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AMERICAN TOWERS OWNERS v. CCI MECHANICAL12/20/1996
Wholesale Supply Co., 681 P.2d 214, 217-18 n. 3 (Utah 1984) (this court has never blended tort and contract concepts to allow products liability for purely economic injuries). Here, the Association alleges negligent design and construction of improvements to real property, not the negligent manufacturing of a product. Thus we conclude that W.R.H. does not apply to this case.
The policy reasons supporting the economic loss rule are sound. When a product does not perform or last as long as the consumer thinks it should, the claim pertains to the quality of the product as measured by the buyer's and user's expectations — expectations which emanate solely from the purchase transaction. Thus, contract principles resolve issues when the product does not meet the user's expectations, while tort principles resolve issues when the product is unsafe to person or property.
The Association argues that applying the economic loss rule in construction cases rewards builders who construct defective housing and wrongly focuses on the consequences of the defective activity instead of on the activity itself. We disagree. Builders who construct low quality housing that does not cause injury to persons or property may still be held liable for damages, but that liability should be defined by the contract between the parties. The law of torts imposes no standards on the parties' performance of the contract; the only standards are those agreed upon by the parties. Tort law is concerned only with the safety of a product or an action. See Maack, 875 P.2d at 580; Seely v. White Motor Co., 63 Cal.2d 9, 45 Cal.Rptr. 17, 23, 403 P.2d 145, 151 (1965). Otherwise, the extension of tort law would result in "liability in an indeterminate amount for an indeterminate time to an indeterminate class." Ultramares Corp. v. Touche, 255 N.Y. 170, 174 N.E. 441, 444 (1931); see also East River Steamship Corp. v. Transamerica Delaval Inc., 476 U.S. 858, 871, 106 S.Ct. 2295, 2302, 90 L.Ed.2d 865, 876-77 (1986) (noting need to keep products liability and contract law in separate spheres and to maintain realistic limitation on damages).
These rationales are particularly applicable to claims of negligent construction. Construction projects are characterized by detailed and comprehensive contracts that form the foundation of the industry's operations. Contracting parties are free to adjust their respective obligations to satisfy their mutual expectations. See W. Page Keeton et al., Prosser & Keeton on the Law of Torts § 92, at 659 n.15 (5th ed. 1984) (" enerally . . . a contract's liability for economic loss is fixed by the terms of his contract."). For example, a developer can contract for low-grade materials that meet only minimum requirements of the building code. When the developer sells those units, a buyer should not be able to turn around and sue the builder for the poor quality of construction. Presumably the buyer received what he paid for or he can bring a contract claim against his seller. See Keeton, § 101, at 708 (nondangerous product "cannot be so poor in quality as to be unworthy of sale if the price is right"). Meanwhile, if the developer has a problem with the builder, he too will have a contract remedy. A buyer can avoid economic loss resulting from defective construction by obtaining a thorough inspection of the property prior to purchase and then by either obtaining insurance or by negotiating a warranty or reduction in price to reflect the
risk of any hidden defects. See Casa Clara Condominium Ass'n v. Charley Toppino & Sons, Inc., 620 So.2d 1244, 1247 (Fla. 1993).
Next, the Association contends that the economic loss doctrine should not apply because it suffered damages to proper
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