Iowa Construction Defect Law Update re Claims, Statutes of Limitations and Statute of Repose
Iowa law regarding construction defect claims has evolved over recent years. This article is intended to provide updated general information regarding potential claims as well as information regarding statutes of limitations and statutes of repose that may be applicable to construction defect claims in Iowa. But, construction defect claims are very fact specific. As such, this information must be considered only as general information and not legal advice specific to any facts or potential claims.
Construction Defect Claims
Iowa case law allows claims for negligence based on defective construction. E.T. Corp. v. Frank Paxton Co., Inc., 329 N.W.2d 416 (Iowa 1983). However, such negligence claims are limited (and in many instances actually prohibited) by the economic loss doctrine. Under Iowa’s discovery rule, “a cause of action based on negligence does not accrue until the plaintiff has in fact discovered that he has suffered injury or by exercise of reasonable diligence should have discovered it …” Bob McKiness Excavating & Grading, Inc. v. Morton Bldgs., Inc., 507 N.W.2d 405, 408 (Iowa 1993).
Breach of Contract Claims
In Iowa, construction breach of contract claims can be brought by the property owner against the general contractor or subcontractor, and by a general contractor against a subcontractor. “A cause of action on contract accrues and the limitation period begins to run when the contract is breached, not when the damage results or is ascertained.” Brown v. Ellison, 304 N.W.2d 197, 200 (Iowa 1981); see also Shams v. Hassan, 905 N.W.2d 158, 165 (Iowa 2017); (citing Diggan v. Cycle Sat,, 576 N.W.2d 99, 102 (Iowa 1998).
Breach of Express Warranty Claims
A construction contract is typically a contract primarily for services. As a result, Article 2 of the Uniform Commercial Code does not directly govern most construction contracts. See Johnson v. Associated Milk Producers, Inc., 886 N.W.2d 384, 391 (Iowa 2016). The Iowa Supreme Court has reserved the option to apply UCC Article 2’s “policies and reasons” when analyzing construction contracts. However, when the common law of Iowa and other states provides sufficient authority for analyzing express warranty, the Iowa courts have proceeded without the assistance of Article 2. See Flom v. Stahly, 569 N.W.2d 135, 139 (Iowa 1997). The Iowa Supreme Court, citing common law from Iowa and other states, held “that the theory of express warranty can apply to specific representations or warranties contained in contracts for the sale of real estate” and allowed a buyer to recover for breach of express warranty where the builder of a house made representations that particular materials were used and specifications met, and these representations were expressly incorporated into the contract. Id. at 140. Parties to a construction contract can create an express warranty, even without using words like “warranty” or “guaranty.” Id. In order to create an express warranty, “the plaintiff must ‘show that the seller made some distinct assertion of quality concerning the thing to be sold as distinguished from a mere statement of opinion or of praise.’” Id. (citing Carleton D. Beh Co. v. City of Des Moines, 292 N.W. 69, 71 (Iowa 1940)). The plaintiff must also show “that [the seller] intended such assertion to be believed and relied on by the purchaser as an undertaking on his part that the article is what he represents it to be.” Id. Finally, the plaintiff must show that he understood, believed, and relied on the assertion to successfully recover on a breach of express warranty claim. Id.
Breach of Implied Warranty Claims
Iowa case law has long recognized that “[i]n construction contracts there is an implied warranty that the building to be erected will be built in a reasonably good and workmanlike manner and that it will be reasonably fit for the intended purpose.” Kirk v. Ridgway, 373 N.W.2d 491, 493 (Iowa 1985); see also Sokol v. Morrissey, 909 N.W.2d 230 (Iowa Ct. App. 2017). The Iowa Supreme Court has also held that a warranty can run from the “buyer of the [construction] services…to the seller[,]…based upon the buyer’s contract requirements.” Midwest Dredging Co. v. McAninch Corp., 424 N.W.2d 216, 221 (Iowa 1988) (finding that the buyer created an implied warranty in favor of the contractor where the buyer used tests to develop plans and to require specific techniques that warranted to the contractor that the particular job was feasible).
An implied warranty extends to buyers of homes constructed by a “builder-vendor.” Luana Sav. Bank v. Pro-Build Holdings, Inc., 856 N.W.2d 892, 896 (Iowa 2014). This implied warranty requires that: “(1)…the house was constructed to be occupied by the warrantee as a home; (2)…the house was purchased from a builder-vendor, who had constructed it for the purpose of sale; (3)…when sold, the house was not reasonably fit for its intended purpose or had not been constructed in a good and workmanlike manner; (4)…at the time of purchase, the buyer was unaware of the defect and had no reasonable means of discovering it; and (5)…by reason of the defective condition the buyer suffered damages.” Id. A “builder-vendor” is defined as one “who is in the business of building or assembling homes designed for dwelling purposes upon land owned by him, and who then sells the houses, either after they are completed or during the course of their construction, together with the tracts of land upon which they are situated, to members of the buying public.” Kirk, 373 N.W.2d at 496. (specifically excluding “merchants, material men, artisans, laborers, subcontractors, and employees” from this definition of builder-vendor). Generally, the Iowa Supreme Court has been willing to extend this cause of action to reasonable persons, including subsequent owners of the property but has also been unwilling to extend the cause of action in certain situations.
A construction contract can also become subject to an implied warranty of fitness for a particular purpose. See Semler v.