Review and offer edits to legal memorandum as well as correct use of citations.Cause of Action against Builder for Breach of Contract - Christopher & Ellen Parker

MEMORANDUM

To: Alexander Walker, Supervising Attorney

From: Donna

Re: Cause of Action against Seller for Breach of Contract - Christopher & Ellen Parker

Date: September 13, 2018

1. Introduction

In June of 2007, Christopher and Ellen Parker purchased a newly constructed home located at 242 Crester Lane, La Plata, New Jersey. After living within their new home for a few months, the Parkers noticed that the roof was leaking in several areas and rainwater had started to leak into their living room and bedroom. The shingles started to flake away and were no longer protecting the under-layer portion of the roof’s surface. Once the under-layer had disappeared, the roof’s surface was no longer being protected and caused damage to their home.

1. Issue

Do the Parker’s have cause for action for breach of warranty and who could this action could be brought against?

III: Short Answer

Since implied warranties of habitability and a contractor’s promise to perform the “work” in a good and workmanlike manner cannot be waived, the builder is liable for the damage to the roof and any water damage caused by the leak.

1. Discussion

Breach of warranty is considered by most to be a more specifically defined form of negligence. There are three typical categories for breach of warranty including breach of express warranty, breach of implied warranty of merchantability, and breach of implied warranty of fitness for a particular purpose. Breach of express warranty means the manufacturer violated their own written guarantee. Breach of implied warranty implies the defective product was reasonably understood to be free from defect and no disclaimers such as "as is" or "with faults" indicated otherwise. Breach of implied warranty of fitness for a particular purpose means the seller knew the buyer's purpose and the buyer was relying on the seller's skill and judgment to fulfill that purpose.

When land, new homes, and other forms of real estate are sold, the real estate usually comes with at least one warranty. Sellers and buyers of real estate may negotiate warranties regarding the title to the property. They also may negotiate additional warranties for the property, such as warranties on plumbing or electricity or any other matter of special concern. If such defects occur, the builder, and not the original buyer, is financially responsible for their repair. “There is an implied warranty that builder-vendors have complied with the building code of an area in which the structure is located. Where, as here, a home is the subject of sale, there are implied warranties that the home was built in workmanlike manner and is suitable for habitation”

In analyzing the circumstances of the Parker home, the builder of their home has a duty to ensure the construction of the home is without defect and is applicable to the building codes of the area. In the case of Schipper v. Levitt & Sons, 44 N.J. 70, 207 A.2d 314(1965), the Supreme Court of New Jersey acknowledged “the need for imposing on builder-vendors an implied obligation of reasonable workmanship and habitability which survives delivery of the deed.” In deciding who has the responsibility in liability for the damage of the roof, including the damages to the home after the roof began to leak, we must define the merchant of the goods sold and who is responsible for the roof and the shingles flaking away which caused the leak. Under most circumstances, there is rarely any question as to whether the seller is the merchant of the goods sold.

In the case of Humber v. Morton, 426 S.W.2d 554 (Tex. 1968), the petitioner sued the respondent who was the builder of their home “claiming that the house she bought from the builder was not suitable for human habitation.” The petition claimed the construction of the fireplace and the chimney within the home was defected due to improper construction. When the owner of the home built a fire within the fireplace, the house caught on fire. The respondent filed a motion for a summary judgment “holding that the fireplace was built by an independent contractor, and the doctrine of implied warranty did not apply. Two grounds of defense were brought up by the builder “(1) that an independent contractor built the fireplace and, therefore, the builder was not liable, (2) the doctrine of caveat emptor applied to all sales of real estate. The Court granted the respondent’s motion for summary judgment, ruling that the “that the fireplace was built by an independent contractor, and the doctrine of implied warranty did not apply.”

The lower Court’s decision was reversed and remanded ruling that the “the respondent built the house and sold it as a new house, the law raised an implied warranty that the house was constructed in a good workmanlike manner and was suitable for human habitation.” The issue in this case is whether a homebuilder may disclaim the implied warranties of habitability and good and workmanlike construction that accompany a new home sale. Holding that the implied warranties of habitability and good and workmanlike construction could not be waived, the court of appeals reversed the trial court's judgment and remanded the homeowners' claims for further proceedings, 18 S.W.3d 807. The important aspect of this case is that the sale and construction of a new dwelling carries with it the laws of habitability. In the Parker’s case, the implied warranties of habitability and good and workmanlike construction cannot be waived, therefore, the builder is liable for the damage to the roof and any water damage caused by the leak.

The Uniform Commercial Code (UCC), adopted by most states, provides that courts may imply a warranty of merchantability when (1) the seller is the merchant of such goods, and

(2) the buyer uses the goods for the ordinary purposes for which such goods are sold (§ 2-314). Thus, a buyer can sue a seller for breaching the implied warranty by selling goods unfit for their ordinary purpose. If a seller does not live up to the warranty - whether express or implied - the Uniform Commercial Code gives the buyer a choice of remedies” (§ 2-714).

For a breach-of-implied-warranty claim to be successful, the consumer must establish that an implied warranty existed, that it has been breached, that the breach harmed the consumer, that the consumer dealt with the party responsible for the implied warranty, and that the consumer notified the seller within a reasonable time. In the Parker’s case, an implied warranty existed since “there is an implied warranty that builder-vendors have complied with the building code of an area in which the structure is located. Where, as here, a home is the subject of sale, there are implied warranties that the home was built in workmanlike manner and is suitable for habitation.”

The policy behind the implied warranty of merchantability is basic: sellers are generally better suited than buyers are to determine whether a product will perform properly. Holding the seller liable for a product that is not fit for its ordinary purpose shifts the costs of nonperformance from the buyer to the seller. This motivates the seller to ensure the product's proper performance before placing it on the market. The seller is better able to absorb the costs of a product's nonperformance, usually by spreading the risk to consumers in the form of increased prices.

1. Conclusion

Under the provisions of the implied warranty that work performed will be done in a skillful manner, the Parker’s can sue the builder under the breach of contract principles. If the seller of real estate is the same party who constructed a building on the property, a warranty of habitability may be automatically included in a sale of the property. A warranty of habitability in the context of a sale of real property is a promise that the dwelling complies with local building codes, was built in a professional manner, and is suitable for human habitation. In the Humber case, the Court’s decided “the respondent built the house and sold it as a new house, the law raised an implied warranty that the house was constructed in a good workmanlike manner and was suitable for human habitation.” The issue raised in this case is whether a homebuilder may disclaim the implied warranties of habitability and good and workmanlike construction that accompany a new home sale.

In the Parker’s situation, the provisions under implied warranty of merchantability can be applied. Under the UCC, the Parker’s have a cause of action for breach of warranty since the builder did not live up to the warranty (§ 2-714). In addition, the implied warranties of habitability and a contractor’s promise to perform the “work” in a good and workmanlike manner cannot be waived; therefore, the builder is liable for the damage to the roof and any water damage caused by the leak.