## Facts

- Thomas and Mary Caceci contracted with Di Canio Construction Corp. to purchase land and have a new one-family home constructed in Suffolk County, New York, for $55,000.
- The contract included a limited one-year express guarantee covering specified components (plumbing, heating, electrical, roof, and basement walls against seepage and defective workmanship), with repair or replacement as the stated remedy.
- The contract required construction consistent with municipal and lender requirements and approved plans, and contained a merger clause providing that contract terms would not survive the closing unless expressly stated.
- Title closed on October 14, 1977.
- In December 1981, the Cacecis observed a dip in the kitchen floor; Di Canio performed repairs and later represented the condition was normal settling, but the problem recurred.
- An independent structural firm concluded the house was built on unstable soil with biodegradable materials, causing differential settlement; meaningful correction required replacing the foundation and underlying soil.
- Evidence at trial indicated the builder proceeded despite awareness that the home was being built on unsuitable fill containing biodegradable material.
- The Cacecis sought damages for extensive remedial work requiring substantial time and expense.

## Issues

1. Whether a builder-vendor who contracts to construct and sell a new home impliedly warrants to the first purchaser that the home will be built in a skillful manner and free from material defects, such that caveat emptor does not control.
2. Whether a standard merger/integration clause and a limited one-year express guarantee eliminate an implied warranty claim for latent defects discovered after closing.

## Decision

- The New York Court of Appeals affirmed the judgment for the purchasers on an implied warranty theory.
- The court recognized an implied “Housing Merchant” warranty in the sale of a newly constructed home by a builder-vendor.
- The court held caveat emptor is unavailable to a builder-vendor against the first purchaser in this setting.
- The court held a standard merger clause does not extinguish the implied warranty as to latent defects not reasonably discoverable at closing.
- The court treated the implied warranty as contractual in nature; liability does not depend on the builder’s negligence or actual knowledge of the defect.

## Legal Principles

- In a contract for the construction and sale of a new home by a builder-vendor, the law implies a warranty that the dwelling will be constructed in a skillful manner and will be free from material defects.
- The implied warranty protects first purchasers against latent, material defects that substantially impair the home’s fitness and are not reasonably discoverable at closing.
- The implied warranty sounds in contract; proof of fault or the builder’s knowledge is not required to establish breach.
- A limited express warranty and general merger clause do not, without clear and specific disclaimer, bar implied warranty claims for latent structural defects discovered post-closing.

## Conclusion

The court shifted the risk of latent, material defects in newly built homes from first purchasers to builder-vendors by recognizing a contractual implied “Housing Merchant” warranty and refusing to treat boilerplate merger language as a waiver of that protection.


Caceci v. Di Canio Constr. Corp., 526 N.E.2d 266 (N.Y. 1988)