Lempke v. Dagenais

New Hampshire Supreme Court · Property

Propertyimplied warranty of workmanlike qualitylatent defectseconomic lossprivitysubsequent purchaserbuilder liabilityprivity not required

Facts

In 1977, the plaintiffs' predecessors in title contracted with the defendant to build a garage on the property. Within six months after construction, the original owners sold the property to the plaintiffs. Shortly after purchase, the plaintiffs noticed structural problems in the garage, including an uneven roof line and bowing roof trusses, and claimed the truss separation was a latent defect not discoverable until it became visible from outside. The defendant initially agreed to repair the defects but did not complete the repairs, and the plaintiffs sued.

Issue

May a subsequent purchaser of real property sue the builder or contractor for breach of an implied warranty of workmanlike quality, for latent defects causing purely economic loss, even though there is no privity of contract between them? Also, does New Hampshire continue to bar negligence recovery for purely economic loss in these circumstances?

Rule

Privity of contract is not required for a subsequent purchaser to maintain an action against a builder or contractor for breach of the implied warranty of workmanlike quality as to latent defects that become manifest after the purchase, were not discoverable by reasonable pre-purchase inspection, manifest within a reasonable time, and cause economic harm. The builder's implied duty is to perform in a workmanlike manner and in accordance with accepted standards; the plaintiff must show the defect was caused by the defendant's workmanship, and the builder may defend by showing the defect is due to age, ordinary wear and tear, or substantial changes by prior owners.

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

In Portland, Maine, Nora Kim bought a townhouse from Evan Price, who had hired Harbor Peak Builders, LLC, to construct an attached staircase two years earlier. Three months after closing, concealed fasteners inside the staircase failed, and an engineer concluded the defect was hidden and would not have been discovered by a reasonable pre-purchase inspection; Nora seeks only the repair costs from Harbor Peak.

Which is the strongest argument that Nora may recover from Harbor Peak?

Explanation. The majority held that privity is not required for a subsequent purchaser to sue a builder or contractor for breach of the implied warranty of workmanlike quality when a latent defect manifests within a reasonable time after purchase, was not discoverable by reasonable inspection before purchase, and causes economic harm. The court expressly refused to allow negligence recovery for purely economic loss in these circumstances and also emphasized that the builder is not an insurer of all later defects.