Zambrano v. M & RC II LLC – 09/28/2022

October 4, 2022

Arizona Supreme Court holds that the implied warranty of workmanship and habitability may not be disclaimed and waived.

A buyer purchased a new home and agreed to expressly disclaim and waive the implied warranty of workmanship and habitability—present in all contracts between builder-vendors and homebuyers—in exchange for a limited express warranty that carried different terms and protections. 

The buyer later sued the builder-vendor for breach of the implied warranty after discovering defects outside the express warranty’s terms.  She argued the disclaimer and waiver violated public policy.  The builder-vendor successfully moved for summary judgment, but the court of appeals reversed.  A five-Justice majority of the Arizona Supreme Court agreed with the disposition of the court of appeals but vacated the opinion to replace the court’s reasoning with its own.

The majority recognized that the freedom to contract is a significant, longstanding public policy that courts preserve by enforcing contract terms.  However, courts may void terms that are illegal or against recognized public policy.  As to the latter, courts must determine whether the public policy at stake clearly outweighs enforcement of the term in question. 

The implied warranty of workmanship and habitability exists only in the common law.  Its dual purpose is to protect homebuyers and their successors against latent defects in a home’s construction by holding builder-vendors accountable to generally accepted workmanship standards in the community.  The majority explained that this uniquely serves the public interest given the unequal bargaining power and expertise of builder-vendors and the harm unrepaired homes cause to the public generally.  The majority stressed that no other legal remedies offer the same protections.  And, while an express warranty may provide a competitive edge, it is an insufficient substitute because it only ensures conformance with specific, rather than generally accepted standards.  Accordingly, the majority held that the implied warranty of workmanship and habitability cannot be disclaimed, waived, or replaced by express terms.

The dissent emphasized that declarations of public policy such as the categorical ban in the majority opinion should be left to the Legislature.

Vice Chief Justice Timmer authored the opinion of the Court, in which Chief Justice Brutinel and Justices Lopez, Beene, and Montgomery joined.  Justice King joined by Justice Bolick dissented.

Posted by: Payslie M. Bowman

Disclosure: Osborn Maledon attorneys were involved in this case.