WARRANTY LANGUAGE MATTERS FOR PURPOSES OF THE STATUTE OF LIMITATIONS

Nobody likes reading warranty language, but as it turns out, that language actually matters.  In LTL Acres L.P. v. Dryvit Systems, Inc., the Delaware Supreme Court overturned a grant of summary judgment in favor of Dryvit Systems, Inc. on statute of limitations grounds.

As quick backstory, LTL was building a furniture store downstate in 2005 and contracted with a subcontractor to install a Dryvit exterior surface.  The Dryvit had a 10 year warranty with the following relevant language:

DRYVIT . . . hereby warrants for a period of ten (10) years from the date of substantial completion of the project that the Exterior Insulation and, Finish System materials manufacture and sold by Dryvit, including the insulation board, adhesive, basecoat, mesh and finish shall be free from defects in the manufacture of the materials and will not, as a result of such defects, when installed in accordance with the current published Dryvit Specifications, within said period of 10 years, under normal weather conditions and excluding unusual air pollution, lose their bond, peel, flake or chip, and further that the finish will be fade resistant, except for specially produced colors, and will be water resistant so long as the surface integrity is retained . . . . . . . The sole responsibility and liability of Dryvit under this warranty shall be to provide labor and materials necessary to repair or replace the Dryvit materials described herein shown to be defective during the warranty period, and only for the materials warranted hereunder.

By 2012, the Dryvit exterior was beginning to fail and ultimately, LTL brought suit for breach of warranty.  The Delaware Superior Court granted Dryvit’s motion for summary judgment on the basis that LTL’s claims were barred by the 4 year statute of limitations found in 6 Del. C. § 2-725, which governs the statute of limitations in contracts for sale.  The Superior Court found that the statute began to run on the day the Dryvit was delivered to the building side in 2005, and therefore, had completely run by the time suit was filed in 2013.

Justice Vaughn, writing for the Court, determined that the relevant question was whether “Dryvit’s ten year warranty explicitly extends to the future performance of the materials supplied or merely promises to repair or replace defective materials.”  The Court held that “a limitation on remedy is not dispositive on the issue of whether a warranty is a promise to repair or replace; or a warranty of future performance.”

The Court continued:

The language of the warranty must be examined to determine if it explicitly, that is, plainly, warrants future performance. To be explicit, the warranty must be unambiguous, and will normally “indicate that the manufacturer is warranting the future performance of the goods for a specified period of time.”17 A provision limiting the remedy to repair or replacement is not dispositive, by itself, in determining whether the warranty extends to future performance.

The word “will,” as used in the warranty, refers to the future and creates an explicit warranty that the Dryvit materials will perform for the ten year period. 19 We do not mean to imply that the word “will” must be used to make a warranty one extending to future performance, but in this case we need not look beyond the use of the phrases “will not . . . lose their bond,” “will be fade resistant,” and “will be water resistant” to conclude that this warranty explicitly extends to future performance and that discovery of a breach must await future performance. Therefore, the Superior Court erred in rejecting LTL’s contention that the Dryvit warranty explicitly extended to future performance and finding that any alleged breach occurred when the product was delivered. Any alleged breach occurred when it was or should have been discovered.

The language in your warranty matters for purposes of the statute of limitation, so be sure you read it!  You can read the entire opinion here.

Chris Lee

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