72 N.Y.2d 52 (1988)

In New York, a builder-vendor impliedly warrants to a purchaser that a newly constructed home will be built in a skillful manner, free from material defects; this “Housing Merchant” warranty applies to latent defects and cannot be waived by a standard merger clause.

Summary

The Cacecis contracted with Di Canio Construction for a new home. After moving in, they discovered the foundation was sinking due to the presence of buried wood and tree trunks. The Cacecis sued for breach of contract, negligence, and breach of implied warranty. The New York Court of Appeals held that a builder-vendor has an implied duty to construct a home in a skillful manner, free from material defects. This “Housing Merchant” warranty protects purchasers from latent defects in newly constructed homes, reflecting a shift away from the traditional caveat emptor doctrine and recognizing the unequal bargaining power between builders and buyers.

Facts

Mary and Thomas Caceci contracted with Di Canio Construction Corp. to purchase land and have a one-family ranch home built on it. The contract included a limited one-year guarantee covering plumbing, heating, electrical work, the roof, and basement walls, but limited liability to repair or replacement. Four years after closing, the Cacecis noticed a dip in their kitchen floor. Attempts to repair it failed. They hired experts who discovered the foundation was sinking because it was built on soil containing deteriorating tree trunks and wood. Repair required replacing the entire foundation.

Procedural History

The Cacecis sued Di Canio Construction Corp., alleging breach of contract, negligent construction, and breach of implied warranty. The trial court dismissed the fraud and negligent repair claims but upheld the claims for negligent construction and breach of implied warranty, awarding $57,466 in damages. The Appellate Division affirmed solely on the implied warranty theory. Di Canio appealed to the New York Court of Appeals.

Issue(s)

Whether New York law recognizes an implied warranty of skillful construction in contracts for the sale of newly constructed homes, protecting purchasers from latent defects caused by faulty workmanship.

Holding

Yes, because there is an implied term in the contract between a builder-vendor and a purchaser that the house will be constructed in a skillful manner, free from material defects. A standard merger clause does not negate this implied warranty regarding latent defects.

Court’s Reasoning

The court reasoned that the traditional doctrine of caveat emptor (buyer beware) is outdated in the context of modern home construction. Purchasers of new homes often lack the expertise to inspect for latent defects and must rely on the builder-vendor’s skill and expertise. “When a buyer signs a contract prior to construction of a house, inspection of premises is an impossibility, especially and obviously with respect to latent defects. Thus, the purchaser has no meaningful choice but to rely on the builder-vendor to deliver what was bargained for—a house reasonably fit for the purpose for which it was intended.” The court noted a national trend toward recognizing an implied warranty of skillful construction. Placing the responsibility on the builder-vendor is justified because they are in the best position to prevent and bear the loss from such defects. The court stated that this implied warranty is consistent with the parties’ reasonable expectations: “Common sense dictates that the purchasers were entitled to expect, without necessarily expressly stating the obvious in this contract, that the house being purchased was to be a habitable place. The law ought to fulfill that commonsense expectation.” The court also emphasized its role in adapting common-law principles to reflect changing societal norms, quoting Cardozo: “If judges have wofully misinterpreted the mores of their day, or if the mores of their day are no longer those of ours, they ought not to tie, in helpless submission, the hands of their successors.”