Byrd v. English
64 L.R.A. 94, 117 Ga. 191, 43 S.E. 419 (1903)
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Rule of Law:
A party cannot recover purely economic damages resulting from a defendant's negligent act that harms the property of a third party, with whom the plaintiff has a contractual relationship.
Facts:
- The plaintiff operated a printing and publishing business that depended on electric power supplied by the Georgia Electric Light Company.
- The plaintiff had a contract with the Georgia Electric Light Company for the provision of this power, which was delivered via underground wires.
- The defendants, including English, were constructing a building on a lot adjacent to the plaintiff's business.
- While excavating for the building's basement, the defendants' employees negligently caused a wall of earth to collapse.
- The collapse crushed the underground conduits owned by the Georgia Electric Light Company, breaking the wires inside.
- As a result, the power supply to the plaintiff's business was interrupted for several hours, causing the plaintiff to suffer business-related damages.
- The plaintiff's contract with the electric company precluded recovery against the company for damages from an accidental interruption of service.
Procedural Posture:
- The plaintiff filed a petition (a lawsuit) in the trial court against the defendants to recover for business damages.
- The defendants filed a general demurrer, which is a motion to dismiss for failure to state a claim upon which relief can be granted.
- The trial court sustained the defendants' demurrer, dismissing the plaintiff's case.
- The plaintiff (appellant) excepted to the ruling and appealed to the highest state court.
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Issue:
Does a defendant who negligently damages the property of a third-party utility company owe a duty of care to a plaintiff who suffers purely economic loss as a result of an interruption in their contractual right to receive service from that utility?
Opinions:
Majority - Candler, J.
No. A party who suffers purely economic loss due to an interruption of a contract with a third party cannot recover from a defendant whose negligence caused the third party's property to be damaged. The plaintiff's right to receive power was based solely on his contract with the Georgia Electric Light Company, a relationship to which the defendants were not a party. The defendants' duty was to not negligently injure the person or property of others; here, they injured the property of the electric company, not the plaintiff. To allow recovery for such a remote and indirect injury would open the door to limitless liability, where customers of the plaintiff, and their customers in turn, could all bring suit for their own derivative losses. This type of remote harm is considered damnum absque injuria—a loss without a legal injury for which compensation is available.
Analysis:
This case establishes a foundational version of the economic loss rule in tort law, which prevents recovery for purely economic losses in negligence actions absent privity of contract or physical injury to the plaintiff's person or property. The court's primary concern is to prevent a "ripple effect" of litigation from a single negligent act, which could lead to indeterminate liability for an indeterminate class of plaintiffs. This decision forces parties to manage the risk of economic loss through their own contracts, such as by negotiating service guarantees or obtaining business interruption insurance, rather than relying on tort law to compensate for indirect financial harm.
