In the construction industry, many contracts include a one-year warranty, commonly called a “call-back” or correction period. The warranty provision generally states that the contractor warrants that the materials it furnishes will be of new and good quality, will conform to the requirements of the contract documents, and will be free from defects. The standard form typically goes on to state that if, within one year after the date of substantial completion, any work is found to be deficient, the contractor shall correct it after being informed of the issue by the owner. The provision will often state further that if the owner fails to notify and give the contractor an opportunity to make the correction within the one-year period, the owner waives its right to require correction by the contractor and to make a claim for breach of warranty.

This standard provision often results in a misconception among contractors, and even some lawyers, that exposure to claims for defective work ends when the one-year warranty period expires. In support of this misconception, parties will point to the warranty provision as a “contractual limit” on the contractor’s obligations to correct defective work discovered more than one year after completion. However, although the contractor’s obligation to personally repair may be limited to the one-year “call-back” period, the contractor’s financial obligation to pay for defective work is typically limited only by the applicable statute of limitations, unless the contract contains other limitations shortening the statute of limitations.

Below are answers to a few frequently asked questions regarding this misconception, followed by practical pointers to help you and your team manage post-warranty claims.

What is a “call-back” warranty, and how is it limited?

A typical call-back provision, modeled on the widely used AIA A201 General Conditions, reads: “If within one year after the date of Substantial Completion, any of the Work is found to be not in accordance with the Contract Documents, the Contractor shall correct it promptly after receipt of notice from the Owner to do so.” With language this simple, it’s easy to see why misconceptions occur.

Contractors often view the call-back period as a limit on the owner’s right to recover for defective construction once the year is up. In reality, a standard “call-back” provision simply establishes a procedure to handle issues that arise during the first year following completion of the project. The end of this call back period does not end the contractor’s underlying obligations to perform the work in accordance with the contract documents, and it does not eliminate claims for breach of contract or defective work. Rather, these claims remain available until the applicable statute of limitations runs.

The “call-back” warranty has no relation to the time when an owner can initiate a legal proceeding to establish the contractor’s liability for its obligation to complete the work without defect. Instead, it only limits the time during which the contractor is obligated to return and personally make repairs.

Is there an example of what the warranty-provision does not protect against?

In Nebraska, if an owner who has a construction contract with a one-year warranty provision brings a lawsuit against the contractor for breach of contract due to defective construction two years after substantial completion, unless the contract includes non-standard language limiting the time to sue, the one-year “call-back” warranty will not bar this claim. Rather, this breach of contract claim will be allowed to proceed.

In Nebraska claims for breach of a written contract have a five-year limitations period while claims for breach of warranty or for deficient construction of an improvement to real property generally must be brought within four years. Where the claim is based on improper workmanship on a single project, the Nebraska Supreme Court has held that the four years run from substantial completion of the project. If the defect is not discovered, and could not reasonably have been discovered, within that period (or within the last year of it), the owner has two years from discovery to sue, subject to an outer limit of ten years from the act giving rise to the claim. (Shorter periods apply to condominium projects.) Accordingly, the warranty limitation will not serve as a complete defense to the owner’s claims. If the owner establishes that the work is defective or was not performed in a good and workmanlike manner, the contractor may still be financially responsible for the cost of repairs, even years after the warranty has expired.

Can the parties contract to limit all claims to one year?

The short answer is often, yes. Parties can include terms in their agreement that effectively shorten the time in which an owner must bring a claim, although courts will scrutinize whether the shortened period is clear and reasonable. However, owners frequently resist an all-encompassing limitation, and sophisticated owners’ forms often expressly preserve the full statutory period. If a contractor wants this protection, it must be negotiated and drafted expressly; the standard call-back language will not accomplish it.

Practical Pointers for Contractors

To reduce the risk of being surprised by a defect claim after the call-back period ends, contractors should consider the following:

Know what your contract actually says. Review the warranty, correction period, and dispute-resolution provisions in your standard forms and in owner-drafted contracts before signing. Do not assume the one-year call-back period caps your exposure.

Negotiate expressly if you want a shorter claim period. If limiting post-completion exposure matters to you, propose clear language that shortens the time to bring claims or that makes the correction period the owner’s exclusive remedy. If the owner will not agree, price the risk accordingly.

Document and track substantial completion. The limitations clock generally starts at substantial completion. Obtain a signed certificate of substantial completion or other written confirmation of the date for every project and keep it with the project file.

Keep project records well beyond year one. Retain plans, submittals, inspection reports, photos, daily logs, change orders, and punch lists for at least the full limitations and repose periods. Those records are often the best defense to a claim made years later.

Respond to post-warranty complaints carefully. A notice received after the call-back period is not automatically a non-issue. Investigate, document the condition before any repair, preserve evidence, and notify your insurer and any responsible subcontractors promptly. Make it clear in writing whether any repair is offered as a courtesy and without admission of liability.

Align your subcontracts and supplier warranties. Make sure your subcontracts flow down warranty, correction, and indemnity obligations for at least as long as your exposure to the owner, and track manufacturer warranties that may cover the failed component.

Confirm your insurance coverage. Discuss with your broker whether your commercial general liability policy, including completed-operations coverage, will respond to a defect claim brought years after completion.

Conclusion

A one-year call-back warranty limits how long a contractor must come back and fix its work. It does not, by itself, limit how long the contractor can be held financially responsible for that work. When contractors agree to perform work free from defects, a failure to do so can be a breach of the contractor’s obligations long after the one-year warranty has expired. If you have questions about the warranty or correction provisions in your contracts, please do not hesitate to contact any member of Koley Jessen’s Construction Industry Practice Area.

_{This content is made available for educational purposes only and to give you general information and a general understanding of the law, not to provide specific legal advice. By using this content, you understand there is no attorney-client relationship between you and the publisher. The content should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.}