Economic Loss

Question 1

what is economic loss?

Answer 1

financial loss from negligence (not indirectly through injury or damage), or loss from negligent misstatement

Question 2

what is needed for a claim of economic loss?

Answer 2

a negligent act must have caused the harm to the victim- in this case a financial impact.

Question 3

economic loss example

Answer 3

a defendant gives the claimant negligent advice which they rely upon and suffer a loss. there’s usually no contract between these parties but there must be some sort of ‘special relationship’ between parties.

Question 4

remedies for economic loss

Answer 4

compensation for a claimant’s injuries or compensation to repair/ replace property as a result of the negligence.

consequential costs- costs relating directly to the negligence eg. the cost of hiring a replacement car while theirs is being repaired.

Question 5

pure economic loss definition

Answer 5

pure economic loss is financial loss not caused by the injury or damage eg. loss of profit suffered whilst a business is unable to operate.

Question 6

Spartan Steel v Martin and Co (shows the courts making decisions for policy reasons rather than justice)

Answer 6

facts: Spartan Steel sued Martin & Co for unpaid rent. Martin & Co claimed frustration of contract due to WWII bombing.
held: Court held the lease wasn’t frustrated, and rent was owed.

Question 7

pure economic loss requirements

Answer 7

is it morally unfair not to compensate someone who suffers loss through no fault of their own?
is loss of profit a loss at all, could it be argued this a loss of opportunity to make a gain?
is it fair just and reasonable to impose a duty of care on defendants?

Question 8

what is negligent misstatement causing economic loss?

Answer 8

claimant relies on the advice of the defendant (usually because the defendant is trusted and possibly a professional qualified to give advice)

Question 9

two ways negligent misstatement can occur

Answer 9

two-party liability
three-party liability (no claim)

Question 10

two party liability

Answer 10

A makes a statement to B
B relies on that statement
B suffers a loss as a result

Question 11

three-party liability

Answer 11

A makes a statement to B
B communicates the statement to C
C relies on the statement and suffers a loss

Question 12

Candler v Crane Christmas and Co

Answer 12

Lord Denning dissented the majority of the CoA felt an investor who lost money relying on advice should be owed a duty of care.

Question 13

Hedley Byrne v Heller and Partners

Answer 13

facts:
held: Hedley Bryne case failed despite this as a disclaimer was used (Heller used this disclaimer as a defence). lost case but new precedent
precedent: claim can be made for negligent misstatement where a special relationship exists between the parties

Question 14

negligent misstatement requirements

Answer 14

special skill or expertise
reliance
communication
knowledge of purpose
no disclaimer

Question 15

special skill or expertise

Answer 15

does not need to be a professional advisor, but defendant has some special skill or expertise.

Question 16

reliance

Answer 16

the claimant must have relied upon the advice (but proximity must be considered eg Raja v Gray)

Question 17

Raja v Gray

Answer 17

facts: Raja sued Gray for injury from falling tree branch on Gray’s property.
held: Court ruled in favor of Raja, holding Gray liable for negligence in maintaining the tree.
principle: property owners can be held liable for negligence if they fail to maintain their premises, leading to harm to others.

Question 18

communication

Answer 18

must be communicated directly to the claimant, not through something like a newspaper

Question 19

knowledge of purpose

Answer 19

the defendant knows the information is being relied upon

Question 20

no disclaimer

Answer 20

there is no disclaimer to act as a defence. its a standard practice for professional references to include a disclaimer that they do not accept responsibility for the advice.

Question 21

special relationship definition

Answer 21

special relationship usually involves somesort of business relationship but sometimes it can be a social relationship or friendship eg. Chaudhry v Prabhakar

Question 22

Chaudhry v Prabhakar

Answer 22

facts: Chaudhry sued Prabhakar for unpaid rent. Prabhakar counterclaimed for breach of lease.
held: Court ruled in favor of Prabhakar, stating Chaudhry breached the lease, nullifying rent claims.
principle: breaching a lease agreement can nullify claims for unpaid rent.