contracted with Menezes , a general contractor, to build
their "dream house" on their ocean-view lot.
After Erlich moved in, it rained and the house had severe leaks
that caused the house literally fall apart.
The Erlichs did try to remedy the situation were to no success.
another General Contractor
It turned out that the home was structurally unsound
The husband suffered severe emotional distress and developed a
permanent heart condition, as a result.
The jury found Menezes breached his
contract with the Erlichs by negligently
constructing their home and awarded $406,700 as the cost of
Each spouse was awarded $50,000 for emotional distress, and Barry
Erlich received an additional $50,000 for physical pain and
suffering and $15,000 for lost earnings.
Appellant (2 to
The appellate court affirmed.
Dissent said the Pl - were not entitled to recover damages for their ED.
The court reversed and remanded
Holding that the available damages for defective construction are
limited to the cost of repairing the home, or the
diminution in value; and
emotional distress damages in connection with property damages
are not compensable.
Case under Tort
Tort damages are permitted in contract cases ONLY when there has been a
violation of a duty completely independent of the contract, or
where the breach is both intentional and intended to harm.
None of these factors were present.
Tort damages for emotional distress are not available where the Pl -
suffers only property damages or economic loss.
Negligent construction did no cause physical injury.
No one was hit by a falling beam.
They lived there for 5 years.
The only physical injury alleged was one plaintiff's heart disease,
which flowed from the emotional distress and not directly from
the negligent construction.
Leaving Happily Ever After
No reasonable homeowner can embark on a building project with certainty
that the project will be completed to perfection.
Consequential Damages for Emotional Distress Analysis
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 the time; consequential damages beyond the
expectations of the parties are not recoverable.
like a Mini-Universe
Each voluntarily chooses his contracting partner, each trusts the
other's willingness to keep his word and honor his commitments,
and in which they define their respective obligations, rewards
Under such a scenario, it is appropriate
to enforce only such
obligations as each party
voluntarily assumed, and to give him only such
benefits as he expected to receive; this is the function of
Recovery Damages for Emotion Distress from a Breach Of Contract
Damages for mental suffering and emotional distress are generally not
recoverable in an action for breach of an ordinary commercial
contract in California.
Recovery for emotional disturbance will be excluded
unless the breach
also caused bodily harm
or the contract or the breach is of such a kind that serious
emotional disturbance was a particularly likely result.
The Restatement specifically notes the breach of a contract to build a
home is not "particularly likely" to result in "serious
permit Recovery for Emotion Distress
Cases permitting recovery for emotional distress typically involve
mental anguish stemming from more personal undertakings the
traumatic results of which were unavoidable.
Except cases involving contracts.
Pl Argue for a
Broader Notion of Damages
Pl - urge the court to permit emotional distress damages in cases of
negligent construction of a personal residence when the
negligent construction causes gross interference with the normal
use and habitability of the residence.
- Public Policy Reasoning
Such a rule would make the financial risks of construction agreements
difficult to predict.
Contract damages must be clearly ascertainable in both nature and
A contracting party 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.
Range Of Exceptions
Where emotional tranquility is the contract's essence.
A rule which focuses not on the risks contracting parties voluntarily
assume but on one party's reaction to inadequate performance,
cannot provide any principled limit on liability.
The Erlichs received more than $400,000 in traditional contract
damages to correct the defects in their home.
Court of Appeal
Reverse for Public Policy Concerns
We conclude the balance of policy considerations--the potential for
significant increases in liability in amounts disproportionate
to culpability, the court's inability to formulate appropriate
limits on the availability of claims, and the magnitude of the
impact on stability and predictability in commercial
affairs--counsel against expanding contract damages to include
mental distress claims in negligent construction cases.