Application of the Economic Loss Rule in Texas
The economic loss rule provides a limitation on damages in cases alleging both breach of contract and certain other causes of action sounding in tort, by precluding a party’s recovery of damages when the only economic loss is the subject matter of the contract. In operation, the rule "restricts contracting parties to contractual remedies for those economic losses associated with the relationship, even when the breach might reasonably be viewed as a consequence of a contracting party's negligence." This article explores this rule and when it applies — as well as the exceptions to it.