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Simple English definitions for legal terms
economic-loss rule
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A quick definition of economic-loss rule:
The economic-loss rule is a legal principle that says a person cannot sue someone else for money they lost, unless they were physically hurt or their property was damaged. However, there are some exceptions to this rule, such as if the other person lied or if they had a special relationship with the person who lost money. This rule is sometimes called the economic-harm rule or the economic-loss doctrine.
A more thorough explanation:
The economic-loss rule is a principle in tort law that states a plaintiff cannot sue for purely monetary loss caused by the defendant, without physical injury or property damage. This rule is also known as the economic-harm rule or economic-loss doctrine.
For example, if a company purchases a defective product that causes financial loss, they cannot sue the manufacturer for tort damages. However, if the manufacturer made fraudulent claims about the product, the economic-loss rule may not apply, and the company could sue for damages.
Another exception to the economic-loss rule is when a special relationship exists between the parties, such as an attorney-client relationship. In such cases, the plaintiff may be able to sue for economic loss caused by the defendant.
The economic-loss rule is intended to distinguish between tort and warranty claims and prevent plaintiffs from seeking damages for purely financial losses.