When business deals break down, parties often attempt to escalate a simple breach of contract into something more dramatic—such as a claim for fraud or negligent misrepresentation. But in North Carolina, the economic loss doctrine (ELD) draws a clear line. This legal principle bars tort claims for purely economic losses that arise out of a contractual relationship, unless there’s a separate legal duty independent of the contract. A recent North Carolina Business Court case, BioGas Corp. v. NC Biogas Dev., LLC, reinforces how this doctrine functions as a protective shield in lender and contract-based disputes.
In BioGas, the Counterclaim Defendants—including BioGas Corp. and S. Anwar Shareef—were accused of violating a consent order that prohibited them from entering into certain contracts without written approval from NC Biogas Development, LLC (NCBD). Although the case centered more on civil contempt and contractual non-compliance than traditional lender liability, the court’s enforcement of the consent order and its refusal to entertain broader tort theories illustrates the ELD in action. The dispute remained firmly within the boundaries of contract law, with the court entering judgment for an interim award and dismissing the related counterclaim after relief was granted.
This ruling highlights a recurring theme: when parties enter into binding agreements, the legal system expects them to resolve disputes within that contractual framework. The economic loss doctrine prevents opportunistic litigation strategies that attempt to recharacterize contract breaches as tort claims. Unless there is a distinct and legally recognized duty beyond the contract—such as fiduciary responsibility or statutory obligation—courts are unlikely to allow tort recovery for economic harm.
At Lord & Lindley, we guide clients through complex business litigation and help enforce or defend against claims rooted in contract law. Whether you’re drafting a critical agreement or facing a contractual dispute, our team is equipped to protect your interests using the legal tools available—like the economic loss doctrine. To learn more, call us at 704-457-1010 or visit www.lordlindley.com.