The Problem with Pure Economic Loss
University of Toronto - Faculty of Law
September 7, 2009
South Carolina Law Review, Vol. 60, No. 4, 2009
It is now virtually a dogma among contemporary tort scholars that the non-recovery of pure economic loss in a variety of situations may be justified, if at all, only as a special, policy-driven rule that limits the usual operation of general negligence principles, in particular the foreseeability doctrine. This familiar view in turn rests on a further assumption as to the underlying conception of negligence in which the central concept is the standard of care, with the notion of duty being a matter of foreseeability and playing at most a subsidiary and instrumental role. My aim has been to challenge these views through a systematic reconsideration of the rationale for the denial of so-called relational economic loss claims – the longest standing category of non-recoverable pure economic loss. Drawing on the leading cases, I argue that the prevailing policy-driven explanation not only fails to account for core instances of the law but in fact obscures the basis for non-recovery as set out in the decisions. A completely different rationale for non-recovery emerges: one that is rights-based and that has nothing to do with foreseeability, limitations on foreseeability or the usual policy concerns which writers endorse and dispute. Not only does this rationale account for this area of negligence; it also suggests a larger conception of negligence which affirms the autonomy and priority of duty and is both rights-based and relational, in contrast to the dominant model widely assumed by scholars. I argue that it is this alternative conception that not only underlies the law’s treatment of relational economic loss but shows this to be fully consonant with the very same principles of negligence that govern physical loss.
Number of Pages in PDF File: 59
Keywords: economic loss, tort law
Date posted: September 7, 2009 ; Last revised: September 16, 2009