Erlich v. Menezes

Supreme Court of California · 1999 · Contracts

Contractsemotional distress damagesnegligent constructiontort versus contract remediesbreach of contractnegligenceemotional distressconstruction defects

Facts

The Erlichs hired Menezes, a licensed general contractor, to build their house. After they moved in, the house leaked extensively, repair efforts failed, and later inspection revealed major construction defects, including improperly installed shear walls, unsafe decks, and an inadequate foundation support for a main beam. The jury found Menezes breached the contract by negligently constructing the home, awarded over $406,000 in repair costs, and also awarded damages for the homeowners' emotional distress and related harms. The jury rejected the homeowners' fraud and negligent misrepresentation claims.

Issue

May homeowners recover emotional distress damages for a contractor's negligent breach of a contract to construct a house when the negligence causes only economic injury and property damage and does not breach a duty independent of the contract? If not in tort, may such damages be recovered as consequential or special contract damages?

Rule

Conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law; mere foreseeability is not enough to create such a duty. Emotional distress damages are generally unavailable for negligent breach of an ordinary commercial contract, including a contract to build a home, unless the breach causes bodily harm or the contract or breach is of such a kind that serious emotional disturbance is a particularly likely result. When negligent construction causes only property damage or economic loss, available damages are limited to repair costs, diminution in value, and lost use or relocation expenses.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In San Diego, Nina Lopez hired Harbor Crest Builders, a small residential contractor, to renovate and expand her house. The contractor carelessly installed flashing and support posts, causing leaks, warped floors, and expensive structural repairs, but no one was physically injured; Nina also developed severe anxiety and sleeplessness over the condition of the home.

If Nina sues for breach of contract and negligence and seeks emotional distress damages, what is the most likely result?

Explanation. The majority held that conduct amounting to breach of contract becomes tortious only when it also violates a duty independent of the contract arising from tort law. Mere negligent construction causing only economic loss or property damage does not support emotional distress damages. Foreseeability alone does not create the necessary duty, and a contract to build or improve a home is not treated as a peace-of-mind contract. (Derived from Erlich v. Menezes (n.d.).)