*571¶ 1 In this case, we must determine whether the purchaser of a newly
constructed home may assert a claim for breach of an implied warranty of habitability
against a subcontractor who took part in the construction of the home, where the
subcontractor had no contractual relationship with the purchaser. For the following
reasons, we hold that the purchaser may not., ¶ 3 The plaintiff, Sienna Court Condominium
Association, is a condominium association governing the Sienna Court Condominiums,
a two-building, 111-residential-unit property located in Evanston, Illinois. In
2013, plaintiff filed a verified complaint in the circuit court of Cook County on
behalf of the individual unit owners in the condominium buildings. In its complaint,
plaintiff alleged that Sienna Court Condominiums was a newly constructed property
developed by TR Sienna Partners, LLC (TR Sienna), and that TR Sienna had marketed
and sold the buildings' condominium units to individual purchasers. Plaintiff further
alleged that, at the time the units were sold by TR Sienna to their purchasers,
the condominium buildings contained a number of latent defects that resulted in
water infiltration and other conditions that rendered both the individual units
and common areas of the buildings unfit for their intended purpose of habitation.,
¶ 4 As ultimately amended, plaintiff's complaint contained 10 counts. Count I of
the complaint alleged breach of an express warranty against TR Sienna. The remaining
nine counts of the complaint asserted claims for breach of an implied warranty of
habitability against (1) TR Sienna; (2) the general contractor; (3) the architect
and engineering design firms; (4) material suppliers and (5) several subcontractors,
including the defendants in this case, Don Stoltzner Mason Contractor, Inc.; BV
and Associates, Inc., d/b/a Clearvisions, Inc.; Lichtenwald-Johnston Ironworks Company;
and Metalmaster Roofmaster, Inc. Relevant to the issues in this case, the complaint
alleged that each condominium unit and the common elements of the buildings were
subject to an implied warranty of habitability extending from "each and every subcontractor"
and that the subcontractors had therefore warranted that the buildings, or the portions
constructed by them, would be suitable and fit for their intended purpose of habitation.,
¶ 5 Prior to the filing of plaintiff's complaint, both TR Sienna and the general
contractor were declared bankrupt by order of the United States Bankruptcy Court
for the Northern District of Illinois. Plaintiff sought and was granted relief from
the automatic bankruptcy stay so that it could pursue its claims against TR Sienna
and *572*1115the general contractor to the extent of their available insurance.
See 215 ILCS 5/388 (West 2010) (the bankruptcy or insolvency of an insured shall
not relieve the insurer from its liabilities in case of any loss occasioned during
the term of the policy). Subsequent discovery revealed that TR Sienna and the general
contractor both had two separate insurance policies, each providing coverage of
$1 million per occurrence with $2 million aggregate limits. Discovery further revealed
that plaintiff had recovered approximately $308,000 from TR Sienna through a warranty
escrow fund that TR Sienna had been required to establish under a City of Evanston
ordinance., ¶ 7 The circuit court denied defendants' motion to dismiss. Thereafter,
defendants moved for the circuit court to certify that its order denying the motion
merited discretionary appeal under Illinois Supreme Court Rule 308 (eff. Feb. 26,
2010), because it involved questions of law to which there was a substantial dispute
and the resolution of the questions would materially advance the litigation. The
circuit court granted that request and, as required under the rule, identified the
pertinent questions of law as follows:, ¶ 8 The appellate court granted leave to
appeal. The Rule 308 appeal was consolidated with two additional appeals: (1) an
appeal by the plaintiff of an order dismissing its claims for breach of an implied
warranty of habitability against the architect, engineering design firms, and material
suppliers and (2) an appeal from the general contractor of an order dismissing its
counterclaims against the subcontractors and material suppliers. 2017 IL App (1st)
143364, 412 Ill.Dec. 280, 75 N.E.3d 260.1, ¶ 9 With respect to defendants' Rule
308 appeal, the appellate court held that legal insolvency, rather than an inquiry
into the availability of recourse, determines whether a claim for breach of an implied
warranty of habitability may be asserted against a subcontractor. Id. ¶¶ 75-99.
The appellate court also rejected defendants' alternative argument that where a
homeowner has no contractual relationship with a subcontractor there can be no implied
warranty of habitability and, thus, Minton was wrongly decided. Id. ¶¶ 96-98., ¶
10 We granted defendants' petition for leave to appeal. Ill. S.Ct. R. 315 (eff.
Mar. 15, 2016)., ¶ 13 In this case, the questions certified by the circuit court
ask whether a plaintiff homeowner's claims against a subcontractor for breach of
an implied warranty of habitability are barred where either the plaintiff has potential
recourse from insurance policies or where actual proceeds are received by the plaintiff
from a warranty escrow account. As defendants point out, underlying these certified
questions is the general assumption that, at least in some instances, it is appropriate
to recognize a claim for breach of an implied warranty of habitability against the
subcontractors of a newly constructed home, even though the subcontractors have
no contractual relationship with the homeowner. Defendants *574*1117challenge this
assumption, arguing that, where there is no contractual privity between a subcontractor
and a homeowner, there is no implied warranty of habitability. Plaintiff in its
brief does not dispute that we may consider this threshold argument, and we agree.
There is no point in determining whether recovery from a subcontractor depends on
the availability of recourse from an insolvent developer-vendor if the implied warranty
of habitability itself does not exist. See, e.g. , Fireman's Fund Insurance Co.
v. SEC Donohue, Inc. , 176 Ill. 2d 160, 164-66, 223 Ill.Dec. 424, 679 N.E.2d 1197
(1997) (considering underlying premise of Rule 308 questions). Accordingly, we modify
the questions certified by the circuit court to add a threshold inquiry: May the
purchaser of a newly constructed home assert a claim for breach of an implied warranty
of habitability against a subcontractor who took part in the construction of the
home, where the subcontractor had no contractual relationship with the purchaser?
See, e.g. , Hampton v. Metropolitan Water Reclamation District of Greater Chicago
, 2016 IL 119861, ¶ 10, 405 Ill.Dec. 131, 57 N.E.3d 1229 (modifying Rule 308 questions)
; De Bouse v. Bayer AG , 235 Ill. 2d 544, 556-57, 337 Ill.Dec. 186, 922 N.E.2d 309
(2009) ; Boyd v. Travelers Insurance Co. , 166 Ill. 2d 188, 192-93, 209 Ill.Dec.
727, 652 N.E.2d 267 (1995) (same). We turn now to this question., ¶ 14 The implied
warranty of habitability for newly constructed homes was first recognized by this
court in Petersen v. Hubschman Construction Co. , 76 Ill. 2d 31, 27 Ill.Dec. 746,
389 N.E.2d 1154 (1979). In Petersen , this court held that an implied warranty of
habitability protects the first purchaser of a new house against latent defects
that would render the house not reasonably fit for its intended use. The court stated
that it was necessary to recognize such a warranty due to the significant changes
in the construction methods and marketing of new houses that had arisen in the modern
era. The court explained that many "new houses are, in a sense, now mass produced,"
that the buyer often purchases the house "from a model home or from predrawn plans,"
and that the buyer of a newly constructed house "has little or no opportunity to
inspect" the construction. Id. at 40, 27 Ill.Dec. 746, 389 N.E.2d 1154. The court
stated that the purchaser "must rely upon the integrity and the skill of the builder-vendor"
and concluded that the "vendee has a right to expect to receive that for which he
has bargained and that which the builder-vendor has agreed to construct and convey
to him, that is, a house that is reasonably fit for use as a residence." Id. For
these reasons, the court determined that recognition of an implied warranty of habitability
was appropriate., ¶ 15 Importantly, Petersen stressed that the implied warranty
of habitability is based in the contract of sale. It arises, the court explained,
"by virtue of the execution of the agreement between the vendor and the vendee."
Id. at 41, 27 Ill.Dec. 746, 389 N.E.2d 1154. The warranty exists "as an independent
undertaking collateral to the covenant to convey" that relaxes the rule of caveat
emptor and the doctrine of merger, and it should be understood as "an implied covenant
by the builder-vendor that the house which he contracts to build and to convey to
the vendee is reasonably suited for its intended use." Id., ¶ 17 Subsequent to Petersen
, this court has never held that a homeowner may pursue a claim for breach of an
implied warranty of habitability against a subcontractor. Plaintiff maintains that
we should recognize such a cause of action now. Plaintiff acknowledges the contractual
origins of the implied warranty of habitability and further acknowledges that neither
it nor the individual condominium owners at issue in this case had contracts with
the defendant subcontractors. Nevertheless, plaintiff maintains that its cause of
action should proceed., ¶ 18 Plaintiff analogizes to the law of personal injury
and strict products liability. Plaintiff points out that product liability law has
its origins in the concepts of implied warranties and contract law, and that many
of the early decisions limited the right to recover for personal injuries from defective
products to those who were in contractual privity with the manufacturer. See, e.g.
, Winterbottom v. Wright (1842) 152 Eng. Rep. 402; 10 M. & W. 109. Over time, however,
product liability law evolved to the point that contractual privity was no longer
required, and the action to recover against the manufacturer came to be recognized
as a tort. See, e.g. , Suvada v. White Motor Co. , 32 Ill. 2d 612, 617, 210 N.E.2d
182 (1965) ("lack of privity is not a defense in a tort action against the manufacturer").,
¶ 19 Plaintiff contends that we should follow the same course here. Plaintiff contends
that "privity should not be a factor" in determining whether its claims for breach
of an implied warranty of habitability may go forward against defendants because
its claims are really tort or "tort-like" causes of action. Plaintiff explains that,
because "an implied warranty of habitability claim is not governed by contract,
there is no reason why the implied warranty should not be similarly applied against
a subcontractor in the same way a tort claim is applied against a component supplier"
in product liability law. In short, plaintiff maintains that an owner of a newly
constructed home should be allowed to proceed directly against a subcontractor under
a claim that is "analogous to a strict liability tort claim." We disagree., ¶ 20
Plaintiff's contention that the implied warranty of habitability should be considered
an action in tort is refuted by the economic loss rule recognized by this court
in Moorman Manufacturing Co. v. National Tank Co. , 91 Ill. 2d 69, 61 Ill.Dec. 746,
435 N.E.2d 443 (1982). In Moorman , this court held that, in an action against a
product manufacturer, a plaintiff "cannot recover for solely economic loss under
the tort theories of strict liability, negligence and innocent misrepresentation."
Id. at 91, 61 Ill.Dec. 746, 435 N.E.2d 443. Economic loss is, in turn, defined as
" 'damages for inadequate value, costs of repair and replacement of the defective
product, or consequent loss of profits-without any claim of personal injury or damage
to other property * * *' [citation]." Id. at 82, 61 Ill.Dec. 746, 435 N.E.2d 443.
The Moorman court recognized three exceptions to the economic loss rule: (1) where
the plaintiff sustained damage, i.e. , personal injury or property damage, resulting
from a sudden or dangerous occurrence ( id. at 86, 61 Ill.Dec. 746, 435 N.E.2d 443
); (2) where the plaintiff's damages are proximately caused by a defendant's intentional,
false representation, i.e. , fraud ( id. at 91, 61 Ill.Dec. 746, 435 N.E.2d 443
); and (3) where the plaintiff's damages are proximately caused by a negligent
misrepresentation by a defendant in the business of supplying information for the
guidance of others in their business transactions ( id. at 89, 61 Ill.Dec. 746,
435 N.E.2d 443 )., In general then, an action for economic loss requires the plaintiff
to be in contractual privity with the defendant. Bernot v. Primus Corp. , 278 Ill.
App. 3d 751, 754, 215 Ill.Dec. 453, 663 N.E.2d 464 (1996) ; East River Steamship
Corp. v. Transamerica Delaval Inc., 476 U.S. 858, 870, 106 S.Ct. 2295, 90 L.Ed.2d
865 (1986) (the failure of a purchaser to receive the benefit of his bargain is
"traditionally the core concern of contract law"). In addition, the economic loss
rule has not been limited to strict liability actions against product manufacturers
and has been frequently applied in construction cases. See, e.g. , 2314 Lincoln
Park West Condominium Ass'n v. Mann, Gin, Ebel & Frazier, Ltd. , 136 Ill. 2d 302,
144 Ill.Dec. 227, 555 N.E.2d 346 (1990) ; Morrow v. L.A. Goldschmidt Associates,
Inc. , 112 Ill. 2d 87, 96 Ill.Dec. 939, 492 N.E.2d 181 (1986) ; Foxcroft Townhome
Owners Ass'n v. Hoffman Rosner Corp. , 96 Ill. 2d 150, 70 Ill.Dec. 251, 449 N.E.2d
125 (1983) ; Redarowicz v. Ohlendorf , 92 Ill. 2d 171, 65 Ill.Dec. 411, 441 N.E.2d
324 (1982)., ¶ 22 The implied warranty of habitability allows the homeowner to recover
solely for latent defects that interfere with the home's intended use. Park v.
Sohn , 89 Ill. 2d 453, 461, 60 Ill.Dec. 609, 433 N.E.2d 651 (1982) ("That warranty,
implied in the contract of sale, was that the house, when conveyed, would be reasonably
suited for its intended use."). This is the definition of pure economic loss under
Moorman , i.e. , when the product disappoints the purchaser's commercial expectations
and does not conform to its intended use. Accordingly, under Moorman , the implied
warranty of habitability cannot be characterized as a tort., ¶ 23 Plaintiff stresses,
however, that, unlike most contractual terms that are agreed to by the parties,
the implied warranty of habitability exists as a matter of law and, thus, the warranty
is in reality a duty in tort imposed by the courts. Plaintiff is correct that the
warranty is implied by the courts as a matter of public policy. However, an implied
term in a contract is no less contractual in nature simply because *1120*577it 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.
See, e.g. , Woodward v. Chirco Construction Co. , 141 Ariz. 514, 687 P.2d 1269,
1271 (1984) (court's statement that "the implied warranty of workmanlike performance
and habitability 'is imposed by law' was not meant to transform the duty arising
out of the contract into one based on tort principles alone"); Aronsohn v. Mandara
, 98 N.J. 92, 484 A.2d 675, 679 (1984) ("The implied covenants and terms of a contract
are as effective components of the agreement as those expressed."). And this point
is underscored by the fact that, in Petersen , this court held that the implied
warranty of habitability may be waived by the purchaser. Petersen , 76 Ill. 2d at
43, 27 Ill.Dec. 746, 389 N.E.2d 1154. A person may choose not to commence an action
in tort, but he cannot waive a duty imposed by the courts. This court's holding
in Petersen that the implied warranty of habitability is a contractual term that
may be waived is a conclusive indication that a cause of action for breach of the
warranty must be based in contract, not tort., ¶ 24 In light of the foregoing, it
is clear that to hold the implied warranty of habitability is a duty imposed in
tort, as plaintiff contends, we would necessarily have to recognize a new exception
to the Moorman doctrine and also eliminate the option of waiver of the warranty.
Not only does this implicate principles of stare decisis , but it also raises significant
practical problems, particularly for subcontractors. Subcontractors depend upon
contract law and their contracts with the general contractor to protect and define
their risks and economic expectations. The subcontractors' fees and costs are set
in relation to their liability exposure, which is controlled in turn by their contracts.
To allow what is, in effect, a tort claim to be brought directly against subcontractors
by homeowners would undermine and, in some instances, render pointless these contractual
obligations and restraints. Avoiding this outcome and preserving the distinction
between tort and contract law is the principal point of the economic loss rule.
See, e.g. , Davencourt at Pilgrims Landing Homeowners Ass'n v. Davencourt at Pilgrims
Landing, LC , 2009 UT 65, ¶ 21, 221 P.3d 234 ; Ass'n of Apartment Owners of Newtown
Meadows v. Venture 15, Inc. , 115 Hawai'i 232, 167 P.3d 225, 285 (2007) ; Ward
Farnsworth, The Economic Loss Rule , 50 Val. U. L. Rev. 545 (2016)., ¶ 25 As it
did in the lower courts, plaintiff points to Minton in support of allowing its claims
for breach of an implied warranty of habitability to go forward. As noted previously,
Minton held that where the purchaser of a newly constructed home "has no recourse
to the builder-vendor and has sustained loss due to the faulty and latent defect
in their new home caused by the subcontractor, the warranty of habitability applies
to such subcontractor." Minton , 116 Ill. App. 3d at 855, 72 Ill.Dec. 582, 452 N.E.2d
835. We find Minton unpersuasive. Because there is no contractual privity between
a homeowner and a subcontractor, Minton essentially recognized a tort action against
subcontractors for economic loss where the builder-vendor is bankrupt. Minton said
nothing about Moorman or why the economic loss rule would not apply, and it did
not address what effect its holding would have on the contractual relationships
between subcontractors and general contractors. Further, we can find no authority
for the idea that a tort duty comes into and out of existence depending on whether
another entity is bankrupt. For these reasons, Minton is overruled., *578*1121¶
26 Plaintiff also relies on this court's decision in Redarowicz v. Ohlendorf ,
92 Ill. 2d 171, 65 Ill.Dec. 411, 441 N.E.2d 324 (1982). In Redarowicz , this court
held that the implied warranty of habitability could be extended to the second purchaser
of a home and, in so holding, stated "[p]rivity of contract is not required." Id.
at 183, 65 Ill.Dec. 411, 441 N.E.2d 324. From this, plaintiff argues that this court
has already effectively held that a claim for breach of an implied warranty of habitability
is a tort claim that exists independently of all privity concerns. Plaintiff reads
Redarowicz too broadly. Reading Redarowicz as plaintiff suggests would run counter
to the economic loss rule, a rule that Redarowicz itself recognized and applied.
Id. at 176-78, 65 Ill.Dec. 411, 441 N.E.2d 324. Instead, as this court recently
explained in Fattah v. Bim , 2016 IL 119365, 402 Ill.Dec. 411, 52 N.E.3d 332, Redarowicz
stands for a narrower principle., ¶ 27 Redarowicz allowed a subsequent purchaser
to enforce the implied warranty of habitability because the builder-vendor in that
situation "is held to nothing more than those obligations that arose from its original
contract with the first purchaser." Id. ¶ 26. Allowing subsequent purchasers to
enforce the implied warranty 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." Id. ¶ 34. Redarowicz did not create a tort or tort-like
cause of action for economic loss and did not expand the class of defendants to
include those who were not a party to the underlying sales contract., ¶ 28 Finally,
plaintiff contends that denying its causes of action against defendants in this
case would leave the owners of the condominium units without a judicial remedy since
TR Sienna is bankrupt. We reject this argument. The fact that a defendant may become
bankrupt is a possibility faced by every civil litigant. Upon purchase of their
condominium units, the homeowners in this case possessed a potential cause of action
against TR Sienna for breach of the implied warranty of habitability (assuming they
had not waived the warranty). The fact that TR Sienna subsequently became bankrupt
does not mean that the homeowners in this case were deprived of a remedy by the
courts., ¶ 30 The loss that can be recovered under the implied warranty of habitability
is for disappointed commercial expectation, i.e. , pure economic loss. As such,
the implied warranty of habitability must be a creature of contract, not tort. 933
Van Buren Condominium Ass'n v. West Van Buren, LLC , 2016 IL App (1st) 143490,
¶ 58, 406 Ill.Dec. 661, 61 N.E.3d 929 (the "argument that the implied warranty of
habitability is a tort claim has no merit"). Accordingly, we answer the threshold
question in this case in the negative. The purchaser of a newly constructed home
may not pursue a claim for breach of an implied warranty of habitability against
a subcontractor where there is no contractual relationship. Because of our resolution
of this issue, we need not answer the remaining questions certified by the circuit
court. We reverse the judgments of the appellate and circuit courts and remand the
cause to the circuit court with directions to dismiss counts III through VI and
count IX of plaintiff's complaint. See, e.g. , Bayer AG , 235 Ill. 2d at 558, 337
Ill.Dec. 186, 922 N.E.2d 309 (reversing the circuit court's underlying order in
a Rule 308 appeal); Heidelberger v. Jewel Cos. , 57 Ill. 2d 87, 92-94, 312 N.E.2d
601 (1974) (same).