Legal Notes: Climate change could affect the nature of fit for purpose warranties
Warranties generally fit into one of four types: Implied warranty, warranty of merchantability, warranty of title and warranty of fitness for purpose. Each is designed to meet the specific expectations of the purchaser. As Nicholas Ellis of U.S. law firm Foley & Lardner LLP writes, “Some of the most important terms in any contract for the purchase or sale of goods are the warranties that apply to those goods.”
As construction is affected by the ongoing evolution of codes and standards, increased focus is being placed on the fit for purpose warranties provided under the project contract. However, disputes still arise even when work carried out to the letter of the specifications fails to perform to the required function.
The Supreme Court of Canada spoke to this back in 1966 in the case of Steel Co. of Canada vs. Willand Management Ltd. It ruled, “generally the express obligation to construct a work capable of carrying out the duty in question overrides the obligation to comply with the plans and specifications, and the contractor will be liable for the failure of the work notwithstanding that it is carried out in accordance with the plans and specifications.”
This is powerful stuff. As Ellis explains, “unless properly disclaimed in the contract, an implied warranty of fitness for (a) particular purpose arises when: (1) the seller knows, or should know, buyer’s purpose for the goods; and (2) the seller knows, or should know, that buyer is relying on seller to determine what the buyer needs for that purpose.”
Climate change initiatives could make matters even more complex for warranty obligations, writes David Warren, partner with international law firm Corrs Chambers Westgarth.
This raises issues never encountered before in standard construction contract agreements.
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