The economic loss doctrine bars tort recovery for purely economic loss arising from a contractual relationship, on the theory that the parties allocated those risks by agreement.
Purely economic loss means loss of the benefit of the bargain, repair costs, lost profits — as distinct from personal injury or damage to other property.
Rationale. Commercial parties can bargain over warranties, remedies and limitations. Allowing tort claims would displace those bargains and expand liability beyond what was priced.
The other property exception. Where a defective component damages property other than the product itself, tort recovery is generally available. Defining the product is the disputed step in integrated systems.
Fraud. Jurisdictions divide. Some bar fraud claims entirely where a contract governs; some except fraud in the inducement; some except fraud extraneous to the contract’s performance. This is the single most important variation to check before pleading.
Independent duty. Claims resting on a duty independent of the contract — professional negligence, fiduciary duty — often survive.
Practical consequence. Where the doctrine applies robustly, the contract’s limitation of liability and remedy provisions become close to complete, which is an argument for negotiating them seriously and for choosing governing law with this doctrine in mind.