Article Title
Economic Loss Rule - Commercial Painting Co. V. Weitz Co.: Tennessee's Abrogation of the Economic Loss Doctrine as Applied to Service Contracts
Abstract
In its broadest form, the “economic loss rule” stands for the proposition that contracting parties who suffer purely economic damages may not recover in tort.1 The doctrine reasons that, in cases where there are no personal injuries or property damage, contract law— and not the law of tort—provides the appropriate avenue for recovery.2 This rule originated in the context of products liability,3 and it exists to preserve the boundary line between contract and tort law when both theories could ostensibly apply.4 However, “the economic loss rule” is a bit of a misnomer because there is not one unified rule.5 Instead, there is widespread disagreement about the contours of the doctrine’s application and its numerous exceptions.6 In Commercial Painting Co. v. Weitz Co., the Tennessee Supreme Court (“Court”) addressed for the first time whether Tennessee should recognize an exception to the economic loss rule for service contracts.7 Commercial Painting centers around a contractual dispute between an established commercial contractor, the Weitz Company, and its drywall subcontractor, Commercial Painting Company, during the construction of a retirement community in Shelby County.8 Commercial Painting asserted both breach of contract and tort claims, including a claim of intentional misrepresentation, after the Weitz Company failed to inform Commercial Painting that the construction schedule would be compressed.9 This expedited schedule required Commercial Painting to pay for supplemental manpower to bring the project up to speed.10 Reversing the Court of Appeals’ ruling as to the applicability of the economic loss doctrine, the Court held that the economic loss doctrine “only applies in products liability cases and should not be extended to other claims” because extending the doctrine would risk creating a “confusing morass” of exceptions.11 The Court’s conclusion, while attempting to preserve the protections of tort law,12 undermines much of the established contract law. Freedom of contract should apply equally to contracts for goods and services, especially when the parties are sophisticated business entities.13 Further, the Court’s holding leaves in dicta the applicability of the fraud exception to the economic loss rule.14