Pete discusses the warranties subcontractors offer and how to remain fair and profitable within these.

I recently bought a bed from a Washington-based company called Sleep Country U.S.A. Prior to one year's worth of use I noticed the "top of the line" mattress sagging similar to the old grey mare's back. I notified Sleep Country U.S.A., and I received a letter advising me the manufacturer will come out and do an inspection (Hmmm ... I thought I bought the bed from Sleep Country). The inspection was performed and I received a second prompt letter, advising me that I had damaged the bed and therefore it would not be covered under warranty. My $1,800 king-size bed and I are out to pasture with the grey mare, not to mention I feel like I should buy some scuba equipment since I'm in so deep!

You wonder: how do these bed problems apply to subcontracting? They apply because we subcontractors are too liberal with our warranties. It seems as though we enjoy taking on more and more liability. When we submit a warranty letter stating, "We warrant our work to be free from defects in material and labor," do we indicate a starting and ending date of the warranty? Why do we provide a warranty if we've not been paid in full? Have we done our duty in striking contract language that turns a one-year warranty into a six-year warranty, or has us warranting the design of the architect or engineer?

The following is an excerpt of warranty language contained in a contract, which my customer expects me to sign:

The subcontractor warrants and guarantees the work and materials which he performs or furnishes under the subcontract and agrees to make good, at his own expense, any defect in materials or workmanship which may occur or develop prior to contractors release from responsibility to the owner thereof as required by the contract documents.

(Not bad so far?)

Subcontractor further agrees to adopt and assume, as a direct obligation to the contractor and or the owner, any guarantee or warranties which would otherwise be the responsibility of the contractor or other subcontractors which when such guarantees or warranties have been voided, waived, withdrawn or cancelled as a result of the subcontractor's operations hereunder, or on account of any act or omission of subcontractor in the performance of this subcontract. Subcontractor's responsibility for latent defects shall extend beyond the warranty period to the full extent applicable statutes permit.

It's all Greek to Pete

I'm going to stop writing at this point and e-mail this to Kerry Lawrence, our attorney, to find out what the heck this second paragraph means.

Hi Pete!

That paragraph means that if you do anything that voids or in some way limits any warranty of another subcontractor, supplier or the contractor, you have to make good on the original warranty. A good example would be if your workers got drywall mud on some surface warranted by another subcontractor and manufacturer. If the mud in some way reacted with the material in a way that the manufacturer and subcontractor would no longer warranty it, you have to pick up their warranty.

The last sentence of the paragraph means that if there is some hidden defect in your work that is not discovered during the warranty period, but later causes damage, you are responsible for up to the six-year statute of limitations for written contracts. For example, one of your workers slips with a screw gun and drives a screw into a copper water line. The line doesn't leak for three years because the screw threads can hold the pressure, but corrosion slowly leads to a leak. You are still responsible to repair the damage because the defect was hidden.

Sincerely,

Kerry

Thanks, Kerry! I wonder how many times we drywall contractors have voided the warranty of another subcontractor? How about taping mud on a concrete floor that is later covered with linoleum? If the linoleum releases, we may be blamed for the problem. Or sanding dust sucked into a new rooftop-heating unit? This could be ugly since we were the ones begging the general to give us heat!

The nature of construction causes potential warranty issues. Do we really want to warrant linoleum, air-handling units, as well as wall coverings for more than a year? Six years seems a little excessive.

The following are suggestions you may want to try:

? Get a certificate of insurance from your supplier, naming you as additionally insured. (This should be standard practice since they work on your job.)

? Provide your supplier with a warranty form to sign, which includes similar language you contractually agreed to.

? Get rid of contract warranty language that is vague or indefinite with regards to durations.

? Get advice from a qualified construction attorney.

? During construction, advise the general contractor in writing of conditions that may result in a warranty issue.

? Include in your quote a specific warranty duration.

? Use your quote for excluding such things as dust control and floor protection. (Remember your bid is based on all the conditions you put in your quote.)

? Make note on your quote form that your quote is to be made part of the subcontract.

? Make any warranty letter you provide conditioned upon the fact that you are paid 100 percent of contract work, change order work and retention.

More than that

Since material is roughly 30 percent of a drywall contractor's job (in our area), and since our suppliers deliver material to our job sites (for which we are responsible), wouldn't you agree that subcontractors need more than the limited warranty provided by the manufacturers?

I've seen manufacturer warranties that are limited to giving us new material to replace the bad stuff. In this case the subcontractor is responsible for all installation costs, as well as the cost to remove the bad stuff. At that point our budget is blown!

I don't believe that a manufacturer after reading this story is going to jump up and say, "We are going to make our warranties more broad." I do think subcontractors must gain the support of suppliers and let them lead the charge for improving manufacturer warranties.

My conclusions based on my own personal experience with drywall manufacturers have been that James Hardie Gypsum handles warranty issues well. I've found that the company is quick to respond and resolves problems fairly. I'm sure all of us have war stories, but the bottom line is whether or not your supplier and manufacturer resolves the problem fairly and quickly.

We need to be clear with general contractors and suppliers that we cannot afford to take full responsibility for those issues that are not in our control. We are not in control of the manufacturing process of drywall products, nor are we in control of the GC or other subcontractors.

I hate open-ended stories, but the fact remains we subcontractors once again carry the entire burden when we sign contracts that extend our liability to include those things we have no control over.

We make our beds by the contracts we sign and the quotes we submit. The bed I bought from Sleep Country U.S.A. sags so bad I have to roll uphill to kiss my wife good night. I have flipped and turned that bed so many times it makes me dizzy just thinking about it. The real question is who will we buy our material from and what will we start doing differently to lessen our liability?

Sleep on it! And remember: teamwork begins with a fair contract!