What is the “economic loss” rule in defective products law?

The economic loss rule is a concept that is part of Californian defective products law. It states that in cases where a product is deemed to be defective, but no physical harm is caused, then a consumer cannot seek damages from the seller of the product. This was developed in 1975 by the California Supreme Court in the case of Seely v. White Motor Co. The economic loss rule is part of defective products law because it acts as a safeguard to protect manufacturers from being held liable for damages related to a defective product if the product itself did not cause physical harm. This protects businesses from the potential financial strain of having to pay out large damages claims due to non-physical losses, such as the loss of value of a product or financial losses related to repairs and replacements. In order for a consumer to be successful in a defective product claim, they must show that the product was defective and that it caused physical harm. This generally involves proving that the product was not used in the manner it was intended and/or that the manufacturer was aware of the problem and failed to address it. If these elements are not present, then it is unlikely that the consumer will be successful in their claim.

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