Warranties and Construction Work

Written by Ryan M. Morstad, Law Student

Email: rmorstad@gfslaw.ca

It’s the middle of Winter and you, as the General Contractor, get a call from the owner of your newly constructed condominium building in the middle of the night. A pipe on the third floor has become disconnected and is leaking water, which is seeping through the drywall, and out into the hallway. The water is spreading, and you are unable to turn it off. You call your plumbing sub-contractor; however, they have an “out of office” set stating that they will not be returning for 5 days. What should you do? Should you wait for the sub or hire a third party to repair? If you hire a third party to repair will this void the subs warranty?

Mitigation of Damages

Those who encounter a warrantable construction defect that is causing damage, have a duty to mitigate. The obligation to mitigate is not limited to defects or deficiencies and exists regardless of the nature of the claim.  Mitigating damages means that if your plumbing sub-contractor for example has installed a faulty pipe that leaks, it cannot simply be left to cause damage. Under the law of contract, a wronged party must avoid “unreasonable accumulation” of damages and take steps to limit the impacts of the wrongful conduct[1] (i.e., the faulty pipe installation). Generally, this will involve contacting the company who has installed whatever is causing the damage and allowing them the opportunity to come and repair.  However if that contractor cannot, or does not, respond in a reasonable amount of time, other steps should be taken, such as, hiring a third party to repair faulty work. What is considered to be reasonable time will depend on the circumstances.  In the above example of the pipe leaking, factors to consider would be the size and location of the leak, the external temperature, and whether the leaking water can easily be contained. The key is that the sub-contractor must be given a “reasonable” amount of time to repair the damaged or faulty work.

What happens to the warranty if someone else fixes the defect?  Will my warranty still be valid? 

Having a third-party complete repair work may raise other questions about the warranty on the original work. A term that limits the warranty is known as an “exclusion clause” and will only be found to be enforceable in certain circumstances.

Generally speaking, sophisticated parties such as contractors, who enter into a contract will be bound by the terms of the contract, which includes any agreed to exclusions. An exception to this rule occurs where an exclusion clause in the contract is “onerous or unusual”[2]. Terms that exclude a contractor from liability, or limit ones right to repair, may be seen as onerous, as the cost of repairing deficiencies in manufacture or installation can be astronomical.