Page 11 - John Hundley 2019

Real Estate Roundup

Sharp Thinking

No. 168 Perspectives on Developments in the Law from Sharp-Hundley, P.C. April 2019

High Court Curtails Warranty Of Habitability

By John T. Hundley, 618-242-0200, john@sharp-hundley.com

The purchaser of an uninhabitable new home may not sue a subcontractor with which the purchaser
had no contractual privity for breach of the implied warranty of habitability.
So ruled the Illinois Supreme Court recently in Sienna Court Condo. Ass’n v. Champion Alum. Corp.,
2018 IL 122022.
In Sienna, the plaintiff condo association sought to sue subcontractors after the developer and the
general contractor on the project went bankrupt. It claimed the bankruptcies denied it recourse against
the parties with which it was in privity and thus created an action against the subcontractors under Minton
v. The Richards Group of Chicago, 116 Ill. App. 3d 852 (1983). The Supreme Court overruled Minton en
route to ordering the relevant counts of the plaintiff’s complaint dismissed.

Citing the seminal case for the implied warranty (Peterson v. Huschman
Constr. Co., 76 Ill.2d 31 (1979)), the court said the implied warranty of
habitability is based in the contract of sale, not tort law. It said that to
recognize such an action in tort, as plaintiff urged, would contradict the
economic loss rule of Moorman Mfg. Co. v. Nat’l Tank Co., 91 Ill.2d 69
(1982). The economic loss rule says that a plaintiff generally cannot recover
in tort for disappointed contractual or commercial expectations. In general,
an action for economic loss requires the plaintiff to be in contractual privity
with the defendant, the court said.
“An implied term in a contract is no less contractual in nature simply because it is implied by the
courts, and the fact that a contractual term is imposed by law does not automatically convert any cause of
action for violating that term into a tort,” the court reasoned.
Moreover, because a person “cannot waive a duty imposed by the courts,” holding that habitability
was a duty in tort would mean reversal of the rule that the warranty of habitability is waivable, it said.
While overturning as much as 35 years of appellate court case law, the high court did not reverse its
own decision in Redarowicz v. Ohlendorf, 92 Ill.2d 171 (1992), that the implied warranty of inhabitability
could be extended to the second purchaser of a home. That case, Sienna said, “does nothing more than
recognize an implied assignment of a first buyer’s warranty rights, with the second purchaser merely
stepping into the shoes of the first.”
Duty To Mitigate Eviction Damages May Be Waived

The adoption of § 9-213.1 of the Eviction Statute (735 ILCS 5/9-213.1), seeming to impose upon
landlords a duty to mitigate damages when a tenant defaults, merely extended to real estate tenants the

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Sharp Thinking is an occasional newsletter of Sharp-Hundley, P.C. addressing developments in the law which may be of interest. Nothing contained in Sharp Thinking
shall be construed to create an attorney-client relation where none previously has existed, nor with respect to any particular matter. The perspectives herein constitute
educational material on general legal topics and are not legal advice applicable to any particular situation. To establish an attorney-client relation or to obtain legal advice on
your particular situation, contact a Sharp-Hundley lawyer at the phone number or one of the addresses provided on page 2 of this newsletter.