Section 3.8.15 The Integrated Systems Limitation

• Library: Construction Law Practice Manual 3rd Edition 2016

§ 3.8.15 The Integrated Systems Limitation

The ELR is inapplicable when the damages sustained are to “other property”, namely, property other than that which is the subject matter of the contract. If the roof leak were to result in damage to the grand piano, the ELR obviously would not apply?the piano is inarguably “other property.” However, if the resulting damage were to drywall, questions arise.

The Arizona Court of Appeals was presented with this issue in Hughes Custom Building, LLC v. Davey,⁶² where a civil engineer allegedly designed building lots in a subdivision resulting in soil subsidence and structural damages to the homes constructed on them. The civil engineer performed his work for a developer, who, in turn, sold the lots to a builder. The builder, upon completion of two residences, sold them to 2 individual home buyers, both of whom took the builder to task when the structural damages appeared. As a result, the builder suffered extensive economic damages, including the cost of litigation.

The court found that the ELR was inapplicable, not as a matter of law, but rather because the court deemed the property damage to be collateral, i.e., not to the “products”...