TortsProf Blog

Editor: Christopher J. Robinette
Widener Commonwealth Law School

Friday, July 18, 2008

Perry on Economic Loss

Ronen Perry (Haifa/NYU) has posted The Economic Bias in Tort Law on SSRN.  Here is the abstract:

Economic loss is moving to the forefront of tort discourse on both sides of the Atlantic. A Council draft of the Restatement (Third) of Torts: Economic Torts and Related Wrongs is being appraised and discussed by prominent American tort scholars, and European academics are seeking common ground regarding liability for economic loss in the European Union. The time may well be ripe to focus on an unexplored, perhaps unnoticed, mystery in the common law of torts: the consequential/relational economic loss dichotomy. Consequential economic loss is economic loss that stems from physical injury to the plaintiff's own person or property. Relational economic loss is purely economic loss that stems from physical injury to the person or property of a third party, or to an ownerless resource. The difference between the two may often seem normatively immaterial, but it has far-reaching implications in tort law. This Article endeavors to unveil the political--redistributive--underpinning of this perplexing legal distinction.

Part I shows that while all common law jurisdictions have allowed recovery for consequential losses without much hesitation for centuries, most of them have been reluctant to impose liability for relational losses.

Part II identifies the various reasons given by courts and scholars for the consistent unwillingness to impose liability for relational losses. It shows that these reasons are equally applicable to consequential losses, inapplicable to most cases of relational loss, or fundamentally flawed. The inevitable conclusion is that the law should treat consequential and relational losses similarly, at least as a general rule. The positive and normative analyses thus seem incongruent.

Part III theorizes that the best account for the consequential/relational economic loss distinction is an embedded political inclination of common law judges. The traditional distinction has been used, perhaps unconsciously, to empower the powerful. Following a general overview of my hypothesis, notwithstanding its intrinsic appeal, I substantiate it further on three levels. First, I place it in a wider theoretical context, assuming that an interpretive account of a particular doctrine must, at least to some extent, fit with an interpretive theory of the relevant branch of law. Put differently, I "zoom out" to show that Robins is an unremarkable tile in a larger mosaic. Second, I "zoom in" to show that the intricacies of the law concerning relational economic loss, not only the general rule of no-recovery, roughly conform to my hypothesis. Third, I test my hypothesis from a comparative perspective. If my contention holds, and the consequential/relational loss dichotomy is politically contingent, different legal regimes may be expected in other political environments. I demonstrate that this is in fact the case.

Via Solum/Legal Theory Blog.


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I always viewed the distinction between compensable "consequential" harm and non-compensable "relational" harm simply to be a heuristical application of proximate causation.

Or is p.c. also a mere "embedded political inclination ... to empower the powerful"?

Posted by: KipEsquire | Jul 18, 2008 7:46:19 AM

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