One can never overemphasize the economic reality underlying civil liability. From a strictly normative perspective, full compensation for damages is linked to the literal wording of Article 944 of the Civil Code and the implications of the specific prerequisites for a particular attribution of liability (whether subjective or objective). At this first hurdle, most damages are contained, leaving victims to bear the brunt of their own misfortunes.
The premise is that the legal system will only transfer damages from the defendant to the plaintiff if there is a link of attribution capable of attributing the conduct to the party responsible for the damage, whether it be a tort, a duty of care, or the risk inherent in an activity.
On the other hand, within a broader, supra-legal framework, examining the appropriateness of transferring damages from the injured party to the perpetrator’s assets has always involved discerning the meaning each legal system assigns to the balancing of two principles: the protection of victims through full compensation versus the casum sentit dominus (or “the loss lies where it falls”) principle—axioms that justify the limitation of liability and the refusal to convert every loss into compensable damages.
Those applying civil liability must bear in mind that in democratic and pluralistic societies, individual and economic freedoms go hand in hand, and a constant threat of claims for compensation would be a decisive factor inhibiting the exercise of constitutionally guaranteed rights. Since civil liability is not based on charity, and in order for losses to be shifted from the victim to another party, there must be a convincing argument grounded in the principles of appropriateness and reasonableness.
In this delicate “balancing act,” the concept of pure economic damages comes into play. Examining this topic does not mean bringing up a Brazilian doctrinal debate (which is still in its infancy here), but rather reflecting on a fundamental discussion in any legal system regarding the possibilities and limitations of civil liability. In any jurisdiction, the recoverability of pure economic loss lies at the intersection of crucial questions, such as these: Should this type of interest be protected? If so, as a matter of policy, should the recovery of pure economic damages fall primarily within the realm of contractual liability? If not, to what extent can tort liability be expanded without imposing excessive burdens on individual activity?1
Pure economic damage can be defined as damage that has not involved a violation of absolute rights—such as property rights or personality rights—but rather merely patrimonial rights. The damage affects one’s overall financial situation without, however, involving the infringement of an absolutely protected right. Legal doctrine on the subject recognizes compensation for such damages only in exceptional cases.
In particular, CARNEIRO DA FRADA argues that in an open economic space such as the market, this special requirement “is linked to the need to safeguard the freedom of action of individuals, as this freedom is opposed to indiscriminate protection of property in the context of civil liability.”2
A primary difficulty is that we are dealing with a negative concept, as it does not allow us to understand what such damages truly consist of. In fact, in legal systems where the term is well recognized, it is typically explained as: “It is loss without antecedent harm to the plaintiff’s person or property.” The word “pure” plays a central role, for if there is economic loss linked to harm to the victim’s person or property, then the latter is called consequential economic loss, and the entire set of damages will be compensable (the economic loss will be a parasitic damage). The loss is recoverable because it presupposes the existence of physical injuries, whereas pure economic loss affects only the victim’s finances and nothing else.3
There is no terminological consensus, and therefore we find various expressions that correspond to the one we adopt here, such as primary pecuniary damage, pure economic loss, financial loss—(bloss, rein, or primaer Vermoegensschaden)—since a universal definition of purely pecuniary damages has never been accepted.
The controversy falls directly within the scope of extracontractual or Aquilian liability, given that in the context of contractual civil liability—whether in other legal systems or in Brazil (Art. 389, Civil Code)— the obligation to compensate reflects the legal fact of breach of contract in the broad sense, with compensation even covering pure economic loss when it falls within the scope of a prior contractual agreement, within the limits of private autonomy. However, even a breach of a credit relationship has no effect on third parties affected by purely economic damages.
Several legal systems discuss at length the justifications for excluding compensation for damages that are not linked to absolutely protected rights.
That is to say, pure economic loss is contrasted with so-called “consequential” property damages, which are those arising from a prior violation of an absolute right, typically subject to compensation. However, this is not merely a distinction between types of economic interests that are concretely worthy of protection, but rather a broader examination of the boundaries between contractual and non-contractual liability—and their specific characteristics—and the possibility of liability based on reliance as a third avenue to bridge such gaps. Discussing pure pecuniary damage also involves reflecting on the scope of pre-contractual liability, the enforceability of the external effects of contracts, and the concrete application of objective good faith and the abuse of rights.
English law generally takes a cautious approach to such damages. There is a concern that liability might extend to an indeterminate class of claimants, for an indeterminate amount, placing an excessive burden on the defendant.4 Added to this is the lesser weight given to economic interests as opposed to personality rights and property rights, as well as the consideration that many pure economic losses are not social costs, but merely involve the transfer of wealth from one party to another, which leads to the conclusion that it is preferable for these costs to be spread across society as an economic risk rather than concentrated on the defendant, unless such risks were the subject of a contractual allocation, or even in the absence of a contract, if the party causing the damage has in some way assumed some form of liability toward the injured party.5
In fact, in common law jurisdictions, as well as in Germany, Italy, and Portugal, the controversy is significant. Specifically, the BGB marks the emergence of the first organized opposition within civil law to the French system of the general “faute” clause (encompassing unlawfulness and fault). In this distinct system of civil liability, an objection arises to the compensation of purely pecuniary damages, since the alleged unlawfulness does not exist in a legal system that requires its establishment only in the event of a violation of an absolute right. Perhaps, as has already been ironically noted, the “sluice gate syndrome” has affected those legal systems in which access to compensation is governed by containment dikes, such as in England, where “causes of action” and binding precedents restrict certain damages, or even in Germany, where protected interests are placed in separate boxes and, the moment a new interest emerges, the syndrome is reactivated.6
We might venture to say that, with rare exceptions,7 our indifference to the matter8 is justified by two apparent reasons: first, the Civil Code does not distinguish between different types of damages; on the contrary, our general provisions in Articles 186 and 927 of the Civil Code are generous, covering any kind of pecuniary or non-pecuniary damage, including purely pecuniary damages. Specifically in economic terms, as in the paradigm of the French Civil Code, our Catholic culture does not readily accept the possibility of someone profiting at the expense of another’s misfortune (“battre monnaie avec ses larmes” or “making money out of one’s tears”); secondly, since we cannot escape the universal need to prevent the anarchic reparability of any loss—disguised as damage—the limitation of certain claims for damages occurs indirectly through other principles of civil liability, particularly causation.
For example, if a car breaks down on a major urban road due to a lack of fuel, causing a massive traffic jam and resulting in missed appointments for drivers stuck in traffic, could they sue the negligent driver—whether for missing an exam, a flight, or lost earnings from a business meeting? In principle, Brazilian courts would dismiss the claim on the grounds of remote causation; they might assume that driving in busy areas involves assuming a risk, or, if they were to admit liability, they would apply the “loss of a chance” theory to minimize the amount of damages.
In contrast, from a comparative law perspective, the answers would be more straightforward. Thus, under German law, the refusal to impose a duty to compensate would result from an interpretation of the three general clauses on civil liability in the BGB,9 namely, the absence of a violation of a protective provision or conduct contrary to public morals. The same conclusion can be drawn from English law, as no breach of the duty of care by the wrongdoer toward the victim is identified. An identical result is found in the Portuguese Civil Code, as there is no violation of a protective rule or an absolute right, nor is there even a question of an abuse of rights.10
However, purely economic damages would be compensable if a driver who was supposed to transport a certain person to their destination failed to show up at the scheduled time. The difficulties raised here do not apply in this case, as there is a contractual relationship between the wrongdoer and the injured party. The preexisting relationship allows for a delimitation of the circle of potential creditors entitled to compensation, toward whom the debtor must act with particular care—namely, by avoiding breaches of obligations and exercising the necessary diligence in their performance.11
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- BUSSANI, Mauro; SEBOK, Anthony; INFANTINO, Marta. Common Law and Civil Law Perspectives on Tort Law. Oxford: Oxford University Press, 2022. p. 143.
- FRADA, Manuel Antonio de Castro Portugal Carneiro da. Forjar o direito. Coimbra: Almedina, 2019. p. 164.
- BUSSANI, Mauro; SEBOK, Anthony; INFANTINO, Marta. Common Law and Civil Law Perspectives on Tort Law. Oxford: Oxford University Press, 2022. p. 145.
- "In many situations where French law has allowed third parties to assert claims under another party’s contract, the only option under English law is a civil liability claim, which is subject to restrictive rules regarding the recovery of pure economic damages. For example, in contracts for the sale of goods, unlike in France, in England the end buyer may bring a contractual claim against its direct counterparty and not against parties further down the chain. The option of bringing a tort claim may be more apparent than real, because the courts refuse to impose a duty of care when doing so would be inconsistent with the established contractual structure, thereby undermining the principle of privity of the parties.” ROWAN, Solène. The New French Law of Contract. Oxford: Oxford University Press, 2022. p. 170.
- OLIPHANT, Ken. Basic Questions of Tort Law. In: KOZIOL, Helmut (ed.). Basic Questions of tort law from a comparative perspective. Viena: Jan Sramek Verlag, 2015. p. 410.
- MORÉTEAU, Olivier. Basic Questions of tort law from the perspective of the USA. Wien: Jan Sramek Verlag, 2015. p. 76.
- FACCHINI NETO, Eugênio. Expandindo as fronteiras da responsabilidade civil: danos puramente econômicos. O autor os conceitua como: "Por dano puramente econômico entende-se aquele prejuízo que não afeta bem tangível de outrem, nem lesiona a integridade psicofísica alheia. Trata-se de dano puramente pecuniário: perda de dinheiro, de vantagem econômica ou aumento de despesas. A expressão "pure" ou "puramente" está a indicar que o tema não abrange aqueles outros danos econômicos que são consequências de um dano a coisas ou à pessoa, como ocorre com a figura semelhante, mas não idêntica, dos lucros cessantes". Revista de Direito Civil Contemporâneo - RDCC, 27, 2021, p. 153.
- In a text dedicated to this topic in the context of a comparison between Portugal and other legal systems, Fábio Leite de Farias Brito admits that “Our initial idea was to conduct a comparative study of Portuguese and Brazilian non-contractual civil liability, focusing on the issue of purely pecuniary damages. However, this idea was discarded because, from the perspective of civil liability under Brazilian law, the issue is virtually unknown.” BRITO, Fábio Leite de Farias. Responsabilidade civil por danos puramente patrimoniais. Anais do VII Encontro Internacional do CONPEDI/BRAGA - Portugal - Direito Civil Contemporâneo. Disponível aqui. Acesso em: 05 dez. 2022. p. 8.
- Paragraph 823(1), which holds liable anyone who, with intent or negligence, unlawfully causes harm to the life, body, health, liberty, property, or other rights of another; b) § 823(2), which holds liable anyone who violates a legal provision intended to protect others; c) § 826, which holds liable anyone who, with intent, causes harm to another by violating public morals.
- Article 483 (General Principle) “1. Any person who, with intent or mere negligence, unlawfully violates the rights of another or any legal provision intended to protect the interests of others is obligated to compensate the injured party for the damages resulting from the violation.”
- VICENTE, Dario Moura. Direito comparado. Obrigações. Coimbra: Almedina, 2017. v. II, p. 432.