Chapter 4 - Pure Economic Loss Flashcards
What is pure economic loss in the context of negligence?
Pure economic loss is financial loss caused without physical damage or impact to the claimant’s person or property.
How is pure economic loss different from consequential economic loss?
Consequential economic loss results from physical injury or property damage (e.g., loss of income from personal injury or damage to property). Pure economic loss occurs without any physical damage.
What is an example of pure economic loss in a defective item?
If a defective car is purchased, and it breaks down (e.g., engine failure), the loss is economic, but without any physical harm to the claimant or property, making it pure economic loss.
Can a claimant claim pure economic loss for damage to third-party property?
No, if the claimant suffers financial loss due to damage to a third party’s property (e.g., in Spartan Steel where electricity failure disrupted manufacturing), it is pure economic loss and not recoverable.
Can pure economic loss arise from a disease outbreak affecting business?
Yes, if a business suffers loss due to an outbreak affecting trade (e.g., cattle disease closing a market), but without physical damage, this constitutes pure economic loss and cannot be claimed.
Can a claimant claim for pure economic loss caused by negligent advice or statements?
Generally, no. However, there is an exception if there is an assumption of responsibility by the defendant and the claimant reasonably relies on the advice.
What is the first part of the test for negligent statements causing pure economic loss?
The assumption of responsibility test requires the defendant to know the purpose of the advice, be aware it will be communicated to the claimant, and know the claimant will likely rely on it without further inquiry.
What is the second part of the test for negligent statements leading to pure economic loss?
The claimant’s reliance on the advice must be reasonable in the circumstances, and it must be clear that the claimant would rely on the defendant’s advice due to the defendant’s superior knowledge.
Is there a duty of care for personal advice given in social situations?
No, generally there is no duty of care for advice given in social situations. However, if the defendant knows the claimant will rely on the advice and has greater expertise, a duty may arise.
Are there exceptions where negligent advice can lead to liability for pure economic loss?
Yes, examples include job references given to a third party (new employer) or professional financial services, where negligent advice can lead to liability for pure economic loss.
What is the general rule about a defendant’s duty of care for pure economic loss?
The general rule is that there is no duty of care for pure economic loss, except for certain situations involving negligent statements or advice.
What must a claimant prove after establishing a duty of care for pure economic loss?
The claimant must prove breach of duty and causation and may face defenses, such as exclusion of liability.
