In the commercial construction setting, warranties can be written to commence as of substantial completion, final completion, date of beneficial use, date of installation or some other agreed-upon triggering event. The commencement date of the warranty (let alone the duration) can greatly impact a contractor’s financial and performance obligations for the instant project, as well as for future work. As an owner, the commencement date—and duration—of a warranty, and the types of warranties given, impact whether the owner will have the benefit of a contractor knowledgeable with the owner’s project to make timely repairs at no additional cost to the owner, should any aspect of the project fail or prove to be deficient post-construction.
For a general contractor on a large project, whether its warranty commences upon substantial or final completion, in theory, the timing difference would be no more than perhaps 60 days—the projected period for completion of punch-list items, resolution of open change order requests, and delivery of project closeout documents. If, however, the time to close out a project is extended due to disputes with the project owner or otherwise, for the contractor whose warranty is to commence on final completion, this 60-day window could easily become a window of 90 days or longer. With the warranty period pushed out, the contractor can be negatively impacted in a variety of ways, including its ability to fulfill obligations on future projects, its bonding capacity and its bottom line.