Economic Loss Flashcards
What is economic loss
A loss of earnings due to person injury or damage to property.
What is pure economic loss
Financial loss which is not caused by damage to property or personal injury. This is when a business suffers from a loss of profit
What is one exception to pure economic loss
Where the financial loss is due to negligent misstatement. However to make a claim the claimant must establish there was a special relationship
Why can’t a claimant claim for pure economic loss and give a case
Courts decided that loss of profit is an issue of contract and not tort.
“spartan steel vs Martin and co ltd”
no liability under tort since it was PEL
What is negligent misstatement
Negligent misstatement is when the claimant is given false information by another party which results in a loss of earnings.
- Two party liability= when A gives advice or makes a statement to B which makes B suffer a loss for relying on it. Question arises if B can make a claim against A without a contract present in
What are the two types of negligent misstatement
Two party liability = When A gives advice or makes a statement to B which results in B suffering loss due to relying on the statement. The question arises if B can make a claim for A’s negligence without a contract present in tort
Three party liability= A makes statement to B who communicates it to C which causes C to suffer a loss however the question arises if A owes a duty of care towards C since there is no contractual agreement between them.
What is tort of deceit and why is it significant
Giving false information purposely to cause a loss earning. Originally only claims of tort of deceit were successful however this changed in the case of “Chandler vs christmas crane and co”
What was the outcome of Chandler vs christmas crane
Lord Denning’s felt that a duty of care was owed to an investor who lost money relying on an advisor
What does the case of Hedley Byrn V Heller and partners show
This case set the rule that those who suffer financial loss as a result of relying on a statement can make a claim
However 2 things must be established
1. The statement was made negligently
2. There is a special relationship between the parties
What is a special relationship and what case defines the requirements
The case “Caparo vs Dickman” was used by HoL to determine features of a special relationship.
- Having specialist knowledge on the advice which being given. Does not need to be professional.
- Proximity. No claim if the potential claimant is in a group of people as the claimant must show the loss they suffered
Requirements for the claimant to make a claim for loss due to advice
- Must be directly communicated to claimant and not a third party
- The advice must be given for a purpose. Should be aware that claimant will act upon advice and not get advice from anybody else
What happened in the case Chaudhry V Prahbaker and what did it show
The claimant had bought a car on the advice of claimant who had good car knowledge although it was unroadworthy. Advice does not need to be given in business situation as they can be given by one of your friends who you have full trust in
How has the law of negligent misstatement developed due to judicial precedent
Courts were strict to avoid opening floodgates however this led to unfair decisions therefore making the courts slightly more lenient.
