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Tort is a division of the civil law based on a claim that the defendant has caused loss or injury to the plaintiff by breaking a relevant obligation imposed by the general law. This definition tells you nothing about what conduct is tortious. Tort law is one of the ways by which individuals who have suffered injuries are been compensated. The law of tort deals with whether losses should be transferred to someone thought to be to blame for what has happened or lie where they fall or (Gerven, W. et al.1999).
The person to blame’ will usually be insured or will be a large corporation or government agency and so the losses will usually be spread so widely. For example, when a person is injured by a careless driver, the driver’s insurance company will pay the damages and the resulting costs of the accident will fall on the general population who pay insurance premiums (Gerven, W. et al.1999).
When a product fails there are only three types of damages that can result. These damages are identified by courts as economic loss damages, and non-economic loss damages and personal injury damage. When a defective product causes physical damages, that case will proceed as a tort case. When the defective product causes either economic or non-economic damages, the economic loss doctrine comes into practice (Mayss 2006).
The economic loss doctrine requires that courts recognize economic loss from non-economic loss. This type of damages found to be economic loss can be recovered through law of contract. Again, damages deemed to be non-economic loss are only recoverable through law of tort. In almost every state, the theories are mutually exclusive. Therefore, the situation can only proceed as a contract or tort case, but not both. The main factor is whether the damages involved are non-economic or economic losses.
Most damage claims that arise from a product’s failure include, repair or replacement, lost profits, downtime, overtime, and other consequential and incidental damages. These damages are understood to be economic loss damages recoverable through law of contract in case there is absence of any coincident property damage. There are some circumstances where purely economic damages are recoverable by law of tort.
According to (Boom 2008) when a product fails and as a result it causes property damage, trying to determining whether the damage is economic or not becomes very difficult. Distinctions must be made between damage to the product itself and damage to other property. There is no majority rule on how to make such distinctions. Even though one may tend conclude that the damages are non economic losses, there are situations where the non-economic loss is recoverable through law of contract.
According to the economic loss doctrine, a customer who buys a defective product and as a result suffers solely economic loss is required to recover his damages through law of contract, including the Uniform Commercial Code (Boom 2008). If the product causes personal injury or other property damage, then strict liability and negligence theories are available. it is necessary to be able to identify uniquely economic loss from personal injury and other property damage because the loss nature incurred determines as to whether the claim of the buyer is to be considered in contract or tort.
The final type of damages arising from the sale of a defective product is consequential damages. Consequential damages could be, first is any loss that results from the general or specific requirements of the buyer that the seller had grounds to be conscious at the time of contracting or purchasing, and which could not be prevented by insurance . These damages are mostly due to the lost profits suffered by the consumer because the product did not meet the standard and performance expectations as suggested by (Mayss 2006).
They do not involve damage to property and are therefore solely economic loss damages. Second type can be divided into two classes. First class is personal injury that proximately results from any breach of warranty. In nations that do not acknowledge the doctrine of economic loss, the personal injury claim could be a different contract claim in apart from a tort claim against the seller or manufacturer. However, in those states that recognize the economic loss doctrine, the tort claim precludes the contract claim.
Economic losses are recoverable through contract law, not tort. There are two circumstances where only economic losses are recoverable in tort. The first is the Fraud Exception to the Economic Loss Doctrine. An agreement of the sale of a product is the outcome of falsified inducements by the supplier or the seller. The damages suffered by the purchaser are solely economic losses, such as, downtime, repair and replacement costs, loss of product value, lost profits or any similar damages. There is no property damage caused by the defective product. Some States have taken different measures when dealing with an issue of the fraudulently induced agreements that result into economic loss. One approach is to ignore the fraud and treat the case solely under contract law. The second approach is to allow the distressed party to take legal action in tort in every case where the agreement is fraudulently perpetrated. Lastly, the approach is to allow tort recuperation only in those instances where the fraud is determined not pertinent to the contract, as opposed to intrinsic to the contract (Mayss 2006).
The second is the Intrinsically Dangerous Substance Exception to the Economic Loss Doctrine. There is a regulation to the economic loss doctrine’s decree that a substandard product that results exclusive economic loss could be brought only under law of contract .The rule states that a defective product that causes other property damage may be brought as a tort case. In some states both theories are available. In those states a choice must be made since they have adopted the economic loss doctrine. The choice will depend on the nature of the damages obtained by the use of the substandard product. The purpose of this will be to fully examine the Restatement of Torts, analogous insurance law and relevant case law to establish when a substandard product results into non-economic loss (Mayss 2006).
The Restatement (Second) of Torts provides that “one who sells any product thats is defective condition and dangerous to the user or buyer or to his property is subject to liability for physical harm thereby caused to the consumer, or to his property. This means that, there is stern tort legal responsibility when a substandard product results into damage to an individual or his property; these damages are referred to as non-economic losses as indicated by (Stapleton 2004). A number of justifications for this rule of strict liability are in place. First, the seller had undertaken and assumed a particular liability to any consuming component of the community to care for that individual from physical damage to the person using. Second, the consumer has a right to expect that the sellers will stand firmly behind their product when it causes physical harm or damage.
According to (Weinrib 2007) third, public policy demands that the problem of accidental injuries caused by the defective products is to be placed to those placing in the market. Fourth, the price to compensate the injured user has to be taken care of as a cost of production to be owed as fraction of the cost of the merchandise. Fifth, the seller is projected to obtain liability insurance to cover the cost of compensating injured users. Sixth, the user of the defective product is entitled to the maximum protection. Lastly, the liability for such harm should be positioned on the individual most able to solve future defects in the product.
According (Stapleton 2004) The Restatement (Third) of Torts expands the role of a manufacturer or seller for a defective product. It provides that if one engaged in the business of selling or distributing products is liable to the injured party for damage obtained by the imperfect merchandise to the user’s individual or possessions. It is defective if it contains a warning, manufacturing defect, contains inadequate instructions or contains a design defect Damage is exclusively defined to comprise economic loss when accompanied by harm to the plaintiff’s possessions. Merchandise can be imperfect in any of three conducts. It could be concluded that Restatement of Torts has not retained the irrationally unsafe standard for producing defects. It is intended to expand the reach of strict liability to all cases where the defect products cause harm to an individual or property.
Boom, H. (2008). Pure economic loss. Oxford University Press.
Bishop, W.(2002). Economic loss in tort. Oxford: Journal of Law.
Giliker, P., (2008). Revisiting pure economic loss: lessons to be learnt from the Supreme Court of USA. Westview Press.
Lunney, M. (2005). Tort Law: Text and Materials. 2nd ed. Oxford: Oxford University Press.
Stapleton, J.(2004). Duty of care and economic loss: Cambridge University Press
Gerven, W. et al., (1999). Cases, Materials and Text on National, Supranational and International Tort Law. London: Cambridge University Press.
Weinrib, E. (2007). Disintegration of duty, in Madden, M. S: Exploring Tort Law. Oxford: Blackwell Publishing.
Mayss, A. (2006). Statutory Reform of Choice of Law in Tort and Delict. Oxford: Hart Publishing.