Sometimes construction material or equipment the contractor buys turns out to be defective.  It leaks. A part is missing.  Something simply does not function straight from the box.  Jumping on the defect claim may not seem to have highest priority in the middle of a construction project.  “Back charge” may the automatic response, but it may also be the wrong one.

Typically, the contractor warrants that all materials and equipment will be new and of good quality and it warrants that its workmanship will be free from defects.  The contractor usually also warrants that it will come back for one year (or more) to repair or replace work which is found to be defective (at least in the eyes of the owner). If an issue arises on the job, any differences between the contractor’s warranties and the warranties on that material or equipment become important.  Contrary to a contractor’s usual expectations, those warranties often do not correspond.  The contractor may discover it made broader warranties to an owner than the warranty available from the particular vendor and finds itself liable to the owner to fix a “defect” in the vendor’s product or system (“defect” in the eyes of the owner) or for a measure of damages not covered by the vendor’s warranty.  This hazard is particularly important in this time of pervasive design-build.

When construction material or equipment arrives, the contractor has the responsibility to inspect them before they are legally accepted or rejected. (UCC 2-513).  Once the goods are accepted, the focus shifts to the vendor’s warranties.  In order to protect the right to a warranty claim against the vendor or manufacturer, UCC requires timely notice of the defect claim.  Failing to give notice can result in being barred from having any remedy. That could include effectively invalidating that back charge that jumped to mind.  Attempting to rely on an unsupportable back charge could end up exposing the contractor to a lien or bond claim by the unpaid vendor as well as the “defect” and the cost to fix it because of the upstream warranty obligations to the general contractor or the owner.

The important notice requirement is UCC Section 2-607 (3)(a):  where a tender has been accepted (contractor took delivery of the goods, used them or did not send them back promptly) the buyer must, within a reasonable time after buyer discovers or should have discovered any breach of contract (defect),  notify the seller of the breach or be barred from any remedy.

In addition, in recognition that vendors of goods often have little flexibility in price for most products, those vendors need to be able to control their risks because risk translates to cost.  The UCC allows vendors to disclaim most warranties and provide only a limited warranty instead.  The limited warranty is often expressed as repair or replace only.  Repair or replace generally does not include the cost to remove and reinstall.

There is no universal rule for limiting this risk exposure to contractors. The UCC presents buyers and sellers of construction materials and with both opportunities and challenges.  Reading the forms you use or sign is the first step.  What warranty and what limitations does the vendor actually make? Just because someone says “per plans and specifications” may not overcome a limited repair/replace warranty or extend a short warranty into a longer one.  Even where a vendor’s warranty terms may not be very negotiable, the contractor must at least recognize and understand the risks it takes on board and manage the work accordingly. The reflexive resort to a back charge might leave that contractor high and dry.