The economic loss doctrine is widely misunderstood and often misapplied. The premise of the economic loss doctrine is that a party cannot recover purely economic losses in a tort action. To understand the rationale behind the economic loss doctrine, attorneys must simply recall that joyous moment when they first set their eyes upon Hadley v. Baxendale.[1] The Hadley decision stands for the proposition that, in a breach of contract action, a party may only recover the damages that naturally flow from the breach, or that were of the type within the reasonable contemplation of the parties at the time of contracting. In other words, economic losses such as lost profits, diminished bonding capacity, and loss of use are not recoverable in a breach of contract action unless such damages were contemplated by the parties at the time of contracting. 
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