Update: The merit decision in this case was handed down March 14, 2012. Read the analysis of the decision here.
On October 4 the Supreme Court of Ohio heard oral argument in Paul Jones et al. v. Centex Homes, case # 2010-1826. The issue acknowledged by both sides to be one of first impression is whether the implied duty to build a house in a workmanlike manner can be waived. Existing law neither expressly permits nor expressly prohibits such a waiver. For further detail, see the oral argument preview of this case.
Counsel for the buyers argued that there is a difference between a warranty and a duty, and that the Ohio Supreme Court has clearly held that the implied warranty to build a house in a workmanlike manner is a tort duty, which cannot be waived. Allowing such a waiver would make Ohio the only state to permit a builder to waive its own negligence, and would leave a new home owner with nothing, which is against public policy. He also argued that the waiver was insufficient under Ohio law because it was not a voluntary relinquishment of a known right.
Disagreeing, counsel for Centex argued that there is no distinction between an implied warranty and a duty to build in a workmanlike manner. An implied warranty to build in a workmanlike manner is a tort duty, which can be waived, and was, in this case. Home buyers are obligated to read the contracts which they sign. This contract clearly and conspicuously limited all warranties to 116 express warranties contained in a separate Limited Home Warranty booklet, available for the buyers’ inspection upon request. The buyers did not get nothing in this case. They got the specific express warranties contained in the booklet. The sellers relied on the waiver, and would not have sold the property without it.
What’s this Implied Warranty to Build in a Workmanlike Manner All About?
Justice Stratton asked how far the duty extended, and what its parameters were. Was this implied warranty unique to home building, or did it extend to any product? Was there any distinction between an implied warranty and a duty to build in a workmanlike fashion?
Justice Lanzinger asked for a definition of what it means to construct in a workmanlike manner. No problems in the house whatsoever? If a home does have problems, should a jury decide about duty and breach even though the buyers signed a contract waiving all other claims? If proceeding on a negligence theory, would the plaintiffs have to show something like defective workmanship in the placing of the steel joists?
Really, magnetized steel joists??
Justice Stratton asked if there was any dispute about the magnetization.
Justice Lanzinger asked who should be responsible for this? The general contractor? The manufacturer of the joists? Had the buyers sued the manufacturers of the joists? Was the plaintiff saying the general contractor should have a duty to insure all the components that go into a home?
Chief Justice O’Connor asked if magnetization was inherent in the use of steel joists. Was plaintiff claiming that the use of the steel joists was the failure to build in a workmanlike manner? Was the creation of the magnetic field what the plaintiff sought to hold the builder responsible for? Did the builder cause this?
Justice McGee Brown commented that surely not every house that uses steel joists becomes magnetized. It would never occur to her, she said, that if she built a new home her electronics wouldn’t work. At what point would interference with the daily use of household electronics become a breach of duty?
Justice Cupp asked whether there was any authority that the implied warranty could not be waived? Wasn’t there a substitution here of one kind of warranty for another?
Justice O’Donnell noted that the Court has not permitted waiving one’s own negligence in medical malpractice claims—why should this be allowed in a building contract? Was the waivablility issue even a matter for the courts, or for the General Assembly?
The Sale Contract
Justice O’Donnell quoted from the contract as waiving all express or implied waivers and all other claims for damages to property or personal injury except what was found in the separate booklet—what did that mean, especially the waiver of all other claims? When the contract states that all claims other than those in the limited warranty booklet are waived, isn’t the duty to build in a workmanlike fashion one of those that is waived?
Chief Justice O’Connor asked if Centex was saying the plaintiffs signed documents saying they were not expecting good workmanship on their homes?
What Exactly are the Buyers Getting Here? And What is Fair to Expect of the Buyers?
Justice Pfeifer asked whether the sales contract is substituting a list of permitted express warranties for the implied warranty of good workmanship.
Chief Justice O’Connor asked whether the warranties in the limited warranty booklet were superior to an implied warranty of good workmanship? A substitution for it? Or an attempt to narrow a builder’s legal obligations? She asked if the 21 page express limited warranty was some type of standard document.
Justice McGee Brown expressed her concern with a contract under which a home buyer had to request a separate document that contained express warranties.
Justice Pfeifer reviewed the history of caveat emptor in Ohio, noting that was the rule until the legislature stepped in and required certain kinds of representations to be made by the seller. If the implied warranty can be waived, can a new home builder get away with something an existing homeowner cannot? If the Court were to approve the right to contractually eliminate all tort exposure in a new home, would that be unconscionable?
Justice Stratton asked even if the buyers had carefully read the limited warranty booklet, would they have known the house might be magnetized and that they were waiving that?
Justice Cupp asked what remedy the plaintiffs sought. Monetary damages, or replacing equipment? Was there anything in the limited express warranty that would not be available under the implied warranty?
How it Looks from the Bleachers
While Justices Stratton and Lanzinger seemed sympathetic to the buyers’ plight, I think a majority of the justices will find that the implied warranty to construct a house in workmanlike fashion can be waived in favor of an express limited warranty, so long as the contract language is clear and conspicuous, and the buyers are not left without any remedy. They will likely accept the argument that buyers are obliged to read sales contracts that they sign, and that the waiver language was clear and conspicuous.
Justices Pfeifer and McGee Brown seem the least inclined to accept this type of waiver, appearing to disapprove of a separate limited warranty document referenced in the sales contract that the buyers had to seek out.