The Choice Between Implied Warranty and Tort Liability for Recovery of Pure Economic Loss in Contract-Torts : A Comparison of Judicial and Private Ordering in the Real Property Market

The Supreme Court\u27s decision in Winnipeg Condo. Corp. No. 36 v. Bird Construction expanded recovery for pure economic loss in tort by allowing a subsequent purchaser to recover the cost of repairing a dangerous defect arising out of negligence in the construction of a building. This article outlines the theoretical justifications for extended tort liability when the parties are linked by a contractual chain but are not in privity, and concludes that it is not possible to determine whether extended liability is desirable without considering the details of the market in question. A comparison between tort liability and the protection afforded by the warranties offered by the New Home Warranty Corporations across the country indicates that the private warranties offer a better trade-off between protection and cost than does tort liability. The article further argues that while the builder\u27s liability should be extended, it should be accomplished through a contractually implied third-party beneficiary warranty of fitness for habitation rather than through expansion of tort recovery for pure economic loss. Among other factors, the article considers the view that indeterminacy of recovery militates against expanded tort recovery and argues that indeterminacy per se is not as important as increased litigation and transaction costs that accompany expanded tort recovery