Economic Loss

Question 1

What is the theory of economic loss?

Answer 1

• There is no duty to compensate for a loss of profit as it may open the floodgates and should be compensated through contract law
• It could be morally justified to comepensate lost money however they do not allow it

Question 2

What is the public policy of economic loss?

Answer 2

• As seen in Weller v Foot and Mouth Disease Research and Spartan Steel v Martin, the court restricts case of pure economic loss/loss of profit therefore can create unfair anomalies
• It is morally unfair to not compensate a claimant who has suffered loss through no fault of their own however they can only compensate for loss rather than potential profit

Question 3

What is the claimant liable for if they prove a negligent act?

Answer 3

• If a claimant successfully proves a negligent act or omission, they can claim damages for physical injury, damage to the property and consequential econonomic loss. Consequential economic loss is tfinancial harm that directly results from the event which is a secondary consequence after the damage
• However they cannot claim for pure economic loss

Question 4

What is pure economic loss?

Answer 4

• Pure economic loss is not recoverable
• Economic loss is loss in a financial manner. This is the loss that you have suffered due to the negligence
• Pure economic loss is the failure of gaining actual profit in the future

Question 5

Can you claim for pure economic loss?

Answer 5

• The general rule is that you cannot claim under pure economic loss due to it typically being under contract and it may open the flood gates

Question 6

What is the exception to the rule of economic loss?

Answer 6

• The exception to pure economic loss is when it stems from a negligent misstatement. This can be done through the application of negligence test

Question 7

What is a negligent misstatement?

Answer 7

• When the defendant has negligently made a claim or statement which the claimant relies on which then leads to pure economic loss
• Established in Hedley Byrne v Heller

Question 8

What is the two part liability of a loss caused by negligent misstatements?

Answer 8

• When A gives a statement or advice to B and they make a loss because of it
• B can claim for negligent misstatement if they breach their duty

Question 9

What is the three part liability of a loss caused by negligent misstatements?

Answer 9

• Where A makes a statement to B and they communicate it to C who suffers a loss of relying on the statement. There must be a special relationship between A and C to claim

Question 10

What are the four conditions for economic losses to be recoverable due to a negligent misstatement?

Answer 10

1. A special relationship must exist between the parties. Their relationships do not have to be professional but must be expert to non-expert
2. The advising party needs to have voluntarily assumed the risk of misadvising. They must disclaim that someone should not rely on it through a disclaimer
3. There must be a reliance on the advice by the defendant
4. The reliance must be reasonable and foreseeable

Question 11

What is a special relationship?

Answer 11

• A duty of care exists in a special relationship between the defendant and claimant where they have used information provided by the defendant

Question 12

What are the requirements for a special relationship?

Answer 12

1. Posession of special skill or expertise
2. Reliance on the advice by the claimant
3. Must be directly communicated and not through a third party
4. Knows the advice is being used
5. There is no disclaimer to act as a defence