by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
randolphp@umkc.edu

VENDOR/ PURCHASER; WARRANTIES; CONSTRUCTION: The implied warranty in a contract of sale for a newly-constructed residence that such residence is free from major structural defects and has been constructed in a workmanlike manner extends only to the initial purchaser. Meyer v. Bryson, 891 S.W.2d 223 (Tenn. App. 1994), appeal denied, 1994 Tenn. LEXIS 323 (1994).

The third owner of a home brought suit against his seller, that seller's seller and the original homebuilder, claiming a breach of implied warranty. The court recited the usual rule of caveat emptor, but recognized the implied warranty exception set forth in precedent cases. The court held, however that the implied warranty applied only to the original purchaser of the newly-constructed residence.

For other cases also raising the "privity bar," see Schafer v. Harrigan, 879 P.2d 1384 (Utah App. 1994) (a Daily Development in May); Haygood v. Burl Pounders Realty, Inc., 571 So.2d 1086 (Ala. 1990) (Alabama in general is very conservative on implied warranty issues in real estate). For a case with a thoughtful discussion of justifications for the continuation of the rule, see Oliver v. City Builders, Inc., 303 So. 2d 466, 468-69 (Miss. 1974).

For cases rejecting the privity defense in this context, see Moxley v Laramie Builders, Inc. 600 P2d 733 (Wyo. 1979); Blagg v. Fred Hunt Co. Inc., 612 S.W.2d 321 (Ark. 1981); Redarowicz v. Ohlendorf, 441 N.E.2d 324 (Ill. App. 1982); Gupta v. Ritter Homes, Inc. 646 S.W.2d 168 (Tex. 1983); Richards v. Powercraft Homes Inc., 678 P.2d 427 (1984); Aransohn v. Mandara, 484 A. 2d 675 (N.J. 1984).

In some of the above jurisdictions, subsequent developments, including new "statutes of repose" may have provided new protection for builders.

In others, strict liability for breach of warranty is permitted only with regard to the initial purchaser, but subsequent purchasers can sue if they can demonstrate negligent construction. See, e.g.: Coburn v. Lennox Homes, 378 A.2d 599 (1977); Cosmopolitan Homes, Inc. V. Weller, 683 P.2d 1041 (Colo. 1983); Oats v. Jag, Inc., 333 S.E.2d 222 (N.Car. 1985).

This analysis comes in part from work done by DIRT listers Dale Whitman and Grant Nelson in their casebook Real Estate Transfer, Finance and Development (West 1992). The editor here has made no effort to verify that any of the old cited cases presently reflect your state's law. If you're interested, better check.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last five years, these Reports annually have been collated, updated, indexed and bound into the Annual Survey of Developments in Real Estate Law, volumes 1-5, published by the ABA Press. The Annual Survey volumes are available for sale to the public. Contact Shawn Kaminsky at the ABA. (312) 988 5260.

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