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No Emotional Distress Damages for Breach of Contract in Home Construction
Description California high court reversed a verdict of $150,000 emotional distress damages for homeowners whose home was constructed with numerous major defects. While there was negligence and breach of contract, for which damages could be recovered, there was no tort.
Topic Contracts
Key Words Negligent Breach; Emotional Distress; Punitive Damages
C A S E   S U M M A R Y
Facts The Erlichs hired Menezes, a licensed contractor, to build their "dreamhouse" on an ocean-view lot. Soon after they moved in, it rained, and water leaked in "from every conceivable location" leaving three inches of water in the house. Despite efforts by Menezes to repair the problem, it continued and inspections found major defects in the construction. The Ehrlichs sued for breach of contract and negligence and for emotional distress. The jury awarded $406,700 for the cost of repairs to the house and $150,000 for emotional distress. Menezes appealed. The court of appeals affirmed the award. Menezes appealed to the California high court.
Decision Reversed. Contract damages are generally limited to those within the contemplation of the parties when the contract was entered into or at least reasonably foreseeable by them at that time. This rule enables parties to estimate in advance the financial risks of their enterprises. Contracting parties cannot be required to assume limitless responsibility for all consequences of a breach and must be advised of any special harm that might result in order to determine whether or not to accept the risk of contracting. A breach of contract becomes a tort only when it violates a duty independent of the contract that arises from the principles of tort law. Damages for emotional distress were not recoverable by homeowners for negligent breach of a contract to construct a house.
Citation Erlich v. Menezes, 981 P.2d 978 (Sup. Ct., Cal., 1999)

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