source of duty rule in Virginia

2026A breach of contract will not ordinarily support tort liability, but sometimes contract and tort damages overlap. “[A] single act or occurrence can, in certain circumstances, support causes of action both for breach of contract and for breach of a duty arising in tort, thus permitting a plaintiff to recover both for the loss suffered as a result of the breach and traditional tort damages, including, where appropriate, punitive damages.”9 Dunn Constr., 278 Va. at 266-67 . 8 This concept is related to the “‘economic loss doctrine,’ which serves as a remedy- specific application of the source-of-

2019Property-Damage & Economic-Loss Claims Against Graystone Because all of the complaints at issue in this appeal seek tort remedies for either property damage or economic losses, we must address the “economic loss doctrine,” Abi-Najm v. Concord Condo., LLC, 280 Va. 350, 360-61 (2010), which serves as a remedy-specific application of the source-of-duty rule.

2025In other words, for the source of duty rule to find that the damages suffered stem from contract, there must be at least 1) the existence of a contract from which duties may be owed, see Kaltman v. All Am. - 14 - Pest Control, Inc., 281 Va. 483, 490-91 (2011) (delineating that tort damages in a contractor relationship are those that “were ‘separate and independent wrongs that [went] beyond [the] contractual duties’” (alterations in original) (quoting Richmond Metro., 256 Va. at 556 )), and 2) that the parties to the suit are in privity or a similar relationship to invoke those contractual duti

2023The source of duty rule “has no application to a claim of fraudulent inducement of a contract,” id., as such claims “logically preexist before the contract [was] allegedly induced and thus stand as a viable tort claim,” Tingler, 298 Va. at 82 n.11.

2024Economic “losses suffered as a result of the breach of a duty assumed only by agreement, rather than a duty imposed by law, remain the sole province of the law of contracts.” Filak, 267 Va. at 618 (emphasis added) (citing Sensenbrenner, 236 Va. at 425 ).

2012In Abi-Najm v. Concord Condominium, L.L.C., 280 Va. 350 , 699 S.E.2d 483 (2010), the Court recites an evolving history of its analysis under the source of duty rule: See Dunn Construction, 278 Va. at 268 (“the fact that the representation was made in order to obtain payment . . . does not take the fraud outside of the contract relationship.”); Augusta Mutual, 274 Va. at 206, 645 S.E.2d 290 (“the duties [that the agent for the insurance company] allegedly violated by making fraudulent representations . . . arose solely by virtue of the Agency Agreement.”); Filak, 267 Va. at 618 ([t]he plaintiff

2026See, e.g., Tingler, 298 Va. at 90-93 (holding that the source-of-duty rule applied to preclude negligence claims after the contractor failed to build the home in workmanlike manner as required by the contract); MCR Fed., 294 Va. at 459-60 (holding that the misrepresentation related to the contract even though the duty breached was a condition precedent to closing rather than one specifically in the contract); Dunn Constr., 278 Va. at 268 (holding that the misrepresentation occurred within the contractual relationship because, although it involved repairs, those repairs related back to a duty t

2024To determine “whether a cause of action sounds in tort, contract, or both,” the court must ascertain “the source of the duty violated.” Tingler v. Graystone Homes, Inc., 298 Va. 63 , 81 (2019) (quoting MCR Fed., LLC v. JB&A, Inc., 294 Va. 446, 458 (2017)).

2026A breach of contract will not ordinarily support tort liability, but sometimes contract and tort damages overlap. “[A] single act or occurrence can, in certain circumstances, support causes of action both for breach of contract and for breach of a duty arising in tort, thus permitting a plaintiff to recover both for the loss suffered as a result of the breach and traditional tort damages, including, where appropriate, punitive damages.”9 Dunn Constr., 278 Va. at 266-67 . 8 This concept is related to the “‘economic loss doctrine,’ which serves as a remedy- specific application of the source-of-

2026See, e.g., Tingler, 298 Va. at 90-93 (holding that the source-of-duty rule applied to preclude negligence claims after the contractor failed to build the home in workmanlike manner as required by the contract); MCR Fed., 294 Va. at 459-60 (holding that the misrepresentation related to the contract even though the duty breached was a condition precedent to closing rather than one specifically in the contract); Dunn Constr., 278 Va. at 268 (holding that the misrepresentation occurred within the contractual relationship because, although it involved repairs, those repairs related back to a duty t

2025Pest Control, Inc., 281 Va. 483, 490-91 (2011) (delineating that tort damages in a contractor relationship are those that “were ‘separate and independent wrongs that [went] beyond [the] contractual duties’” (alterations in original) (quoting Richmond Metro., 256 Va. at 556 )), and 2) that the parties to the suit are in privity or a similar relationship to invoke those contractual duties.

2025In other words, for the source of duty rule to find that the damages suffered stem from contract, there must be at least 1) the existence of a contract from which duties may be owed, see Kaltman v. All Am. - 14 - Pest Control, Inc., 281 Va. 483, 490-91 (2011) (delineating that tort damages in a contractor relationship are those that “were ‘separate and independent wrongs that [went] beyond [the] contractual duties’” (alterations in original) (quoting Richmond Metro., 256 Va. at 556 )), and 2) that the parties to the suit are in privity or a similar relationship to invoke those contractual duti

2023Because the damages sought by MCVAP were appropriate in tort and the record supports the jury’s verdict, Scarabelli’s arguments fail. 7 For example, in personal injury cases, damages are inadequate if the jury awards “the exact amount of [the] claimed medical and special damages.” Jenkins v. Pyles, 269 Va. 383, 390 (2005). - 16 - i. The source of duty rule does not bar MCVAP’s counterclaim, as the counterclaim sounds in tort.

2023Because the damages sought by MCVAP were appropriate in tort and the record supports the jury’s verdict, Scarabelli’s arguments fail. 7 For example, in personal injury cases, damages are inadequate if the jury awards “the exact amount of [the] claimed medical and special damages.” Jenkins v. Pyles, 269 Va. 383, 390 (2005). - 16 - i. The source of duty rule does not bar MCVAP’s counterclaim, as the counterclaim sounds in tort.

2023See Gasque v. Mooers Motor Car Co., 227 Va. 154 (1984).

2023See Gasque v. Mooers Motor Car Co., 227 Va. 154 (1984).

2026When a party enters into a contract intending to breach it, the breach can be “actionable as an actual fraud.” Colonial Ford Truck Sales, Inc. v. Schneider, 228 Va. 671, 677 (1985); see Tingler, 298 Va. at 82 n.11 (noting the Supreme Court has not held that the source-of-duty rule applies to bar “a claim for actual fraudulent inducement, which involves a new contract induced with a third party”); see also Harrell v. DeLuca, 97 F.4th 180, 190 (4th Cir. 2024) (“Virginia law ‘distinguishes between a statement that is false when made and a promise that becomes false only when the promisor later fa

2026James River “seek[s] to establish a tort action based solely on [fraudulent] breach of a contractual duty with no corresponding common law duty.” See Foreign Mission Bd. of S. Baptist Convention v. Wade, 242 Va. 234, 241 (1991); see also Richmond Metro.

2026When a party enters into a contract intending to breach it, the breach can be “actionable as an actual fraud.” Colonial Ford Truck Sales, Inc. v. Schneider, 228 Va. 671, 677 (1985); see Tingler, 298 Va. at 82 n.11 (noting the Supreme Court has not held that the source-of-duty rule applies to bar “a claim for actual fraudulent inducement, which involves a new contract induced with a third party”); see also Harrell v. DeLuca, 97 F.4th 180, 190 (4th Cir. 2024) (“Virginia law ‘distinguishes between a statement that is false when made and a promise that becomes false only when the promisor later fa

2025Agency v. Genito Glenn, L.P., 263 Va. 377, 383 (2002) (“In order to recover [economic] losses, [appellee] was required to establish privity of contract between itself and [appellant].”).

2014See, e.g., Ward v. Ernst & Young, 246 Va. 317, 323-24 (1993) (“We decline, however, to carve out and apply against accountants an exception to the rule we have consistently applied in actions seeking damages for an economic loss resulting from negligent performance of a contractual commitment brought by a non-party to the contract.

2012The Supreme Court of Virginia “ha[s] consistently adhered to the rule that, in order to recover in tort, “the duty tortiously or negligently breached must be a common law duty, not one existing between the parties solely by virtue of the contract.” Id. (citing Spence v. Norfolk & Western RR., 92 Va. 102, 116 , 22 S.E. 815, 818 (1895)).” Dunn Constr.

2012The Supreme Court of Virginia “ha[s] consistently adhered to the rule that, in order to recover in tort, “the duty tortiously or negligently breached must be a common law duty, not one existing between the parties solely by virtue of the contract.” Id. (citing Spence v. Norfolk & Western RR., 92 Va. 102, 116 , 22 S.E. 815, 818 (1895)).” Dunn Constr.