4. Pure Economic Loss

Question 1

What is consequential economic loss?

Answer 1

Financial loss resulting from physical injury or property damage.

because of property damage or PI i suffered loss X (think causal link)

Question 2

Are there special rules for owing a duty of care for consequential economic loss?

Answer 2

No special rules.

Question 3

If a duty of care is owed for physical injury or property damage, is there also a duty for consequential economic loss?

Answer 3

Yes.

Question 4

What is pure economic loss?

Answer 4

Financial loss not stemming from damage to property.

general rule, a defendant does not owe any duty of care to a claimant not to cause pure economic loss.

In other words, as a general rule, where a claimant suffers damage which is classed as pure economic loss, that loss is not recoverable

Question 5

Give examples of pure economic loss.

Answer 5

Cost to replace defective product, loss of profits.

the court viewed the foundation defect as an internal issue with the property itself, only affecting the house’s market value.

Because no other property was harmed, and no one was injured, this was classified as pure economic loss and therefore not recoverable under negligence law.

Question 6

Is a defendant liable for a claimant’s financial loss if it does not stem from damage to their property?

Answer 6

No, unless exceptions apply.

I own a factory. Y supplies me electricity. X damages this supply and causes me damage to my machine and future loss in profits

Consequential Economic Loss: Recoverable if it directly results from physical damage to property owned by the claimant (like the damaged melts because the claimant owns these melts).

Pure Economic Loss: Not recoverable if it results from damage to a third party’s property, where the loss is more remote (like lost profit on future melts that weren’t processed).

Question 7

What are the exceptions to a defendant being liable for a claimant’s financial loss?

Answer 7

Negligent misstatement, public nuisance.

Question 8

What is the approach of courts regarding liability for negligent misstatement in social or informal settings?

Answer 8

Reluctant to impose liability.

The general rule is that, usually, no DOC will be owed in respect of advice given in a social situation because there is no assumption of responsibility.

HOWEVER,The court found that when a person with relevant expertise provides advice on which they know another person will rely, they may owe a duty of care—even in a social context—if they assume responsibility by offering guidance in a way that goes beyond informal or casual advice.

Question 9

What are the tests for establishing liability for negligent misstatement?

Answer 9

Reasonable reliance by the claimant+ assumption of responsibility by Defendant; OR special relationship.

Question 10

What is the remedy for negligent misstatement?

Answer 10

Damages for reasonably foreseeable financial loss suffered by the claimant.

Question 11

Can disclaimers nullify liability for negligent misstatement?

Answer 11

Yes, if reasonable under UCTA / CRA.

Question 12

What are the three tests for establishing liability for negligent misstatement?

Answer 12

Reliance, knowledge, purpose.

FOR assumed responsibility–> Caparo laid down the four criteria to be satisfied for a defendant to have assumed a responsibility towards a claimant:

• The defendant knew the purpose for which the advice was required.
• The defendant knew that the advice would be communicated to the claimant (either specifically or as a member of an ascertainable class).
• The defendant knew (actual knowledge or ought to know) that the claimant was likely to act on the advice without independent
  inquiry.
• The advice was acted on by the claimant to its detriment

For reliance–>
* Was it reasonable for the claimant to rely on the defendant for advice?

For example, if the defendant knows that the claimant has sought its advice for a particular purpose and intends to rely on it, this could tend to show that it was reasonable for the claimant to rely on the advice

Question 13

When is reliance likely unreasonable in a negligent misstatement case?

Answer 13

If the claimant has special knowledge.

Question 14

When is reliance unreasonable in a negligent misstatement case?

Answer 14

If it is outside the purpose of the statement.

Question 15

What determines if a defendant has assumed responsibility in a negligent misstatement case?

Answer 15

Whether they are a professional providing a special skill or service.

Question 16

What is the likely result if there is reasonable reliance and assumed responsibility in a negligent misstatement case?

Answer 16

Likely to satisfy the relationship requirement.

Question 17

Is a duty likely to be imposed even if services are free of charge in a negligent misstatement case?

Answer 17

Yes, if there is a reasonable reliance.

Question 18

When You Can Sue in Both Tort and Contract

Answer 18

Existence of a Contract:
* There must be a contract between the claimant and the defendant outlining the professional services to be provided.

Consistent Duties:
* The duties owed in both tort and contract must be consistent. This means that both the contract and tort law require the defendant to act with a certain standard of care (e.g., acting reasonably).

Assumption of Responsibility:
* The defendant must have assumed a responsibility beyond just the terms of the contract. This usually happens when the defendant provides advice or services where they have expertise, and the claimant relies on that expertise. (In meetings, the advisor says, “I have a lot of experience, and I will guide you to make the best decisions for your portfolio.” By saying this, the advisor is taking on a greater responsibility. You are relying on their expertise to manage your money effectively.)

Types of Loss:
* The losses claimed in tort and contract can be different. For example, a claimant may seek different remedies or types of damages from each claim.

Question 19

What do u need for exlcusion notice

Answer 19

• Reasonable steps must have been taken to bring the exclusion notice to the claimant’s attention before the tort was committed.
• • The wording of the notice must cover the loss suffered by the claimant.

The defendant cannot exclude liability for death or personal injury resulting from negligence

Question 20

How to assess reasonable steps taken?

Answer 20

• Were the parties of equal bargaining power?
• In the case of advice, would it have been reasonably practicable to obtain the advice
  from an alternative source taking into account considerations of cost and time?
• How difficult is the task being undertaken for which liability is being excluded?
  ( if a task is inherently complex or difficult, the courts may be more lenient in allowing a disclaimer because it acknowledges that errors may occur despite reasonable care being taken)
• What are the practical consequences, taking into account the sums of money at stake and
  the ability of the parties to bear the loss involved, particularly in the light of insurance?
  (if negligent act would cost business claimant lots of money then likely exclusion deemed unreasonable)