Duhon v. Three Friends Homebuilders Corp.

Louisiana Court of Appeal
396 So. 2d 559, 1981 La. App. LEXIS 3706 (1981)

ELI5:

Sections

Rule of Law:

A contract is classified as a contract to build rather than a contract of sale when the purchaser has control over specifications, negotiations occur prior to construction, and the provider furnishes skill and labor to create the object.

Facts:

Three Friends Homebuilders Corporation operated a business constructing and selling houses where customers selected specific features.
On April 26, 1978, Nolan and Patricia Duhon negotiated with Three Friends to acquire a house, selecting a specific floorplan and color scheme.
Following these negotiations, Three Friends constructed the house on the corporation's premises.
Upon completion in July 1978, the house was moved onto a lot owned by the Duhons.
The Duhons subsequently discovered severe defects in the construction of the house.
Three Friends attempted to remedy the defects but failed to do so to the Duhons' satisfaction.

Procedural Posture:

The Duhons filed a lawsuit against Three Friends in the state trial court seeking rescission of the sale or a price reduction based on redhibition.
Three Friends filed a motion for summary judgment, arguing the contract was a contract to build and thus redhibition was not an available remedy.
The trial court granted the summary judgment in favor of Three Friends, dismissing the plaintiffs' claims.
The Duhons appealed the judgment to the Court of Appeal of Louisiana, Third Circuit.

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Issue:

Is an agreement to construct a home based on a floorplan and color scheme selected by the purchasers a contract of sale or a contract to build?

Opinions:

Majority - Judge Domengeaux

No, the agreement is a contract to build because the purchasers controlled the specifications, negotiations preceded construction, and the defendant provided skill and labor. The court reasoned that under Louisiana law, redhibition (the avoidance of a sale) is only available for contracts of sale, not building contracts. The court distinguished this case from dealership sales where an object is transferred in an essentially complete state. Instead, the court applied a three-part analysis derived from jurisprudence (specifically Henson v. Gonzalez and Airco Refrigeration Service, Inc. v. Fink). Because the Duhons selected the floorplan and colors (control), negotiated before the work began (timing), and Three Friends had to use significant skill to construct the home (labor), the contract met the definition of a contract to build under La.C.C. Articles 2756 and 2757. Consequently, the remedy of redhibition was unavailable to the plaintiffs.

Analysis:

This decision clarifies the boundary between sales law and construction law in Louisiana, specifically regarding the remedy of redhibition. By categorizing semi-custom home construction as a 'contract to build' rather than a 'sale,' the court effectively limits the consumer's ability to simply rescind the transaction for defects (redhibition). Instead, such plaintiffs must rely on breach of contract theories related to workmanship. The ruling highlights that even if a vendor builds multiple similar items, if a specific unit is built to a customer's specifications after negotiation, it is a service (building) rather than a product (sale).

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