[CLC-Discussion] Exclusive remedy provision in home warranty issue

Wed Sep 18 13:15:06 PDT 2013

Good afternoon,

Is anyone familiar with this scenario:

Buyer enters into purchase agreement with builder for lot and construction of home. Purchase agreement contains language that states that the buyer will be provided with a home warranty.  Home warranty is provided after closing and buyer was not given an opportunity to review the warranty.  Two years later, the home begins to experience structural damage determined to be caused by settlement as a result of loose and unsuitable fill.  Buyer makes a claim with the issuer of the home warranty, who suggests use of a repair protocol that the buyer's experts have said will not adequately address the problem.

Accordingly, the buyer refuses to accept the protocol and sues the builder and the issuer of the warranty for breach of contract, breach of implied warranty of habitability, violations of the Florida Deceptive and Unfair Trade Practices Act, and building code violations.  The issuer of the warranty files a Motion to Dismiss based upon an "exclusive remedy" clause in the warranty which states that it has the sole option to repair or replace major structural defects, including making the determination as to the design, method, and manner of any repair or replacement.  Further, another provision in the warranty states that the buyer has waived the right to seek damages against the builder under any causes of action.  The Motion to Dismiss also argues that the warranty, which was attached as an exhibit to the Complaint, is controlling and negates the causes of action because it includes the "exclusive remedy" provision.  My thoughts are that the buyer could overcome this argument by amending the Complaint to include allegations challenging the enforceability of the "exclusive remedy" provision (i.e. waiver, estoppel).

In essence, the buyer entered into a purchase agreement which included language stating that he would be provided a home warranty.  The warranty was provided after closing and before the buyer had an opportunity to review.  Now the issuer of the warranty is arguing that the buyer has no right to demand a repair protocol other than that proposed by the issuer of the warranty and that the buyer has waived his right to seek damages from the buyer.

To make matters more confusing, the issuer of the warranty filed a Complaint for declaratory relief asking the Court to declare the warranty void because of the buyer's violation of the "exclusive remedy" provision.  The declaratory action was filed a few days prior to the filing of the buyer's Complaint, but the buyer's Complaint was served first.  Now, the issuer of the warranty has filed a Motion to Stay the buyer's suit on the grounds that the declaratory action was filed first and that a determination that the warranty is void makes the buyer's suit moot.

Any thoughts regarding these sets of facts are greatly appreciated.

Best Regards,

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Erum S. Kistemaker, Esq.
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