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Death of the Economic Loss Rule - Or Just A Case of Legal Semantics?

The economic loss rule has been a long evolving judicial doctrine that served as a basis to prohibit people from suing for damages that result from nonperformance of the contract under a tort theory when the parties had a contract. Simply put, you cannot sue in tort (i.e. for negligence) for breaches of a contract. Contractual remedies apply to breach of a contractual duty, and one is prohibited from seeking damages in tort for breach of contract losses.  Read On . . .

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Here in the Uk the Courts have held that pure economic loss is not recoverable in the tort of negligence. This means that if a Contractor builds a building defectively and a tenant then sue for the costs of repair then it cannot effect a recovery in negligence. However if, say, a defective cladding panel fell from the building injuring the Managing Director of the tenant company then he could recover his losses, including damages for injury, as those losses would not be pure economic loss.
The legal position has led to the widespread use of collateral contracts that give purchasers and tenants contractual rights to claim pure economic loss.

Thought that you might like to see how the law has developed in the UK

Michael Tiplady

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