Flagstaff Affordable Housing Ltd. Partnership v. Design Alliance, Inc
In Flagstaff Affordable Hous. Ltd. P'ship v. Design Alliance, Inc., 223 Ariz. 320,9, 223 P.3d 664, 666 (2010), the Arizona Supreme Court summarized the policy bases for the application of the economic loss rule it had set forth in Salt River Project Agricultural Improvement & Power District v. Westinghouse Electric Corp., 143 Ariz. 368, 694 P.2d 198 (1984).
It explained that different policies are served by tort and contract law and that those policies should serve as the bases for determining when a party should be entitled to seek tort remedies and when the party should be limited to contract remedies. Flagstaff, 223 Ariz. 320,14, 24, 223 P.3d at 667, 669.
Strict liability promotes product safety and spreads the costs of accidents. Contract law, in contrast, seeks to preserve freedom of contract and to promote the free flow of commerce.
These goals are best served by allowing the parties to specify the consequences of a breach of their agreement.
Accordingly, "when a defect renders a product substandard or unable to perform the functions for which it was manufactured, the purchaser's remedy for disappointed commercial expectations is through contract law." Id.
The Court applied the rule to claims based on construction defects resulting from professional negligence. Id. at 321,1, 223 P.3d at 665.
The court limited tort recovery involving "contracts for construction" to those situations in which the plaintiff's economic loss was "accompanied by physical injury to persons or other property." Id. at 326-27,33, 223 P.3d at 670-71.