Also known as: economic losses · pure economic loss
Written by attorneys · grounded in primary & secondary sources — see below
A monetary loss such as lost wages or lost profits without accompanying personal injury or property damage. The loss typically arises from a defective product failing to meet expected performance levels or from a breach that deprives a party of the benefit of a bargain.
Enigma Technologies sold a software system to Ethan Evans for his accounting practice. The system repeatedly crashed and produced inaccurate reports, forcing Ethan to hire temporary staff and lose client billings. Ethan sued Enigma in tort for negligence even though the only harm was the cost of repairs and lost profits. Because the claim fell outside products liability, the economic loss rule did not bar the tort action.
Esme Ellington purchased shares in Equinox Energy after the company misrepresented its reserves. When the truth emerged the stock price fell sharply and Esme sold at a substantial loss. She sued the suppliers who had assisted the fraud. The court required her to prove economic loss and loss causation as elements of the claim.
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Elite Dynamics installed turbines on vessels owned by Empire Logistics. A manufacturing defect caused the turbines to fail and damage only themselves. Empire sought recovery in tort for the cost of replacement and lost charter revenue. The court held that purely economic loss from injury to the product itself belonged in contract rather than tort.
Ella Emerson owned coastal lots she planned to develop into homes. New state rules barred all construction, eliminating the lots' market value. Ella sued alleging a taking and sought compensation measured by the total economic loss in property value.
Heart of Atlanta Motel spent substantial sums to modify its facilities after Congress banned racial discrimination in public accommodations. The owner claimed the statute caused economic loss by reducing occupancy and increasing operating costs. The Court upheld the law despite the acknowledged financial burden.
Eduardo Enriquez bought a truck from Denny Ford Motor Co. that rolled over due to a design feature. He suffered only repair costs and lost business income with no personal injury. The court examined whether his economic loss claim sounded in implied warranty or strict products liability.
Economic loss covers the cost of repairing or replacing a defective product and resulting lost profits when the product injures only itself. Property damage occurs when the defect harms other property or causes personal injury. Courts treat the former as a contract matter and the latter as eligible for tort recovery.
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No. The Florida Supreme Court limited the rule to products liability cases and receded from earlier decisions that had expanded it to ordinary contract disputes. Parties may still pursue independent tort claims provided they satisfy traditional tort elements.
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A buyer who accepts defective goods may recover consequential damages including lost profits that were foreseeable at contracting and could not reasonably be prevented. The seller must have had reason to know of the buyer's particular needs.
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A private plaintiff must prove economic loss and loss causation in addition to a material misrepresentation and scienter. The loss must result from the fraud rather than from other market factors.
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…theory to suggest that an owner has a constitutionally protected right to harm others, if only he makes the proper showing of economic loss. See Pennsylvania Coal Co. v. Mahon , 260 U. S. 393, 418 (1922) (Brandeis, J., dissenting) ("Restriction upon [harmful] use does not become inappropriate as a means, merely because it…