The economic loss doctrine (ELD) bars tort claims for economic losses in claims arising in contract. The reasoning is that tort principles are better suited to address unanticipated accidents and injuries, while contract principles are better suited to address damages which the parties have, or could have, addressed in their agreement(s). Accordingly, in actions arising in contract, plaintiffs should rely on their contractual remedies rather than tort remedies, regardless of the label placed on the claim. However, in the event of multiple contracting defendants, the issue of whether contractual privity is required with each defendant in order to apply the ELD has been subject to different interpretation by New Jersey courts.

The issue is best illustrated in the construction context where the contractor sues the owner in contract, and multiple other parties in tort. Does the contractor’s contract with the owner preclude tort claims against other parties involved in the project? More generally, among multiple contracting parties, does the ELD bar tort claims against a particular defendant when plaintiff lacks contractual privity with that particular defendant? Discrepancies in state, federal, reported, and unpublished case law in New Jersey largely result in three different approaches: contractual privity is required with each defendant, any defendant, or no defendant at all. An analysis of the case law and reasoning suggests the compromised approach of requiring contractual privity with any defendant best implements the goals of the ELD.

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