terms in the agreement. It is often defined as a guarantee by the builder that the structure will have no defects that would substantially impair the enjoyment of the property. The breach of this warranty generally involves design or workmanship defects that would make the property unsuitable for its intended use.[4] These implied warranties of workmanship and habitability often interplay and are sometimes treated as one implied warranty.[5] In addition, Arizona courts have expanded the allegation of breach of these implied warranties beyond circumstances where there is privity of contract[6] between the parties.[7] (“Privity of contract” means that only the parties involved in a contract have the right to sue one another to claim a breach of the contract and demand restitution for damages arising from the alleged breach.)
Lawsuits alleging a breach of the implied warranty of habitability often allege a variety of defects in the construction of a property, including building deficiencies, improper design, or other claims of substandard workmanship.[8] One recent case example showing the correlation between violations for building codes, substandard workmanship regulations, and its interplay with Arizona statutes is the Arizona Court of Appeals opinion Forsyth v. Four Crown Construction, LLC.[9] In Forsyth, a contract was entered into between an owner and builder for construction of a residential property. During the course of the home’s construction the owner discovered construction defects as well as other improprieties, halted construction, and later filed a Complaint with the Arizona Registrar of Contractors (ROC) alleging defective workmanship (noncompliance with the code) along with other allegations against the builder.[10] The owner subsequently filed a lawsuit alleging, among other things, breach of contract for the implied warranty of workmanship and habitability.
The subsequent ROC proceedings found that the builder had violated his duties pursuant to regulation and A.R.S. § 32-1154(A)(2).[11] The trial court granted Summary Judgment against the contractor concluding that the ROC decision proves a breach of the implied warranties of workmanship and habitability had occurred. The builder appealed. The Arizona Court of Appeals utilizing the concept of res judicata[12] affirmed the trial court’s decision on this subject, concluding that a violation of the applicable statute also proved a violation by the contractor of the implied warranty of workmanship and habitability and was therefore a breach of the contract.[13]
Although the odds of litigation substantially decrease when the builder has complied with the building codes and other regulations of its work, continued diligence is the key. Sometimes issues will present themselves months, if not years, after a construction project has been completed.
[1] Continental Townhouses East Unit One Ass’n v. Brockbank, 152 Ariz. 537, 542, 733 P2.d 1120, 1125 (Ariz. App. 1987).
[2] Id.
[3] Id. n.5.
[4] See Hill v. Jones, 151 Ariz. 81, 84, 725 P.2d 1115, 1118 (Ariz. Ct. App. 1986).
[5] Lofts at Fillmore Condominium Ass’n v. Reliance Commercial Construction, Inc., 218 Ariz. 574, 190P.3d 733, 735 n. 2 (2008); See Metropolitan Property and Casualty Insurance Co. v. Del Webb’s Coventry Homes, Inc., 2007 WL 5448133 (Ariz. Ct. App. 2007)(unpublished opinion).
[6] Privity of contract – only the parties involved in a contract have the right to sue one another to claim a breach of the contract and demand restitution for damages arising from the alleged breach.
[7] Richards v. Powercraft Homes, Inc., 139 Ariz. 242, 678 P.2d 427 (1984).
[8] See also Stephanie Wilson, Business Law Deskbook, Advanced Topics in Business Law, Brent Olsen and Lisa Thompson eds., 9A Arizona Practice Series § 38:5 (2012).
[9] 2010 WL 2403755 (June 15, 2010).
[10] Id. at *1-2.
[11] Id. at *6.
[12] Res judicata – once a case has been adjudicated by a competent court, the parties may not continue to litigate.
[13] Id.
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