Chapter 5 Harm to Economic Interests: Fraud, Other Misrepresentation, Interference with Economic Relationships, and Civil Conspiracy

• Library: The South Carolina Law of Torts (SCBar) (2023 Ed.)

CHAPTER 5 HARM TO ECONOMIC INTERESTS: FRAUD, OTHER MISREPRESENTATION, INTERFERENCE WITH ECONOMIC RELATIONSHIPS, AND CIVIL CONSPIRACY

This chapter addresses a variety of torts that are primarily concerned with economic injury, as opposed, for example, to injury to a person's body or property. As indicated in Chapter 2,¹ physical injury is different from the economic injury addressed in this chapter in three important ways.

First, the economic consequences of an act are potentially unlimited. Where a communication is involved, this extension of consequences can be even more pronounced. For example, a misstatement of fact to one person could be disseminated to many² and, by extension, economic injury could "ripple" through society. In contrast, physical injury is more likely to have a clear limit; for example, the property damage and personal injury in an automobile accident are relatively limited and easy to identify. Given the interconnected nature of economic relationships, there is no such clear limit on economic injury. As will be discussed in Chapters 7 and 8, this interconnection has an important impact on damages rules for all torts. It also has an effect on rules of liability because these rules must provide workable guidelines for limiting liability so that it is "proportional" to the defendant's wrongdoing.³

Second, situations involving only economic injuries frequently do not involve the grave consequences that physical injuries may involve. For example, a serious physical injury usually results not only in trauma combined with pain and suffering but also in a sudden, unexpected economic loss caused by loss of income, medical expenses, etc.⁴ These harms are usually much more serious than the effects when only economic injury is involved—for example, the harmful impact from getting an automobile which is worth less than one thought it would be.

When these first two distinctions are considered together, it is not surprising that tort law generally imposes different standards of liability on defendants where physical injury occurs than it does where only economic loss is involved.⁵ On the other hand, where other, noneconomic interests or losses are involved and clear limits can be imposed, economic loss may not be treated differently.⁶ For example, economic loss connected to one's home or insurance involves significant noneconomic interests, and focused rules can be devised to limit liability. As a result, liability for economic loss in these areas is generally broader.⁷

A third important difference between physical injury and economic injury arises in situations where the economic injury results from activities associated with economic transactions.⁸ For example, injury from fraud typically results from statements made during a sale—e.g., the sale of an automobile that has a bent axle. This injury may appear similar to the economic harm that results from an automobile accident that results in a bent axle. Nevertheless, the sale and the accident are different because our economic...