Texas: Implied Warranty of Good Workmanship Can Be Disclaimed in Residential Construction
 
June 2, 2003
 

The Texas Supreme Court recently looked at the issue of whether the implied warranty of good and workmanlike performance could be disclaimed in a residential building contract.  Good news?  You be the judge. 

A class action was brought by Michael Buecher and other homeowners who purchased new homes built by Centex Homes or Centex Real Estate Corporation (Centex).  The homeowners each signed a Standard Form Sales Agreement that purportedly contained a one-year limited express warranty, in exchange for which the homeowner waived the implied warranties of habitability and good and workmanlike construction.  The homeowners sought to have the disclaimer provisions set aside as unenforceable. 

The Texas Supreme Court had previously held that a builder of a new home impliedly warrants that the residence is constructed in a good and workmanlike manner and is suitable for human habitation.  Humber v. Morton, 426 S.W.2d 554, 555 (Tex. 1968).  Later, the Court held that these warranties could be disclaimed or waived if the intent were clearly expressed in the parties’ agreement.  G-W-L, Inc. v. Robichaux, 643 S.W.2d 392, 393 (Tex. 1982).  Most recently, the Court ruled that an implied warranty for repair services could not be waived or disclaimed.  Melody Home Manufacturing Co. v. Barnes, 741 S.W.2d 349, 355 (Tex. 1987).  What does all that mean for home builders?

The Texas Supreme Court in Buecher v. Centex now holds that the implied warranty of good workmanship can be disclaimed, while the implied warranty of habitability cannot.  Centex v. Buecher, 2001 WL 34055991 (Tex. 2002).  The Court explains that the implied warranty of good workmanship requires that the builder use the standard of care in construction that a proficient builder in the same or similar work would use.  On the other hand, the implied warranty of habitability requires the builder to provide a house that is safe, sanitary and otherwise fit for human habitation, or, in other words, that is “suitable for the intended use as a home.” 

The Court surveyed other court decisions from around the country and concluded that the implied warranty of good workmanship merely fills the gap in the agreement when the parties do not otherwise provide for the manner, performance or quality of the desired construction.  Therefore, the Court found that where the contract does provide  an express warranty for the manner, performance or quality of the desired construction, such as in the Centex warranty at issue, the implied warranty of good workmanship may be disclaimed.  At the same time, because the warranty of habitability extends to defects that render the property so defective that it is unsuitable for its intended use as a home, the implied warranty of habitability may not be disclaimed. 

Confused?  We assume the court means the implied warranty of habitability is breached if the house is not safe, structurally or otherwise, for habitation.  But what about the use of the phrase, “suitable for the intended use as a home.”  Does that mean the walls are falling down, or that the paint color is wrong?  Does that mean that there is a sewage backup, or several plumbing leaks?  How do we know?  Several of the Justices seem to recognize this definition lends itself to completely different interpretations depending on whether you are the homeowner or the homebuilder and may have an unknown affect on consumers and builders.  It is notable that the Court’s holding applies retroactively to existing agreements in which no harm has actually been shown.

It is also important to note that the Court originally released its decision in Buecher on August 29, 2002, but that decision has been withdrawn and superceded by the current decision dated December 31, 2002, the substance of which we have described here.  The December decision has not been released for publication and, until released, it is subject to further revision or withdrawal.  There was much dissension among the Justices about the opinion and, absent the interesting fact that the Court made this public policy decision with little industry evidence before it and without actually reviewing the agreement itself, the result of the legal procedural method by which the case came before the Texas Supreme Court.  As a result, this will be an important issue to watch for either subsequent revision of the court’s current opinion or future cases that may come before the court addressing the same issue.

For more information, contact Alex Huddleston and Stacy Vancil, toll free, at 1‑888-688-8500.