The emergence and evolution of the economic loss rule is the most important development of the past generation in the American common law of torts. It has also been the most confusing development. Courts have struggled to define the rule and have assigned it different boundaries in different states, making it a frequent source of puzzlement and dread for lawyers. The American Law Institute’s Restatement Third, Torts: Liability for Economic Harm has set out to assign the economic loss rule an accurate meaning and a useful purpose, and to clarify the scope of liability in tort for pure economic loss generally. This purpose of this Article is to concisely explain the reasoning behind those efforts and the outcome of them.

To access the complete article, originally appearing in Volume 50, Number 2 of the Valparaiso University Law Review, visit

Ward Farnsworth

Reporter, Restatement of the Law Third, Torts: Liability for Economic Harm

Ward Farnsworth is Dean and John Jeffers Research Chair of the University of Texas School of Law. He taught for fifteen years at Boston University School of Law, where he also served as Associate Dean for Academic Affairs. Dean Farnsworth is author of Restitution: Civil Liability for Unjust Enrichment, The Legal Analyst, and Farnsworth's Classical English Rhetoric. He served as a law clerk to Anthony M. Kennedy, Associate Justice of the United States Supreme Court, and to Richard A. Posner, Chief Judge of the United States Court of Appeals for the Seventh Circuit. He has also served as Legal Adviser to the Iran-United States Claims Tribunal in The Hague.


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