Also known as: economic harm rule · economic-harm rules · economic loss rule · economic loss doctrine
Written by attorneys · grounded in primary & secondary sources — see below
A judicial doctrine that bars recovery in tort for purely economic losses unaccompanied by personal injury or property damage. The doctrine applies principally in products liability cases to prevent a plaintiff from using tort theories to recover losses that are properly addressed through contract or warranty remedies.
Daisy contracted with Plains Eats to list her restaurant on its delivery platform. An internal software error disabled the listing for four days, causing $2,500 in spoiled ingredients and $8,000 in lost online orders. Daisy sued Plains Eats in negligence for both amounts. Because the claimed losses were purely economic and arose from a contractual relationship without physical injury or property damage, the economic-harm rule barred the tort claim.
Bishop Logging purchased specialized harvesting equipment from John Deere under a contract that excluded consequential damages. The equipment failed to perform as expected, causing only economic losses in the form of reduced productivity and repair costs. Bishop attempted to recover those losses by pleading negligent misrepresentation. The economic-harm rule prevented circumvention of the contractual exclusion through a tort claim between commercial parties.
Select any source to read its text and confirm it supports the definition.
No. The rule bars tort recovery only for purely economic losses unaccompanied by personal injury or property damage, and it is now limited to products liability cases in many jurisdictions. When a plaintiff proves actual pecuniary loss caused by negligence in a non-products context, compensatory damages remain available.
Supporting sources
No. When the claim arises from a commercial transaction between parties in privity and seeks only economic losses, courts apply the rule to prevent tort claims from circumventing contractual limitations such as exclusions of consequential damages.
Supporting sources
In many jurisdictions the rule has been narrowed so that it no longer bars tort claims arising from contractual relationships outside the products liability context. Parties remain subject to traditional contract principles and independent tort duties, but the rule itself does not automatically preclude recovery.
Supporting sources
…by the plaintiff, not the product sold by the defendant”); see also Fox & Loftus, Riding the Choppy Waters of East River: Economic Loss Doctrine Ten Years Later, 64 Def. Couns. J. 260, 264, n. 29 (1997) (citing numerous other cases and observing that “[t]he trend in defining ‘economic loss’ is to focus on what the plaintiff…