The law of unintended consequences applies not just to those who write laws, but those who interpret them. A legal dispute in Savannah could harm thousands of Georgians, unless common sense prevails.
Stick with me through a few facts of the underlying case, which involves Savannah-based corporate siblings Southern States Chemical and Southern States Phosphate and Fertilizer Company. In 2000, Southern States (which, like the courts, I’ll use as shorthand for the two) contacted a company called Tampa Tank to renovate a 2.2 million-gallon storage tank for sulfuric acid.
The tank was completed in January 2002, and Tampa Tank included a 12-month warranty. Nine and a half years later, in July 2011, a leak was detected. The companies have been in litigation ever since. Southern States’ allegations include breach of contract for the 12-month warranty and another warranty it claims Tampa Tank had with a subcontractor that installed a crucial element of the tank, which was supposed to guarantee the work for more than 40 years.
Blah, blah, blah, companies sue each other all the time. Right? Well, here’s where it gets interesting for the rest of us.
In the latest round of litigation, the trial court in Fulton County granted the defendants summary judgment. In part, the reasoning was that Georgia law precludes such claims related to “improvement(s) to real property” after eight years under what’s known as the “statute of repose.”
This statute, the court wrote, “does not distinguish claims sounding in tort versus those sounding in contract but rather broadly precludes any ‘action to recover damages’ brought outside of the eight-year repose period.”
Set aside whether Southern States could rightly claim to have a warranty in place as of July 2011. That is a factual matter limited to this particular case. What’s frightening is the court’s declaration that no action can be brought after eight years, even if a contract exists.
That finding could affect every Georgian with a construction-related warranty.
It’s one thing if, for example, a homeowner tries to sue a builder more than eight years after installing a new roof, claiming shoddy workmanship. Proving whether the builder is really to blame, or whether the owner perhaps failed to maintain the roof properly, can be difficult. That’s why the eight-year limitation exists.
But it’s another thing entirely if the builder gave – or sold – the homeowner a warranty guaranteeing his work for, say, 15 years.
The court’s language here, which was adopted by the Court of Appeals in a ruling in October, suggests such a warranty for 15 years, or 20 years, or even 10 years – any period longer than eight years – cannot be enforced.
That’s a grave infringement on the right of private entities to enter contracts.
As the Building Owners and Managers Association of Georgia noted in an amicus filing, warranties for projects such as “roofs, elevators, HVAC, building glass, curtain walls, and nearly all capital equipment” are commonplace and “typically range between 10 and 30 years.” Limiting all contractual warranties to eight years could effectively render countless existing warranties void.
What’s more, the precedents cited by the two courts in making this ruling did not relate to cases that involved warranties or other types of contracts. Most of them concerned medical malpractice cases – where, far from guaranteeing their work for more than eight years, providers often ask patients to sign waivers limiting their liability. One case involved a construction project, but there is no indication of a warranty ever being present in that case.
One of the fundamental features of a free society and a market economy is the right to enter contracts. No one requires builders, engineers or other service providers to offer lengthy warranties guaranteeing their work, but such protections should be enforceable if they are offered.
Before this case is resolved for good, some court in this state needs to make clear that Georgians aren’t losing their right to purchase and enforce these kinds of contracts.
Kyle Wingfield is president and CEO of the Georgia Public Policy Foundation: www.georgiapolicy.org.