In a significant turn in Ohio law, the Supreme Court of Ohio recently held that a home builder's duty to construct a house in a workmanlike manner is a duty imposed by law, and a home buyer's right to enforce that duty cannot be waived. In Jones v. Centex Homes, 132 Ohio St. 3d 1 (Ohio 2012), the court ruled that two couples who purchased new houses from Centex Homes were not barred from asserting claims against the defendant, despite the fact that their claims were based on a defect that was not listed as a covered item in a limited warranty which was part of the purchase agreements and that they waived liability for all such non-listed defects.
After moving in to their new homes in 2004, two couples, Eric and Ginger Estep and Paul Jones and Latosha Sanders, were unable to operate their computers, cordless telephones and televisions. They alleged that the problems were caused by magnetized steel beams used in the construction of their homes. The couples brought suit in Franklin County Court of Common Pleas, asserting claims for breach of contract, breach of express and implied warranty, negligence, and failure to perform in a workmanlike manner.
At the trial court level, Centex moved for and was granted summary judgment. Centex argued that the buyers had waived all express or implied warranties except for a specific list which was enumerated in a Limited Home Warranty that Centex provided in its standard purchase agreement. The trial court held that because the magnetizing of the steel beams was not included in the list, the buyers waived their right to any express or implied warranty claims on that basis.
The Tenth District affirmed. Even though the Tenth District found that the duty to perform in a workmanlike manner is imposed by common law upon builders and contractors, the Tenth District further found that this common law duty could be waived. This conclusion was based upon (1) longstanding Ohio law regarding freedom of contract and (2) the fact that a majority of jurisdictions outside Ohio have held that a waiver of good workmanship is permissible so long as it is clear, unambiguous, and conspicuous.
Upon appeal to the Supreme Court of Ohio, the Supreme Court agreed that the duty to perform in a workmanlike manner is a common law duty. The Court reasoned that the duty imposed upon home builders to construct a home in a workmanlike manner is the same duty “imposed by law on all persons to exercise ordinary care”. This duty, per the Court, is nothing more than a “baseline standard that Ohio home buyers can expect builders to meet”. Even though the duty may arise out of a contract, the Court found that a cause of action for a breach of workmanlike manner is “not based on contract but on a duty imposed by law.”
However, what makes the Jones decision so significant is the Court’s holding that the duty of workmanlike performance cannot be waived. Even more remarkable, the Court came to the conclusion that this common law duty cannot be waived with virtually no analysis or explanation and no discussion as to how this ruling may affect future waivers of liability.
The Supreme Court’s conclusion in Jones arguably brings into question decades of well-established Ohio law regarding waivers of liability in contracts of all types. Historically, waivers of liability for negligence, though disfavored and strictly construed against the drafter of the contract, were not against public policy and could be upheld so long as they were clear and unambiguous. In fact, this long standing law is exactly what the Tenth District relied upon in determining that the homeowners in Jones had no cause of action. Ohio Courts, in fact, have long held that parties to a contract, even if alleged to be of unequal bargaining power, were free to walk away from the contract including a liability waiver if they did not like the terms.
After the Jones decision, the strength of this long-standing law is now in question. However, what is certain is that residential home builders, construction entities, and their insurers must all be aware that, regardless of the existence of or clarity of a waiver of liability, a cause of action for negligence premised upon the breach of workmanlike performance still exists.
If you have any questions on the decision or would like a copy, please contact a member of our Construction and Design Liability Practice Group.