Patent versus Latent Construction Defects

A significant issue for homeowners and contractors alike is whether a construction defect is patent or latent. Which category the defect falls into will determine the time within which an action must be brought on the defect. Generally, this means a difference in years with latent defects enjoying a longer limitations period. For example, in California there is a four-year statute of limitations for patent defects, while the statute of limitations period for latent defects stretches to ten years.

A patent defect is one that is plainly evident or can be discovered upon an ordinary and reasonable inspection. Latent defects are essentially hidden defects. They are those that the owner does not know about and, through the exercise of reasonable care, would not be expected to discover. Generally, the statute of limitations for latent defects would run from the date of discovery or the date that the owner should have discovered the defect. However, to protect contractors from endless liability for their work on a construction project, states like California have placed an outside limit on actions for construction defects.

Oftentimes, the parties will argue over whether the defect was actually latent or on what date the homeowner knew or should have known of the defect. This becomes a question of fact with far-reaching ramifications because the limitations period would run based on the answer to the disputed questions. Though outside limitations for latent defects may be on the books in a state, the date of discovery may shorten this limitations period. So, as it is in California, even though there is a ten-year latent defect limitations period, a homeowner is nevertheless required to file his action within three years from the date of discovery or awareness of the latent defect.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.

Negligence Actions Against Contractors

In addition to a breach of contract action against a contractor, an owner may also be entitled to a negligence action against the contractor. This type of action is based upon the contractor’s negligence during the course of a construction project.

The main reason for asserting a negligence action against a contractor is that the damages in a negligence action generally exceed the damages for a breach of contract action. In a breach of contract action, an owner’s damages are limited to damages that were foreseeable at the time of entering into the contract, such as the cost of repair or replacement. In a negligence action, the damages include all injuries that were proximately caused by the contractor’s actions, which injuries or damages may not have been foreseeable at the time of the contract. The damages may include economic losses, such as lost rents, lost profits, and diminution in value of the owner’s property.

Damages in a negligence action against a contractor may also include punitive damages, that is, damages that punish the contractor for his or her negligence. Punitive damages are generally not recoverable in a breach of contract action.

Damages may be recovered against a contractor in a negligence action even when a contract bars an action against the contractor. Disclaimers or limitations of liability under the contract do not apply to a negligence action.

The elements for an owner’s negligence action against a contractor are the same as the elements for any negligence action. The owner must prove that the contractor owed a duty of care to the owner, that the contractor breached that duty, that the owner sustained damages as a result of the contractor’s actions, and that the contractor’s actions were the proximate cause of the owner’s damages.

A duty of care on the part of a contractor to an owner may arise from either the contractor’s general obligation to carry out his or her activities with regard to others or from the contractor’s specific obligation to the owner to perform his or her duties under a contract. If the contractor negligently performs the contract, the contractor has breached his or her duty to the owner.

Some courts make a distinction between nonfeasance on the part of a contractor, that is, complete failure to perform, and misfeasance or negligent performance. Those courts generally hold that only misfeasance will support a negligence action. Their rationale is that failure to perform a contract can only be remedied by a breach of contract action.

An owner may bring an action against a contractor for negligence per se when the contractor has violated a statute or an ordinance. The contractor’s violation of the statute or the ordinance establishes that the contractor was negligent as a matter of law. However, the owner must prove that there was a valid statute or ordinance, that the contractor violated the statute or the ordinance, that the statute or the ordinance was enacted in order to protect the owner, that the injury that was suffered by the owner was the type of injury that the statute or the ordinance contemplated, and that the contractor’s violation of the statute or the ordinance was the proximate cause of the owner’s damages. Examples of negligence per se include a contractor’s violation of the Occupational Safety and Health Act and local building, safety, and fire codes.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.