Does the economic loss rule bar tort claims based on seller disclosures in real estate transactions? Thorp v. Charlwood Explained

The Utah Court of Appeals in Thorp v. Charlwood addressed whether the economic loss rule bars tort claims when the alleged breach involves duties specified in seller disclosure forms incorporated into a real estate purchase agreement.

Background and Facts

Charlwood purchased and completely remodeled a Park City home in 2005-2006, then sold it to Thorp in 2007. The parties executed a Real Estate Purchase Agreement (REPC) that incorporated Seller’s Property Condition Disclosure forms requiring disclosure of known material defects. Ten years later, Thorp discovered structural problems with the deck and other defects. Thorp sued for defective construction, negligent misrepresentation, and fraudulent misrepresentation, alleging Charlwood failed to properly disclose these issues.

Key Legal Issues

The case presented two primary questions: (1) whether the economic loss rule barred Thorp’s tort claims when the alleged duties overlapped with contractual disclosure obligations, and (2) whether Thorp could establish that Charlwood owed heightened duties as a developer-seller or contractor-seller that were independent of the contract.

Court’s Analysis and Holding

The Court of Appeals affirmed dismissal, finding that Charlwood’s contractual duty to disclose known defects in the Seller’s Disclosures “completely overlapped with his common law duty to do the same.” The court rejected Thorp’s argument that Charlwood owed heightened developer-seller duties, noting that the cited precedents involved new construction rather than remodeling projects. The court also found that Charlwood’s invocation of the economic loss rule constituted enforcement of the REPC, justifying the attorney fee award.

Practice Implications

This decision reinforces that the economic loss rule applies broadly to bar tort claims even when contractual duties appear in ancillary documents like disclosure forms. Practitioners should carefully analyze whether alleged independent duties truly exist apart from contractual obligations, particularly in real estate transactions where disclosure requirements may mirror common law tort duties. The case also clarifies that remodeling projects may not trigger the same heightened disclosure duties as new construction.