What is Economic Loss Doctrine?
The Economic Loss Doctrine (ELD) is a legal principle that applies to the context of commercial transactions. It is a rule of contract law that limits the remedies available to parties in the event of a breach of contract. The doctrine essentially states that a plaintiff cannot recover economic losses that would not have been recoverable in the absence of a contractual relationship. In simpler terms, it means that a party cannot sue for losses incurred due to a breach of contract if those losses would have occurred even if the contract had been performed properly.
The ELD originated in the United States and has been adopted by various jurisdictions around the world. Its primary purpose is to prevent parties from circumventing the principles of tort law, which govern the recovery of damages for harm caused by the breach of a duty imposed by law. By doing so, the doctrine aims to maintain the integrity of contractual relationships and encourage parties to rely on contract law rather than tort law to resolve disputes.
In the following paragraphs, we will delve deeper into the key aspects of the Economic Loss Doctrine, including its historical development, the types of losses it covers, and its implications for parties involved in commercial transactions.
