Crucial Exams

Multistate Bar Examination Practice Question

A backhoe operator employed by Construction Co. negligently ruptures a municipal water main. Water service to a nearby bakery is shut off for 12 hours while the city makes repairs. The bakery sustains no physical damage, but it must close for the day and loses $10,000 in profits. The bakery sues Construction Co. in negligence seeking to recover its lost profits. Under the prevailing rule in most U.S. jurisdictions, is the bakery likely to recover its economic losses?

  • No, unless the bakery can prove that Construction Co. owed it a special duty arising from a specific contractual or professional relationship, which is not shown here.

  • Yes. Lost profits are consequential damages flowing from the damage to the city's water main and are therefore recoverable in negligence.

  • No. The economic-loss rule bars recovery for purely financial loss that is not accompanied by personal injury or property damage to the plaintiff.

  • Yes. A negligent defendant is liable for all foreseeable harms, including economic losses, so Construction Co. must compensate the bakery.

Multistate Bar Examination
Torts
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