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The post below was published on Thursday, December 30th, 2010 at 8:57 AM.

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Second District: Economic Loss Doctrine

With the year’s end nearing, we see this economic loss rule case from the Second District. Economic loss decisions have gone from being plentiful to downright sparse. A few state supreme court decisions disparaging the “rule” are no doubt the cause, but that is a fun discussion for another day.

In this case, a plaintiff asserted that three corporate officials misrepresented the nature of costs the plaintiff had agreed to pay their corporation.

The officials relied on the economic loss rule to argue that any claim against them was barred, but the court held the rule inapplicable for two reasons. First, “[t]he economic loss rule does not bar tort actions based on fraud if the fraud alleged does not relate to an act of performance under the contract but instead relates to a term in the agreement.” So if someone is fraudulently induced to agree to certain terms in a contract, that inducement is actionable. Second, the court held that the rule did not apply because the plaintiff had no contract with the officials and thus “the action against them is for intentional or negligent acts independent of any contract.”

The second reason is far less developed in the case law than the first. As someone who really enjoys this area of the law, I look forward to watching it develop — even if that development will be a bit slow.

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