Economic Loss Rule and Other Tort Rules Limiting Liability

Cases do arise in the course of business interactions, and as a result, the contract law helps manage related agreements. The elements of the statute are instrumental in instances where one of the parties violates the signed contract. Consequently, in a working environment, a faulty product can lead to various damages, but the type of harm caused determines whether the case will be solved with the contract or the tort law. The former applies when the injury caused is exclusively classified as an economic loss. For instance, when a purchased machine does not process the number of items per hour as initially guaranteed by the seller, the economic loss rule then applies. Contrarily, when the defective machine causes physical injury to an employee, elements of tort law such as breach of duty and negligence are applied in resolving the dispute.

A perfect example is the Barber Lines v. Donau Maru case, where one ship could not dock at its usual place because the other had spilled some oil and, as a result, suffered extra costs to dock at a different location. Although the plaintiff sued Donau Maru for negligence, claiming that the spilled oil led to damages in the form of additional expenses, the tort law of negligence could not apply because nobody suffered physical harm. However, in special cases where the purchased defective product causes physical harm to a worker and also evidently leads to an economic loss, the two types of laws can be applied simultaneously. Moreover, product liability, a rule within the tort law, is different from the economic loss doctrine because whereas the former is concerned with damages caused on the property as a result of a faulty product, the latter focuses on financial harm.

Nonetheless, similar to elements of tort law, there are limitations in applying the economic loss rule. Courts usually rely on the doctrine to decide whether the presented case should be addressed as a contract issue or a tort. Consequently, the economic loss rule states that when a faulty product causes financial damages, the plaintiff is allowed to pursue compensation solely through contract law. However, if the defective device leads to personal injury, the victim can claim compensation through tort law. The difference between the two circumstances explains why the plaintiffs in the Barber Lines v. Donau Maru case could not be compensated because the characteristics of their accusations required the administration of the contract statutes and not the tort law.

When claiming compensation, the assumption of risk is a defense that can be asserted by a defendant to prevent the plaintiff’s right to recovery against a negligent offender. The concept works when the tortfeasor can prove that the harmed party consciously ignored the risks related to the hazardous situation that led to the injury. For instance, skydiving, which involves jumping out of a plane, is dangerous, and therefore in case of an accident, the assumption of risk can be used to demonstrate that the plaintiff was well aware of the danger involved. However, elements of the assertion are different from the normal risks people face every day covered by the tort law. For instance, playing rugby can be dangerous because of the game’s nature. However, it is a sport that is encouraged in society that is a source of entertainment and income for others.

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