Implied warranties under sections 396-399 of the Building Act 2004
Implied warranties are different from product warranties because they are duties that can arise automatically without a guarantee ever being offered.
Consumer protection measures set out in sections 362 to 399 of the Building Act 2004 offer homeowners increased protection by ensuring various warranties are implied into certain contracts regardless of whether the warranties are specified in the contract.
The warranties are implied despite any provision to the contrary in any agreement or contract.
When do the implied warranties apply?
These 'implied warranties' only exist in certain circumstances. The warranties apply to two types of contracts for:
- building work on household units
- sale of household units by a commercial on-seller (someone building a property specifically for sale).
The warranties will only be implied into contracts of these types if the contract was entered into from 30 November 2004, the main commencement date of the Building Act 2004.
The contract need not be written for the implied warranties to apply. The warranties are also implied into contracts that arise from an oral agreement or understanding (for example, a verbal contract for building work on someone's house).
What are the implied warranties?
The implied warranties for products are:
1. All materials supplied for use in building the household unit:
- will be suitable for the purpose they are used, and
- will be new (unless otherwise stated in the contract).
2. If the contract states a purpose or result expected by the owner, the building work and materials will be:
- reasonably fit for that purpose
- of a nature and quality reasonably expected to achieve that result.
There are also implied warranties relating to the way in which building work is done. These are:
1. The building work will be done:
- in a proper and competent manner
- with reasonable care and skill
- according to the plans and specifications in the contract
- according to the building consent
- according to all laws and legal requirements (this includes the Building Act 2004 and the Building Code).
2. The building work will be completed by the date specified in the contract (or if no period or date is specified, within a reasonable period).
3. The household unit will be suitable for occupation when building work is complete.
Claims for breach of implied warranties
The contractor (in a contract for residential building work) or the commercial on-seller (in a contract for sale of a household unit), is responsible for ensuring that he or she meets each of the implied warranties. Breach of the implied warranties would be considered a breach of contract.
The recourse for breach of contract depends on the circumstances of the particular case, but are likely to include monetary damages based on the nature of the loss suffered.
The period for an owner to bring action for breach of contract is six years from the date of breach.
Not only the original owner, but also future owners of the household unit to which the contract applied, are entitled to enforce the implied warranties as if they were a party to the original contract (section 362J).