General Contractor/Developer May Not Rely on the Homeowner Protection Act to Avoid a Waiver of Consequential Damages in an AIA Contract

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.