Tort, not contract: an argument for reevaluating the economic loss rule and classifying building damage as "other property" when it is caused by defective construction materials.

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Tort, not contract: an argument for reevaluating the economic loss rule and classifying building damage as "other property" when it is caused by defective construction materials.

TABLE OF CONTENTS INTRODUCTION I. THE CONSTRUCTION CONTRACT A. The Owner-Architect Agreement B. The Owner-Contractor Agreement C. The Important Role of the Supply Team II. THE ECONOMIC LOSS RULE A. MacPherson v. Buick Motor Co B. Seely v. White Motor Co C. East River Steamship Corp. v. Transamerica Delaval Inc D. Saratoga Fishing Co. v. J.M. Martinac & Co III. THE ECONOMIC LOSS RULE IN CONSTRUCTION MATERIAL DEFECT CASES A. Application of the Economic Loss Rule in Construction Cases B. The Problem with Applying the Economic Loss Rule to Construction Material Defect Cases IV. PROPOSED SOLUTION A. Building Construction Should Be Distinguished from Product Manufacturing B. Saratoga, not East River, Provides the Ideal Framework for Construction Material Defect Claims C. There Is Precedent for Reevaluating the East River Analysis in Construction Cases D. This Proposed Solution Does Not Unfairly Burden the Supply Team CONCLUSION INTRODUCTION

A window and a lawnmower have one thing in common--you can buy both of them at Home Depot. (1) Each is a product that is widely available in the market. Yet, if a defect in either product damages another piece of your property, you will likely have very different options for recovery. Under the economic loss rule (ELR), a defendant window manufacturer, unlike the lawnmower manufacturer, may ask the court to find a contractual relationship linking the defective window with your damaged property to preclude your tort cause of action. (2)

Traditional concepts of products liability suggest that if the lawnmower blade flew off and broke your window, then you may sue the lawnmower manufacturer for this damage to your property. (3) The law will recognize a clear distinction between the lawnmower and your house as separate pieces of property. (4) The damage that the lawnmower caused to your house will likely support a tort cause of action against the lawnmower manufacturer. (5)

This analysis changes if your house were to be damaged by the window itself. Perhaps the seals within the window were defective, allowing water to penetrate into the wall cavity and ultimately causing your exterior wall to rot from within. In this situation, a court will likely consider whether there was any contract linking the window purchase and installation with the overall construction of the surrounding wall before evaluating the merits of your tort claim against the window manufacturer. (6)

For example, you might have spent the summer converting your garage into a new home office. You began by replacing your double-hung windows with some modern casement windows. After weekends of hanging drywall, leveling floors, and mitering trim, the room finally smells like fresh paint and is filled with new furniture.

Your neighbor was so impressed with your work that he hired a contractor to give his garage the same transformation. Amazingly, his renovation meticulously copied each of your construction details, even the make and model of your windows. Unfortunately, that window model was defective; the seals were not designed properly. After a few hard rains you both noticed water stains on your walls and carpet. The defective windows have thus ruined both renovations.

Fortunately for you, each of your construction materials was purchased separately as needed. Because no single contract gove...

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