Supreme Court Upholds Long-Term Building Product Warranty

On December 19, 2014, the Supreme Court of North Carolina issued its decision in Christie v. Hartley Construction, Inc. Christie establishes that long-term warranties on building products are enforceable in litigation notwithstanding North Carolina’s six-year statute of repose for construction claims. Put simply, Christie means that, in North Carolina, long-term warranties on building products mean what they say. The decision provides clarity to contractors, design professionals and project owners concerning the risk of litigation associated with building products offering warranties in excess of six years.

In 2004, the homeowners/plaintiffs in Christie accepted their contractor’s recommendation of a particular synthetic stucco product which carried a 20-year warranty against cracking, crazing or delaminating. After several years, the synthetic stucco began cracking, resulting in significant moisture intrusion. In 2011, the manufacturer offered to replace the stucco, but refused to pay to repair the moisture damage. The homeowners proceeded to sue the manufacturer and contractor for breach of warranty and negligence. Both the trial Court and the Court of Appeals found for the defendants, ruling that the lawsuit was barred by North Carolina’s six-year statute of repose. The Supreme Court reversed the lower courts, ruling that the public policy allowing private parties to contract freely (e.g., through a long-term warranty) trumps the public policy underlying the statute of repose. The Supreme Court sent the case back to the trial court to determine whether the warranty was breached, and whether the contractor was negligent in recommending the synthetic stucco product in the first place.

Although Christie can be reasonably viewed as a setback for contractors and design professionals, the decision provides clarity on the risk of litigation associated with building products carrying long-term warranties. It also allows builders and product manufacturers to offer meaningful long-term warranties that can help distinguish their products from competitors’ products. Contractors and design professionals would be wise to secure indemnity protection from manufacturers of such products, and to ensure that their contracts with project owners properly disclaim liability for claims arising from the failure of such products to perform as warranted, or at least claims which arise following expiration of the six-year statute of repose. All project stakeholders should likewise bear in mind the continued importance of assigning such warranties to the owner on a pass-through basis.