John M. Kirby April 20, 2014

In Nowlin v. Moravian Church in America, decided by the Court of Appeals on July 16, 2013, the court ruled that a claim against a contractor was barred by the six year statute of repose, notwithstanding that the builder warranted the product for 20 years

In this case, the paintiffs contracted for the construction of a house in 2004. For the exterior, the builder used a product manufactured by Grailcoat, which was a direct-applied exterior finish system, applied over structural insulated panels." The manufacturer's webiste warranted the product for 20 years. The plaintiffs alleged that due to defects with the product and instructions for installation of the product, it failed causing leaking, resulting in damage to the house. They also alleged that the product was inherently defective and violated the building code. The plaintiffs filed suit in October 2011. The certificate of occupancy was issued in March 2005.

The lower court dismissed the case against the manufacturer, on the basis of the six year statute of repose in G.S. 1-50(a)(5). The majority of the panel ruled that prior case law indicated that the plaintiff's sole remedy for violation of the express 20 year warranty was "specific performance," rather than a lawsuit for "damages."

Judge Hunter dissented. He found that the issue in this was was a "full warranty," where as the warranty at issue in the primary prior case was more limited.

This case is of great significance to the law of North Carolina regarding claims against manufacturers, and also against home builders and other parties. Much of the confusion in these cases stems from what is meant by a "warranty." In some cases, a "warranty" is simply a promise or representation (e.g. that the product will last 20 years). In other cases, a "warranty" is a very specific set of remedies provided to the buyer (e.g. the seller agrees to repair or replace the product for defects within a one year period). In neither of the North Carolina cases on this issue are the terms of the warranty clearly set forth. It seems that the better reasoned view is that unless the manufacturer's (or builder's) warranty expressly limits the buyer's remedy to specific performance (e.g. repair or replace), and does not limit the buyer from recovering consequential damages, that the buyer should be able to sue for those consequential damages (e.g. damage to the structure of the house) even after the statute of repose has expired. This case is, however, likely to ultimately be decided by the North Carolina Supreme Court.

John Kirby has handled many construction defect cases.