¶ 1. The petitioners, Cease Electric Inc., d/b/a Zillmer Electric and Pekin Insurance Company seek review of a court of appeals' decision affirming a circuit court judgment awarding Cold Spring Egg Farm, Inc., and its insurance carrier, Insurance Company of North America, damages for losses sustained due to the failure of a barn ventilation system. 1 Cease Electric, a contract electrician, asserts that it was retained to manufacture a product, namely the ventilation system. Accordingly, it contends that the econоmic loss doctrine precludes Cold Spring's recovery under tort.
¶ 2. We agree with Cold Spring that its contract with Cease Electric was one for services and not for a product. Because we determine that the economic loss doctrine does not apply to contracts for services, we conclude that Cold Spring is entitled to its recovery *366 under tort for the negligent performance of services. We therefore affirm the decision of the court of appeals. 2
r-H
¶ 3. Cold Spring raises chickens to produce eggs. It had a long-standing business relationship with Cease Electric. In the summer of 1996, Cold Spring entered into an oral contract with Cease Electric to upgrade the ventilation system in one of its barns. Ventilation systems are required to bring fresh, cool air into the barns so that the chickens have sufficient oxygen to live.
¶ 4. Prior to installation of the new system, Cold Spring had manual ventilation systems in its barns. Under the manual system, each individual fan had its own thermostat control independent of the other fans. If one individual fan failed, the remaining fans would cоntinue to operate.
¶ 5. The new system was designed so that a single controller would operate all fans in stages. As the temperature in the barn rose, the fan control would engage different fans to bring fresh air into the barn. Conversely, when the temperature in the barn fell, the controller would turn off fans accordingly.
¶ 6. The "brains" of the new ventilation system was the main fan control unit: the ST-4026. Cold Spring purchased this component from Aerotech, Inc. *367 Aerotech designed the system to have a backup thermostat as a safety devicе in the event the primary fan control failed. It recommended wiring the backup thermostat separately from the power source for the primary fan control.
¶ 7. Included with the ST-4026 was a one-page wiring schematic. Based on this diagram, Cold Spring asked Cease Electric to wire the ventilation system's component parts, including the primary fan control and the backup thermostat. Upon completion of the job, Cold Spring terminated its relationship with Cease Electric because it believed that Cease had not completed the project correctly or in a timely fashion.
¶ 8. On January 8,1997, the ventilation system in Cold Spring's barn failed, resulting in the loss of nearly 18,000 chickens. Within a week of the loss, Cold Spring hired A1 Dittmar, an electrician with Carroll Electric, to investigate why the fans malfunctioned.
¶ 9. Dittmar concluded that Cease Electric had improperly wired the main fan control unit to the same power circuit as the backup thermostat. He also determined that Cease Electric's employees had failed to test the new system, which would have revеaled that the backup thermostat was not functioning.
¶ 10. Pursuant to its insurance contract, Insurance Company of North America (INA) paid Cold Spring $118,339.20 for the loss of income and $40,704.89 for the loss of chickens. Cold Spring, meanwhile, sustained a loss of $39,761.02 due to its policy deductible. Both INA and Cold Spring commenced this action in June 1999, alleging that the failure of the ventilation system was the result of the negligence of Cease Electric in its performance of services.
¶ 11. At the conclusion of a two-day trial, a jury found that the employees of Cease Electric were negli *368 gent and that their negligence had caused the plaintiffs' loss. The circuit court inserted the stipulated amount of damages into the verdict. It then entered judgment in the total amount of $204,065.29, representing the amount of stipulated damages plus double costs awarded pursuant to Wis. Stat. § 807.01(3) (2001-02). 3 Cease Electric appealed.
¶ 12. On appeal, Cease Electric maintained that the plaintiffs' negligence action was precluded by the economic loss doctrine. 4 It argued that it had provided a product to Cold Spring, the ventilation system. Acсording to Cease Electric, as the plaintiffs' case was one of disappointed expectations resulting in only economic losses to the product, the economic loss doctrine barred recovery in a tort action.
¶ 13. The court of appeals affirmed the circuit court. It concluded that the economic loss doctrine did not bar Cold Spring's recovery under tort.
Insurance Co. of North America v. Cease Electric Inc.,
*369 II
¶ 14. This case provides us with an opportunity to further define the parameters of the economic loss doctrine in Wisconsin. Before doing so, however, we must first determine whether the transaction at issue was one for goods or services. Interpreting the nature of a contract presents a question of law subject to independent aрpellate review. See Micro-Managers, Inc. v. Gregory,
¶ 15. The economic loss doctrine is a judicially created doctrine that seeks to preserve the distinction between contract and tort. Daanen & Janssen, Inc. v. Cedarapids, Inc.,
III
¶ 16. Our discussion begins with an examination of the nature of the contract at issue. Cease Electric contends that the court` of appeals erred in characterizing its contract with Cold Spring as one for services. It asserts that it was hired to manufacture a unique ventilation system for Cold Springs barn. According to *370 Cease Electric, it fashioned this system by providing additional component parts that Cold Spring did not have. 5
¶ 17. The circuit court rejected Cease Electric's claim that it provided a product to Cold Spring. Similarly, the court of appeals determined that Cease Electric had mischaracterized its role in the agreement.
Insurance Co. of North America,
¶ 18. Like the court of appeals, we determine that the contract at issue was for services, and not for a product. Here, it was Aerotech's ST-4026 that created the ventilation system in the barn, not Cease Eleсtric. All Cease was required to do was to follow the one-page wiring schematic to ensure that the controller was properly wired to ventilation fans and a power source. It failed to do so, and Cold Spring brought suit, alleging negligent performance of services.
¶ 19. A review of the record supports our conclusion. To begin, Cease Electric did not charge Cold Spring a one-time fee for the price of a "system." Rather, the electricians who did the work for Cease Electric kept time sheets and billed thеir time out on an hourly basis. Evidence of billing is a relevant consideration when determining the nature of a contract.
Micro-Managers,
¶ 20. Furthermore, the testimony of Robert Cease, a principal of Cease Electric, belies Cease *371 Electric's assertion that it "manufactured" Cold Spring's ventilation system. After discussing the manual system in place before the installation of the Aerotech system, Cease made the following observation about the new fan controller: "The unit itself is sophisticated, but the wiring of it is very simple. You bring power in, you take power out to a fan or a stage of fans. So it's basically inputs and outputs."
¶ 21. Finally, although Cease Electric claims to have furnished additional component parts for Cold Spring's system, there is no evidence in the record to support this contention. As noted above, Cold Spring had purchased the ST-4026 from Aerotech. The only clear evidence of any "product" provided by Cease Electric is contained in Exhibit 3, which references merely conduit and wiring. Accordingly, we are satisfied that the contract at issue was for services and not for a product.
IV
¶ 22. Having determined that the contract at issue was one for services, we turn next to the applicability of the economic loss doctrine here. Recently, this court described the economic loss doctrine as holding that a commercial purchaser of a product cannot recover solely economic losses from the manufacturer under negligence or strict liability theories, particularly where the warranty given by the manufacturer specifically precludes thе recovery of such damages.
Van Lare v. Vogt,
¶ 23. "Economic loss" for purposes of the doctrine is defined as "the loss in a product's value which occurs because the product is 'inferior in quality and does not
*372
work for the general purposes for which it was manufactured and sold.1"
Wausau Tile, Inc. v. County Concrete Corp.,
¶ 24. The significance of the economic loss doctrine is that it "requires transacting parties in Wisconsin to pursue only their contractual remedies when asserting an economic loss clаim, in order to preserve the distinction between contract and tort."
Digicorp, Inc. v. Ameritech Corp.,
¶ 25. There is a split among the jurisdictions as to whether the economic loss doctrine applies to contracts for services. As one treatise noted, "[t]he judiciary remains hopelessly divided on whether the doctrine should be extended to services . ..." Philip L. Brunner and Patrick J. O'Connor, Jr.,
Construction Law
§ 19:10, at n. 14 (May 2004). This court has not yet addressed whether the doctrine covers such claims. Indeed, in
Daanen,
*373
¶ 26. The genesis of the economic loss doctrine lies in products liability cases. The seminal case on the economic loss doctrine is
Seely v. White Motor Co.,
¶ 27. Wisconsin first recognized the economic loss doctrine in
Sunnyslope,
¶ 28. The application of the econоmic loss doctrine in the abovementioned cases is not surprising given the protections afforded by the Uniform Commercial Code (U.C.C.). Adopted by the legislature in 1963, the U.C.C. sets forth the rights and remedies that govern a transaction between two commercial parties of relatively equal bargaining power.
Id.
at 916. It provides a " 'comprehensive system for compensating consumers
*374
for economic loss arising from the purchase of defective products.'"
State Farm Mut. Auto. Ins. Co. v. Ford Motor Co.,
¶ 29. Protection against damages caused by a defective product injuring itself is the purpose of express and implied warranties provided for in the U.C.C.
State Farm,
¶ 30. Under the provisions of the U.C.C., purchasers of defective products are able to recover costs and lost profits, thereby placing them in the same position as if the product had functioned properly.
Id.
at 343. " 'The expectation damages available in warranty for purely economic loss give a plaintiff the full benefit of its bargain by compensating for forgone business opportunities.' "
Id.
(quoting
East River Steamship Corp. v. Transamerica Delaval, Inc.,
¶ 31. Additionally, the U.C.C. provides protections for manufacturers. Through the terms of a contract, a manufacturer can restrict its liability by disclaiming warranties or limiting remedies.
Id.
In return, the purchaser is likely to pay a lower price.
Id.
" 'The limitation in a contract action comes from the agreement of the parties and the requirement that consequential damages, such as lost profits, be a foreseeable result of the breach.'"
Id.
(quoting
East River,
*375
¶ 32. It is the existence of these rights and remedies that serves as one of the critical rationales underlying the economic loss doctrine. After all, if a commercial purchaser were allowed to sue in tort to recover solely economic loss, the U.C.C. provisions designed to govern such disputes could be circumvented entirely. In that event, the U.C.C. would be rendered meaningless and "contract law would drown in a sеa of tort."
East River,
¶ 33. Our case law recognizes this underlying rationale. In
Sunnyslope,
this court observed that, "the legislative protections granted by the Uniform Commercial Code are not to be buttressed by tort principles and recovery."
Where there are well-developed contractual remedies, such as the remedies that the Uniform Commercial Code (in force in all U.S. states) provides for breach of the quality, fitness, or specifications of goods, therе is no need to provide tort remedies .... The tort remedies would duplicate the contract remedies, adding unnecessary complexity to the law.
Tietsworth v. Harley-Davidson, Inc.,
¶ 34. Here, Cease Electric asks this court to extend the economic loss doctrine to contracts for services. It maintains that allowing Cold Spring to escape the confines of its agreement would permit a classic "end run," eviscerating the doctrine altogether. Cease Electric asserts that when a commercial party suffers a *376 failure in the performance of a contract and the loss sustained is solely economic, the doctrine should apply.
¶ 35. The major problem with Cease Electric's argument is that it assumes that contract law is better suited than tort law for dealing with purely economic loss in the context of service agreements. It is not. Unlike contracts for products or goods, which enjoy the benefit of well-developed law under the U.C.C., no such benefit exists for contracts for services. This is becausе the U.C.C. does not apply to service contracts. Wis. Stat. § 402.102.
Van Sistine v. Tollard,
¶ 36. Given the inapplicability of the U.C.C. to service contracts, we decline to extend the economic loss doctrine in this case. We note that we are not alone in this regard.
See, e.g., Cargill, Inc. v. Boag Cold Storage Warehouse,
¶ 37. The inapplicability of the U.C.C. and its warranties is particularly troubling in light of the facts of this case. Like many agreements between purchasers and providers of services, the agreement between Cold Spring and Cease Electric was oral rather than written. *377 Because of the informal circumstances surrounding most oral contracts for services, the policy provisions underpinning the application of the economic loss doctrine do not readily apply.
¶ 38. In
Daanen
this court identified three policies as a basis for application of the economic loss doctrine to tort actions: (1) to maintain the fundamental distinction between tort and contract law; (2) to protect commercial parties' freedom to allocate economic risk by contract; and (3) to encourage the party best situated to assess the risk of economic loss to assume, allocate, or insure against that risk.
¶ 39. Even though the distinctions between tort and contract law at times may seem blurred, they differ in the interests that each protects. Tort principles protect not only the individuals harmed but also demonstrate a public policy to protect society against the unreasonable risk of harm from accidental and unеxpected injury. Christopher J. Faricelli, Wading Into The "Morass": An Inquiry Into the Application of New Jersey's Economic Loss Rule To Fraud Claims, 35 Rutgers L.J. 717, 723 (Winter 2004).
¶ 40. On the other hand, an operating principle behind contract law is that bargaining parties to a contract will allocate the risks of non-performance. Id. at 722. The disappointed party to the contract is protected against non-performance by the benefit of the bargain. Id. at 722-23. Thus, when a contract is broken, the breaching party is hable for restoring the non-breaching pаrty to the position he or she would have been in, regardless of negligence or intent. Michelle Kristin Hart, Tort or Contract?: New Jersey's Simulta *378 neous Expansion and Dilution of Contract Theory, 26 Rutgers L.J. 495, 496 (1995).
¶ 41. As noted above, contract law is not better suited than tort law for dealing with negligently provided services. Tort law provides an incentive generally to guard against negligent conduct in the provision of services. If tort law is avoided, the ability to deter certain activity is impaired because contract remedies and warranties may be easily disclaimed. Tort principles address more than merely a private interest between two commercial companies; they also address society's interest in minimizing harm by deterring negligent conduct.
¶ 42. Admittedly, contract law also advances a societal interest in seeing that bargained for promises are performed. The fundamental premise in the application of contract law is that the bargaining parties will allocate the risks and remedies. As the facts demonstrate in this case, however, this fundamental premise simply is not at work with many service contracts.
¶ 43. Often the circumstances surrounding service contracts are simple and informal (e.g., electricians, plumbers, lawn care providers, etc.). In light of the societal interests behind the application of tort principles, and the inapplicability of the fundamental premise supporting contract law, the policy of maintaining the distinction between tort and contract law does not warrant the invocation of the economic loss doctrine here.
¶ 44. Likewise, the second policy consideration of protecting the parties' freedom to allocate economic risk by contract is not implicated. Certainly, parties to service contracts, oral or written, can by means of contractual provisions allocate risk and limit remedies. Yet given the informality of such agreements, few *379 parties actually address the allocation of risk or the limitation of remedies. They neither discuss it themselves nor hire attorneys to draft written agreements.
¶ 45. Once again the concept of the parties engaging in discussions of pre-negotiated liability in the event of breach seems to fly in the face of the reality of routine service contract relationships. Although the freedom to allocate economic risk by contract should not he impinged, applying the economic loss doctrine to limit recovery based on the premise that the parties have indeed exercised that freedom simply makes no sense.
¶ 46. Finally, we examine the third policy that the party in the best position to assess the risk of economic loss should be encouraged to assume, allocate, or insure against the risk. The requirement of pre-negotiated agreements seems to presuppose that each party to the service contract can negotiate the terms with an identical level of bargaining power. In many service contract relationships, the information disparities between the parties do not support such a presupposition.
¶ 47. Here, Cold Spring argues that a contractor has more knowledge than the buyer concerning the service that is provided. Cease Electric responds that Cold Spring is in the better position to assess what economic loss will occur to their business if the service fails. Who can better assess the risk of economic loss seems to fall to a case-by-case application. Thus, the third policy consideration, as a general rule, neither supports nor negates the application of the economic loss doctrine to service contracts.
¶ 48. On balance, we conclude that the policy considerations underlying the eсonomic loss doctrine do not support its extension here. Instead, they buttress our decision not to extend the doctrine given the inapplicability of the U.C.C.
*380
¶ 49. In reaching this result, we are mindful of the ramifications that would accompany a decision to extend the doctrine to such agreements. Wisconsin courts have previously held that claims for professional malpractice lie both in tort and contract.
See, e.g., Milwaukee County v. Schmidt, Garden & Erikson,
¶ 50. Inevitably, this court would find itself on a slippery slope of having to decide whether an exception should be made for some or all professional groups. For an illustration of this problem, we need look no further than what is occurring in Illinois, where the state supreme court has exempted some professions from the economic loss doctrine,
Congregation of the Passion v. Touche Ross & Co.,
¶ 51. This inconsistency in application has led one justice to criticize the decision-making process as creating an "exception of the month."
Congregation of the Passion,
¶ 52. Today, we сhoose to avoid those ends by avoiding this beginning. Accordingly, we determine that the economic loss doctrine is inapplicable to claims for the negligent provision of services. This bright line rule will limit the uncertainty and increased litigation that would accompany any other decision.
V
¶ 53. In sum, we agree with Cold Spring that its contract with Cease Electric was one for services and not for a product. Because we determine that the economic loss doctrine does not apply to contracts for services, we conclude that Cold Spring is entitled to its recovery under tort for the negligent performance of services. We therefore affirm the decision of the court of appeals. 7
By the Court. — The decision of the court of appeals is affirmed.
Notes
Insurance Co. of North America v. Cease Electric, Inc.,
Because we determine that Cease Electric's contract with Cold Spring was one for services, we do not address the proper test for distinguishing mixed contracts that involve both products and services. Similarly, because we conclude that the economiс loss doctrine does not apply to contracts for services, we do not reach the issue of whether Cold Spring's chickens constituted "other property."
All references to the Wisconsin Statutes are to the 2001-02 version unless otherwise noted.
Additionally, Cease Electric asserted that the circuit court erred in (1) refusing to impose sanctions against Cold Spring for its alleged spoliation of evidence and (2) exacting the penalty provisions of Wis. Stat. § 807.01(3). The court of appeals rejected both arguments.
Insurance Co. of North America,
It is unclear from the record which party furnished the backup thermostat in this case.
In accordance with our decision, we withdraw the language in
Vogel v. Russo,
Prior to oral argument, Cold Spring and Insurance Company of North America filed a motion asking this court to reconsider its granting of the petition for review. That motion was held in abeyance pending the court's decision on the merits of this case. The court now denies Cold Spring's motion.