Abstract

A comparative analysis of European legal systems reveals that pure economic interests enjoy less protection under tort law than, for example, personality or property rights, but also, that there is quite some uncertainty regarding the prerequisites for compensation and that there exists no consistent system for determining recoverability. This Article begins by outlining the concept of pure economic loss before proceeding to briefly evaluate familiar arguments against the recoverability of such losses in tort, except in defined and restricted circumstances. Integral to the argument is the anxiety to prevent opening the floodgates of litigation, a two pronged, pervasive rationale designed to limit infinite legal actions and the potentially onerous burden on the defendant. A weighty objection against far reaching liability for pure economic loss is that such harm is often unforeseeable and its parameters are indeterminable. Indeed, the exclusionary rule—barring recovery of pure economic loss—also echoes the subordinate value attributed to financial damage and desires to avoid an overly vigilant culture in a bid to limit such liability. These considerations, it is argued, do not lead to the conclusion that the protection of pure economic loss is undesirable in all cases but only that far reaching protection is objectionable. Thus, the pivotal issue centers around the extent to which tort law might reasonably permit the recovery of pure economic loss.

It seems noticeable that under contract law, liability for pure economic loss is neither controversial nor restricted. By considering this and the justifications behind customary exceptions under the exclusionary rule, it becomes apparent that certain factors make a reward for pure economic loss more probable. Thus, the law protects financial interests more readily where, inter alia, potential claimants are restricted in number, a proximate/special relationship exists, no additional duties of care are imposed on the actor, or the tortfeasor acted with intent. Accordingly, the Basiswertung (the basic values) of these factors when weighed against policy considerations against recoverability, determine whether the expansion of tortious liability to protect a particular type of economic loss can be justified. This Article illustrates this balancing exercise through various examples.

This Article aims to illuminate the golden thread that permeates the boundary between recoverable and non-recoverable economic losses so as to underline decisive factors for a consistent and comprehensive system to determine when such losses should be recoverable.

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