Respecting Boundaries and the Economic Loss Rule in Tort

15 Pages Posted: 15 Apr 2007

Abstract

In this Article, I briefly comment on three aspects of the "economic loss rule" - the longstanding no-duty barrier to recovery of pure economic loss - in an effort to dig beneath the surface and explore its foundations. First, I examine the array of circumstances in which the no-duty rule comes into play, which turn out to be varied; second, I explore the set of justifications offered for the rule, which turn out to differ in persuasiveness; and third, I suggest the extent to which the rule shares some common roots with related areas of accident law (such as personal injury). More broadly, I emphasize that the constraints imposed by the economic loss rule do not reflect any single normative principle. Correspondingly, the cases do not comprise a single generic category guided by a unified set of underlying policy considerations, any more than limitations on recovery for emotional harm - ranging from direct emotional distress, to bystander emotional distress and loss of consortium - can be explained by reference to a single rationale. In both areas, attempts to generate a single rationale for what the courts are doing run the risk of oversimplifying the policy concerns at stake.

With these basic premises in mind, I offer an overview of the field based on three scenarios of negligently inflicted economic loss. I will begin by addressing the scenario in which tort is invoked as an alternative remedy in the context of disappointed contractual expectations. Next, I consider the scenario in which a defendant creates a dangerous condition or causes physical harm, resulting in economic loss to a stranger. Finally, I turn to a scenario in which there is either a negligent misrepresentation, or more broadly negligent performance of an obligation, that results in third-party economic loss. This latter category is a hybrid of sorts, falling between the realm of harm arising out of contractual expectations and that of economic loss entirely distinct from any contractual expectations.

Suggested Citation

Rabin, Robert L., Respecting Boundaries and the Economic Loss Rule in Tort. Arizona Law Review, Vol. 48, pp. 857-70, 2006, Stanford Public Law Working Paper No. 980348, Available at SSRN: https://ssrn.com/abstract=980348

Robert L. Rabin (Contact Author)

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
650-723-3073 (Phone)
650-725-0253 (Fax)

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