Construction work relies heavily on fulfilling a professional’s duties in a contract. In New Jersey, the economic loss rule states the extent to which clients can sue contractors who commit negligence. This rule is common in the construction industry where contracts are frequently broken and clients often lose money.
The economic loss doctrine
The Economic Loss Doctrine (ELD) restricts the plaintiff’s ability to recover additional money for torts. The plaintiff is prevented from being further compensated for torts in addition to receiving compensation from legal damages, such as professional negligence or breach of contract.
In New Jersey courts, the ELD is applied when a plaintiff has only an economic loss and there are no injuries or deaths. The court will not allow the person to recover from a tort.
There are numerous exceptions to the rule. The integrated system rule states that the ELD can be applied if the negligence results in another person’s property damage. However, if the property belongs to a larger system of properties, the ELD does not apply. Two jurisdictions may have different outcomes for the same case.
Why it matters in construction claims
The economic loss rule is particularly important in construction litigation that often involves breaches of contracts. The plaintiff can only sue based on the terms outlined in the contract and cannot sue for actions that were not specified in writing.
The economic loss doctrine is applied in the majority of jurisdictions where construction litigation occurs. If the loss from negligence is purely economic, the plaintiff is not allowed to seek recovery from torts. There are many exceptions to the rule that result in different outcomes in different jurisdictions.
