Now That Your Warranty Is Expired, You Can't Be Sued...Right?
Imagine you are a contractor who a massive company just hired to work on a big project. Like many others in your position, you used your proven negotiation skills to include a warranty provision with a fixed expiry date in your contract. With such a provision in place, you can sleep soundly once the warranty period expires. Because, if you get sued for any work that falls under the expired warranty, you can march down to the courthouse holding your contract and get the lawsuit dismissed. Or can you?
In Agrium, Inc v. Worley Canada Services Ltd, the Alberta Court of Appeal explains:
(1) Why such provisions might not be as strong of a shield as you might have hoped; and
(2) The importance of receiving expert legal advice on drafting or interpreting the contracts you sign.
In this case, Agrium hired the engineering firm Worley to work on an upgrade to one of Agrium’s production plants. However, years after Worley completed its work, some of the components they worked on failed, causing significant damage to the plant.
Agrium then sued Worley for its losses from the damaged plant, alleging they were caused by Worley’s negligence.
In response, Worley disputed the lawsuit by stating that the Court must find that all of Agrium’s claims fall under the contract’s warranty provision, which expired 18 months after Agrium completed its work. Therefore, since Agrium brought its claim outside of this 18-month period, they can no longer sue Worley.
The Court, however, disagreed with Worley. Relying on well-established principles of contractual interpretation, the Court found that the warranty provision was narrower than Worley asserted. Accordingly, Agrium could still file a lawsuit against Worley outside of the 18-month warranty period.
One of the Court's main reasons for coming to this conclusion is that the warranty provision in the contract was not worded clearly enough to shield Worley from Agrium's claim. Also, the Court found that the contract as a whole was not clear enough to shield Worley from Agrium's lawsuit.
Consequently, Agrium’s summary dismissal application was dismissed and so was their appeal of that decision.
As a contractor, there is a critical point that you should take from this case. Limited liability provisions like expiring warranty periods can shield you from liability. However, to offer viable legal protection, such provisions need to be clearly worded and carefully drafted.
This lesson does not just apply to contractors. It is vital for all industries that deal with warranties, including: automobiles, electronics, appliances, tools, furniture, and even health and fitness equipment.
Fortunately, the lawyers at Ogilvie LLP are experts at drafting contracts with limited liability provisions and handling disputes involving such provisions. So whether you are entering into a new contract, facing litigation, or seeking guidance on existing agreements, we are here to provide tailored advice to protect your business interests in a timely and cost-effective manner.
For a consultation, please contact us at one of our offices:
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Article written by Jack McCaskill