How do "pure economic loss" and "consequential damages" differ?

The correct answer highlights a key distinction in legal terminology regarding the nature of losses in tort law. "Pure economic loss" refers to financial losses that occur without any accompanying physical damage to a person or their property. This type of loss arises from situations such as lost profits or decreased value of a business due to an incident—these are purely financial impacts that do not correlate with any physical harm.

In contrast, consequences that arise from an event may include both economic loss and other types of damages. "Consequential damages" encompass losses that result from a wrongful act, which may include not only economic loss but also other types of harm that follow as a logical consequence of the initial incident. However, these often arise in connection with physical damage rather than purely economic scenarios.

Understanding this difference helps clarify the compensability of damages in a legal context. While pure economic loss may not always be compensable under tort law due to its nature being detached from physical injury, consequential damages, which typically stem from a direct relationship to an event, tend to include a broader range of losses.

The other options mischaracterize the fundamental differences between these types of damages: purely economic loss does not automatically qualify for compensation and is distinct specifically because it isn't tied to any physical harm,