Recently, in Caribou Ridge Homes, LLC v. Zero Energy, LLC, et al., Case No. 10CV1094, Boulder County District Court Judge Ingrid S. Bakke entered a ruling and order on the Plaintiff’s Motion for Determination of Question of Law Pursuant to C.R.C.P. 56(h) on Issue of Damages. The Order found that the Plaintiff was not a homeowner intended to be protected by the Homeowner Protection Act (the “HPA”) and thus could not pursue its claims for consequential damages against Defendant.
By way of background, on June 18, 2008, Plaintiff Caribou Ridge Homes, LLC (“Caribou”) entered into a Standard Form Agreement Between Owner and Contractor AIA Document A114-2001 (the “Contract”) with Defendant Zero Energy, LLC (“Zero Energy”). Plaintiff hired Zero Energy to serve as a general contractor for the construction of a single-family home in the Caribou Ridge subdivision in Nederland, Colorado. A provision in the contract contained a mutual waiver of consequential damages (“Waiver”).
Plaintiff filed suit in October, 2010 asserting four claims for relief based on breach of contract, including breach of express warranty, breach of implied warranty, negligence, and negligent misrepresentation. On February 7, 2011, Plaintiff filed its Motion for Determination of Question of Law Pursuant to C.R.C.P. 56(h) on Issue of Damages. Judge Bakke entered an Order on June 13, 2011.
Plaintiff asserted that it was the owner and developer of the property, and Zero Energy, as the general contractor, fell within the HPA’s definition of “construction professional.” Thus, Plaintiff argued, the Waiver found in the Contract could not prohibit it from pursuing its claims for consequential damages because the HPA specifically renders such a waiver unenforceable and void as against public policy.
However, the court found persuasive Defendant’s argument that Caribou was a commercial developer, not an individual, unsophisticated homeowner contemplated by the drafters of the HPA to benefit from its protections. Also persuasive to the court was Defendant’s argument that the bill sponsors intended the HPA to address the practice of forcing limitations of liability as a condition of selling a new home to a homebuyer who had no role in designing, construction, budgeting, or selecting materials. Additionally, the HPA was intended to protect new homebuyers from onerous waivers contained in either the developer-created declarations or homebuilders’ purchase agreements. Caribou, Defendant claimed, was not the same type of owner but rather a developer/owner capable of negotiating a contract at arms-length.
Thus, the court concluded that an absurd result would occur if commercial developers such as Caribou received the protections of the HPA, because commercial developers have a greater level of sophistication and ability to negotiate than other types of homeowners. The HPA was not drafted with the intent to void standard form AIA contracts, such as the Contract between Caribou and Zero Energy. The court ultimately ordered that Caribou was not a homeowner who was intended to be protected by the HPA.
This is at least one indication, from the trial court level, that general contractors and developers may not rely on the Homeowner Protection Act to get out of a waiver of consequential damages in an AIA contract. We will see if this holds true once the Colorado appellate courts weigh in, either on this or some other case.
For additional information regarding Colorado construction litigation, please contact David M. McLain at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.
