Besides a specified period of validity, what is the difference between a warranty clause and latent defects? Is there a cap with respect to time on latent defects?

By joel hoffman on Friday, February 02, 2001 - 05:46 pm:

Dave, there are numerous differences between warranties and "latent defects". The following discussion only applies to Federal Contracts. Each State has its own laws and case law.

You can get a copy of Nash and Cibinic's Administration of Government Contracts, 3rd edition, from the Government Contracts Program of George Washington University or through most book stores or law libraries. Chapter 9 Inspection, Acceptance, and Warranties covers the topic in detail.

The shorter version is that once the Government accepts a product or constructed facility, acceptance is deemed final and conclusive - the Government generally has no "implied" warranty rights, except as specifically provided for in the contract by a warranty provision or any warranties furnished by the Contractor.

There are exceptions to this rule. Acceptance is essentially nullified when the Government can PROVE that there was Fraud, Latent defects or "gross mistakes as amount to fraud".

This is too deep for a short discussion, except to say, under a warranty provision, the Government doesn't have to prove one of the last three conditions existed - only that the product failed due to no fault of the design or of the Government, during the warranty period.

Latent defects require several elements of proof. One requirement is that a reasonable inspection by the Government before acceptance would not have revealed the defect. Some latent defects occur when the Contractor covers up a defect before it can be detected. There are many other types - each has to be investigated and a determination made, based on the circumstances. The important distinction is that the burden of proof is much higher to establish a latent defect than a warranty failure.

There may be a statute of limitations for latent defects, otherwise no specific time limit applies. "Quantitative Warranties" generally have a stated time period. "Qualitative warranties" (those which don't state a specific period) are generally subject to a six year statute of limitations for Federal Government claims (I think) but require the Government to initiate legal action to enforce. Happy Sails! Joel

By Ron Vogt on Monday, February 05, 2001 - 03:13 pm:

You should also be aware that in government contracting, case law has drawn a distinction between latent defects and latent conditions. One of the elements that must be proved is that an actual defect existed at acceptance. If there was a condition that existed at acceptance, but that had not developed into a defect, i.e. a nonconformance with contract requirements, then there is no latent defect. This can be a critical distinction for a contractor. The cases on this are Jo-Bar Manufacturing, and Santa Barbara Research Center. If anyone wants the cites, I will have to dig deeper in my files.

Latent defect theory is not as well developed in the civilian world, at least not in the states I have had to research. In fact, if I can trust my search, the words do not even appear in the UCC. Instead, a similar theory can be found in Article 2-608, Revocation of Acceptance. However, its application appears to be more restrictive than in the government. For example, the defect must substantially impair the value of the item, and you must revoke acceptance within a reasonable time.