April 12, 2006
Construction Warranties and Liability to Tenants
An interesting recent British case involving a contractual warranty in a construction case presented a knotty question of interpretation. In the case, Contractor had a contract with Developer, who in turn had a contract with Tenant. The Contractor-Developer contract provided:
The Contractor shall owe no duties or have any liability under this deed which are greater or of longer duration in that which it owes to the Developer under the Building Contract.
The Contractor’s work was apparently not very good, and Tenant had to do some remedial work. Developer went bust and owed Contractor more than the amount of the remedial work. Could Tenant recover from Contractor?
No, said the court. The point of the clause was to limit Contractor’s liability to the amount of its obligations to the amount it was to get from Developer. Since it had a set-off against Developer for all claims, it couldn’t be liable to Tenant.
Jeremy Glover of London’s Fenwick Elliott LLP runs down the facts in Will a Warranty Always Enable an Employer to Pursue a Claim Against the Contractor if the Developer Becomes Insolvent?
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