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Vazquez v. Alden Development Company, Inc.

OAL Dkt. No. CAF 04213-03 (Department of Community Affairs, Bureau of Homeowner Protection 2004) (Unpublished)

CONTRACTORS ; HOMEOWNER’S WARRANTY—A broad general release given by a home buyer to a contractor does not preclude a homeowner’s warranty program claim where the agreement expressly preserves that right for the homeowner.

Buyers entered into an agreement to purchase property from a developer. The property consisted of land on which the developer was to construct a single-family dwelling. Before construction could be completed, the developer filed for bankruptcy. The two parties signed a closing agreement that, as its first provision, gave the buyers a credit in compensation for the developer’s failure to finish construction of the house. A second provision released the developer from any and all claims by the buyer arising out of its purchase of the property. Although this appeared to constitute a general release of all claims by the buyers, the agreement expressly stated that it did not limit the buyers’ rights under the Homeowner’s Warranty program (HOW).

The buyers filed a claim under the provisions of their HOW warranty. The developer argued that the first provision constituted a waiver of the buyer’s HOW rights, barring them from filing a claim. However, when the draftsperson testified, (the developer’s counsel at the time of the closing), he stated that he did not intend that the first provision’s language would supersede the language of the second. It was his intention that the buyers would retain their rights to seek compensation under the HOW. Furthermore, although he was called to testify by the buyer, the attorney made it known that he appeared without subpoena, and his appearance had not been requested by either party. His stated purpose in voluntarily coming forward was to assist the Administrative Law Judge (ALJ) .

The ALJ held that a waiver of contractual rights must be clearly established, and contractual language alleging to constitute a waiver will not be read expansively. Furthermore, contract interpretation must be based on the intent of the parties. According to the ALJ, the order in which the provisions appeared was significant. Reading the agreement as a whole, the ALJ concluded that the first provision established a general release, and the second acted as a modification of the general release. Furthermore, the ALJ pointed out that the developer’s prior counsel came forward, unsubpoenaed by either party, and testified as to the intent of the parties in making their agreement. For this reason, the ALJ found the attorney to be credible and relied on his testimony. The commissioner of the Department of Community Affairs adopted the ALJ’s decision.

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