Material: Economic Loss Doctrine

How does the economic loss doctrine impact construction disputes in Texas?

It limits lawsuits to parties with direct contractual relationships

In a construction project, which parties can typically sue each other directly under the economic loss doctrine?

Only parties with a direct contractual relationship

Which of the following scenarios would the ELD most likely apply to if the injured party brought a tort claim?

A contractor’s failure to deliver a project on time, causing financial losses for the owner.

EBY questions

What was the primary issue in the LAN/STV v. Martin K. Eby Construction Co., Inc. case?

Whether the Economic Loss Doctrine allowed the contractor to recover damages in tort from the architect.

DART - role

project owner

LAN/STV role

architect/engineer

Martin K. Eby Construction Company role

prime contractor

Before the project was complete, Eby filed a lawsuit against ______ for _______, but this lawsuit was dismissed because __________

DART, breach of contract, Eby had not exhausted its contractually required administrative remedies

When Eby began construction on the project it anticipated that there may be some modest changes to the plans and specifications (around 10%), in reality Eby discovered shortly after beginning the project that the what percentage of the plans prepared by LAN/STV had to be changed?

80%

Before Eby's lawsuit against LAN/STV went to trial, Eby pursued a formal claim against DART.  The result of that claim was:

Negotiated settlement between DART and Eby with DART paying Eby $4.7M

As the project came to an end, the court opinion tells us that Eby claimed it suffered $ _____M in damages on this project as a result of poorly prepared plans and specifications.

21

What was the contractor’s main claim against LAN/STV that became central to the court opinion you read?

Negligent misrepresentation in the plans and specifications.

What Court issued the opinion you read for class in the Eby v. LAN/STV case? 

Texas Supreme Court

The Court reversed the judgment of the trial court on the basis that Eby did not prove by a preponderance of the evidence that LAN/STV's plans and specifications were faulty and/or negligently misrepresented the site or construction requirements.

false

back to normal questions:

In the example where a subcontractor paints the wrong color, why can't the owner sue the subcontractor directly?

The owner is not in privity of contract with the subcontractor

In the context of the economic loss doctrine, what does "privity of contract" mean?

a legal agreement between two parties

How does the ELD affect recovery for economic losses in a contractual relationship?

It requires parties to rely on contract remedies instead of tort claims.

Which rationale supports the Economic Loss Doctrine?

It ensures that economic risks resulting from a breach of contract are allocated by contract rather than through tort law.

What type of damages are recoverable in a tort claim but not in a contract claim?

punitive damages

What is the primary purpose of the Economic Loss Doctrine (ELD)?

To prevent recovery in tort for purely economic losses without an injury to a person or property.