Negligence: Pure Economic Loss Flashcards
What is the general rule regarding a duty of care for pure economic loss?
As a general rule, a defendant does not owe a duty of care to a claimant not to cause pure economic loss. This means that pure economic loss is generally not recoverable
What is ‘consequential economic loss’?
Consequential economic loss is a financial loss that results from physical damage to the claimant’s property or personal injury to the claimant. It is recoverable. There are no special rules for consequential economic loss.
How does consequential economic loss differ from pure economic loss?
Consequential economic loss follows on from physical damage or injury, whereas pure economic loss is not connected to these. Pure economic loss is generally not recoverable
List three broad categories of pure economic loss.
○ Economic loss caused by acquiring a defective item of property
○ Economic loss unconnected to personal injury or physical damage to the claimant’s property
○ Economic loss where there is no physical damage
Give an example of pure economic loss caused by acquiring a defective item of property.
Someone buys a faulty product. The cost of replacing the faulty product is pure economic loss and is not recoverable in negligence. For example, the cost of replacing a faulty CD player or hairdryer.
Give an example of pure economic loss unconnected to personal injury or physical damage to the claimant’s property.
A journalist negligently advises that shares in a company are a good investment. Readers who lose money on those shares suffer pure economic loss. Another example is the extra cost of a train ticket when someone is delayed due to a road accident
What are the two subcategories of pure economic loss when there is no physical damage?
○Economic loss caused by negligent actions where there is no physical damage
○Economic loss caused by negligent statements
Under what circumstances can a claimant recover damages for pure economic loss caused by a negligent statement?
A claimant may recover damages for pure economic loss caused by a negligent statement if there is a special relationship between the claimant and the defendant. This is an exception to the general rule.
What are the two elements required to establish a ‘special relationship’ under Hedley Byrne?
○ An assumption of responsibility by the defendant
○ Reasonable reliance by the claimant
What four criteria were established in Caparo to determine if a defendant has assumed responsibility towards a claimant?
○ The defendant knew the purpose for which the advice was required
○ The defendant knew that the advice would be communicated to the claimant
○ The defendant knew that the claimant was likely to act on the advice without independent inquiry
○ The advice was acted on by the claimant to their detriment
Can the duty of care from Hedley Byrne extend to cases where the negligent statement was not made directly to the claimant?
Yes, as seen in Spring v Guardian Assurance, the duty of care can be extended to cases where the statement was made to a third party who then acted to the claimant’s detriment
Can the duty of care from Hedley Byrne extend to the negligent provision of professional services?
Yes, as seen in White v Jones, the principle can be extended from negligent statements to the negligent provision of professional services
What are the two requirements a defendant must meet to rely on an exclusion notice?
○ Reasonable steps must have been taken to bring the exclusion notice to the claimant’s attention before the tort was committed.
○ The wording of the notice must cover the loss suffered by the claimant
What are the limits on excluding liability for negligence under the Unfair Contract Terms Act 1977 and the Consumer Rights Act 2015?
○ A defendant cannot exclude liability for death or personal injury resulting from negligence.
○ For other losses, liability can only be excluded if the exclusion is reasonable (UCTA 1977) or fair (CRA 2015)
What factors are considered when determining if an exclusion notice is ‘reasonable’?
○ Were the parties of equal bargaining power?
○ Was it reasonably practical to obtain the advice from an alternative source?
○ How difficult was the task being undertaken?
○ What are the practical consequences, considering the sums involved and the parties’ ability to bear the loss?
