The Seventh Circuit Court of Appeals has ruled that a seller of real property cannot invoke noncontractual indemnity to shift the risk that was assumed in a purchase-and-sales contract. Wilder Corp. of Del. v. Thompson Drainage & Levee Dist., No. 11-1185 (7th Cir. 9/27/11). Wilder Corp. expressly warranted by contract that the 6,600 acres of farmland it sold to the Nature Conservancy was not contaminated. Later, after contamination was discovered and the Nature Conservancy sued Wilder under the contract, Wilder in turn sued the local drainage district alleging negligence in allowing the property to become contaminated.
The district court awarded $800,000 in damages to the Nature Conservancy in its breach of warranty suit against Wilder, and the Seventh Circuit affirmed. Nature Conservancy v. Wilder Corp. of Del., 2011 WL 3849627 (7th Cir. 2011). The district court also dismissed Wilder’s suit against the drainage district, and Wilder appealed.
The appellate court ruled that the drainage district had no duty to indemnify Wilder. The court reasoned that an avalanche of litigation might “be triggered if an involuntary contract breaker could sue anyone for indemnity who a court might find had contributed to the breach.” The court also cited the economic-loss doctrine, which bars most negligence suits for purely financial loss, as another reason for affirming the district court.