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Recently, the North Carolina Supreme Court issued a decision impacting the application of the economic loss rule in commercial settings, particularly construction.
This article provides a refresher on the economic loss rule before turning to an overview of the Court s decision and its potential impact.
The economic loss rule is a legal construct designed to prohibit recovery under a tort theory of liability, like negligence, for purely economic losses that arise out of a contractual relationship. The overarching premise behind the rule is that parties to a contract are presumed to have considered and contracted for how risk and loss flowing from the contract s subject matter is to be allocated. In other words, allowing a party to a contract to pursue remedies it did not bargain for in negotiating its contract would effectively allow that party to get more than its bargained-for exchange.
Friday, January 22, 2021
Recently, the North Carolina Supreme Court issued a decision impacting the application of the economic loss rule in commercial settings, particularly construction.
This article provides a refresher on the economic loss rule before turning to an overview of the Court s decision and its potential impact.
The economic loss rule is a legal construct designed to prohibit recovery under a tort theory of liability, like negligence, for purely economic losses that arise out of a contractual relationship. The overarching premise behind the rule is that parties to a contract are presumed to have considered and contracted for how risk and loss flowing from the contract s subject matter is to be allocated. In other words, allowing a party to a contract to pursue remedies it did not bargain for in negotiating its contract would effectively allow that party to get more than its bargained-for exchange.