In addition to the express terms of a construction contract, there are various warranties that are implied under statutes. This applies to all residential building work.
There are two main sources of implied warranties. The first is the Building Act 2004 and the second is the Consumer Guarantees Act 2003.
The Building Act 2004
The implied warranties are set out in s 362I of the Building Act. They require that:
- All building work be carried out in a proper and competent manner and in accordance with plans and specifications set out in the contract; and in accordance with the relevant building consent.
- All materials used will be suitable for the purpose for which they will be used; and unless otherwise stated in the contract, will be new.
- The building work will be carried out in accordance with, and will comply with, all laws and legal requirements, including, without limitation, the Building Act and its regulations.
- The building work will be carried out with reasonable care and skill, and completed within the time specified or a reasonable time if no time is stated.
- The dwelling will be suitable for occupation at the end of the work.
- If the contract states the particular purpose for which the building work is required, or the result that the owner wishes the building work to achieve, so as to show that the owner relies on the skill and judgment of the other party to the contract, that the building work and any materials used in carrying out the building work will be reasonably fit for that purpose; or be of such a nature and quality that they might reasonably be expected to achieve that result.
The above warranties apply for 10 years regardless of the form of the contract. In addition to the above warranties, s 362Q provides a 12-month defect repair period in that if any defects are identified within 12 months from the completion date, the contractor has an obligation to fix them. We recommend keeping copies of your contract and all other building documentation for your own reference and for future purchasers of the property. Also, all copies of all correspondence with the contractors involved in construction.
Where there is a breach of an implied warranty and if the breach can be remedied:
- The party may require the contractor to remedy the breach (including repairing or replacing defective materials supplied by the contractor or the contractor’s subcontractor).
- If the contractor, after being required to remedy the breach, refuses or neglects to do so, or does not succeed in doing so within a reasonable time, the party may have the breach remedied by someone else and recover from the contractor all reasonable costs incurred in having the breach remedied, or cancel the contract.
- The party may obtain from the building contractor damages for any loss or damage to the client resulting from the breach (other than loss or damage through reduction in the value of the product of the building work) that was reasonably foreseeable as liable to result from the breach.
In most cases, a breach can be resolved through negotiation. However, if the breach cannot be remedied, the party may obtain from the contractor damages in compensation for any reduction in value of the product of the building work below the price paid or is payable by the client for that work, or cancel the contract.
These warranties extend to subcontractors. This means that communication is key. Contractors should make all subcontractors aware of the required standards, especially in relation to any amendments or variations so that they may then be communicated back to the principal.
The Consumer Guarantees Act 1993
The guarantees provided under the Consumer Guarantees Act are set out in ss 28 to 30. Where building services are supplied to a consumer, they are guaranteed such that:
- Services will be carried out with reasonable care and skill.
- The service and any product resulting from the service will be fit for particular purpose.
- Where a timeframe is not contractually agreed, services provided to a consumer will be completed within a reasonable time.
- Where a price is not contractually agreed, the consumer is not liable to pay more than a reasonable price for the services.
Where services fail to comply with guarantees, and the failure can be remedied, the consumer may:
- Require the supplier to remedy it within a reasonable time;
- Where a supplier who has been required to remedy a failure refuses or neglects to do so, or does not succeed in doing so within a reasonable time:
I. Have the failure remedied elsewhere and recover from the supplier all reasonable costs incurred in having the failure remedied; or
II. Subject to s 35, cancel the contract for the supply of the service in accordance with s 37.
Conclusion
It is important that contractors and consumers alike are aware of the implied warranties provided by the legislation on top of the warranties explicitly provided in construction contracts.
Contact us if you are concerned about the implied warranties identified in this article following or during your construction project. Our lawyers at Norling Law can review your circumstances and discuss strategies on how to progress your project as part of our no obligation legal consultation.
To book a free 30-minute consultation, please click this link https://norlinglaw.co.nz/consultation-brent/
Brent is the Director of Norling Law. He has a wealth of experience in the District Court, High Court, Court of Appeal and Supreme Court. Brent is passionate about negotiating favourable outcomes for his clients and able to implement this in his daily negotiations.
Wendy has over 20 years’ experience in civil litigation in New Zealand with a main focus on construction, insolvency and debt recovery and security enforcement.