A decision this week from the Third District Court of Appeals serves as a reminder for why contractors need to be aware of all of the terms of the warranties they rely on and pass on to their customers.
In West Bay Plaza Condominium Association v. Sika Corporation, a condominium association appealed the dismissal of its lawsuit due to claims that the lawsuit was filed in the wrong location. The case arose from contracts the condominium association entered into with a builder, construction manager, and engineer to make repairs to the condominium buildings in 2013 and 2014. In 2016, Sika issued a five-year warranty to the association for sealant products used in the garage as part of this work.
Three years later, the association sued the building contractor, construction manager, engineer, and Sika, asserting claims of breach of contract and negligence. Against Sika specifically, the association claimed Sika breached the warranty because the sealants had allowed water into the garage. Sika filed a motion to dismiss, claiming that its warranty required all claims to be litigated in New Jersey due to a forum selection clause contained in the warranty. The association argued that it should not be required to litigate in New Jersey because it had never signed the warranty with Sika. The trial court rejected this argument and dismissed the association's lawsuit against Sika.
The association then appealed, and the Third District Court of Appeals also rejected the association's arguments and left the dismissal in place.
While this case may not seem terribly related to construction, it actually addresses a very common issue in construction. Work is completed every day using products manufactured or warehoused all over the country. Many contractors rely on these warranties to give their own assurances to customers, or assign these warranties to customers. But, as this case demonstrates, just having a warranty doesn't mean it will be easy to enforce it, even locally. If the terms of the warranty require litigation out of state, then you could be forced to litigate out of state.
Contractors should become familiar with the critical terms of their key warranties to ensure that they will be able to enforce them efficiently should the need arise.
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