Economic Loss

Question 1

What is pure economic loss?

Answer 1

Financial loss which is not caused by physical injury of damage to property. One would not be usually able to claim as no duty of care is owed for this.

Question 2

What is consequential economic loss?

Answer 2

loss which arises directly from the physical damage suffered by D.

Question 3

Is there liability for pure economic loss? + case

Answer 3

There is no liability for pure economic law caused by D’s negligent act: SPARTAN STEEL v MARTIN & CO

Question 4

Facts of SPARTAN STEEL v MARTIN & CO

Answer 4

D negligently cut electric cable outside C’s smelting factor, caused C to lose 14 hours of electricity. Melt in furnace had to be exploded to prevent the furnace being wrecked.

Question 5

What did the courts hold in SPARTAN STEEL v MARTIN & CO

Answer 5

Even where C is clearly owed a duty of care in respect of physical damage to property, any pure economic loss that are unrecoverable as either too far remote, or outside the scope of duty of care owed by D.

Question 6

Why could C be successful in SPARTAN STEEL v MARTIN & CO

Answer 6

• damages to metal in melts on production line was physical damage caused by D’s negligent act.
• The lost of profits from this sale amounted to consequential loss arising immediately from physical damage caused by D’s act. However, loss of profit from further melts that could have be created were not recoverable as this was pure economic loss.

Question 7

First point in proving liability for pure economic loss caused by negligent misstatements + case

Answer 7

HEDLEY BYRNE v HELLER & PARTNERS held that a claim may be made by those who suffer PEL as a result of relying on D’s negligent advice or information provided there was a special relationship between C and D.

Question 8

Second point in proving liability for pure economic loss caused by negligent misstatements + case

Answer 8

The precise meaning of what amounts to a ‘special relationship’ was clarified in CAPARO INDUSTRIES v DICKMAN

Question 9

What are the 5 points the House of Lords set out in CAPARO

Answer 9

• D must possess a special skill relating to the advice greater than C’s. D may state to have a special skill or knowledge in the field in which the advice is being given
• D must give advice for known purpose
• D must communicate directly or know the advice will reach C
• C relies on the advice by using and acting on it and suffers economic loss
• D knows C will rely on