Overall test-Tort-Negligence leading to economic loss

Question 1

What are the two types of economic loss?

Answer 1

Consequential economic loss
Pure economic loss

Question 2

What is consequential economic loss?

Answer 2

This is where physical loss leads to economic loss
For example, a man is injured and cannot work, hence losing earnings

Question 3

What is pure economic loss?

Answer 3

Loss does not derive from physical loss
e.g. Traffic accident closes road so no one can get to C’s cafe

Question 4

What case demonstrates both consequential and economic loss?

Answer 4

Spartan Steel and Alloys Ltd v Martin and Co (Contractors) Ltd (1972).

Question 5

In instances of liability due to a negligent act, why are people able to make claims for consequential economic loss but not pure economic loss?

Answer 5

The courts do not want to open the floodgates
For example, imagine the amount of liability if a whole city occurred economic losses because of a power loss.

Question 6

What are the two exceptions where there can be liability for pure economic loss?

Answer 6

Wills
Negligent misstatement

Question 7

What is the case which created the exception for wills?

Answer 7

White and Jones (1995).

Question 8

What is a negligent misstatement?

Answer 8

A D may be liable if he makes a statement to someone to whom he owes a DoC but, due to his negligence, the statement is inaccurate and it causes the claimant a reasonable foreseeable pure economic loss.

Question 9

What case can you use in essays for negligent misstatement?

Answer 9

Hedley Byrne v Heller (1964).

Question 10

What case can you use in essays for negligent misstatement?

Answer 10

Hedley Byrne v Heller (1964).

Question 11

What principle derives from Hedley Byrne v Heller (1964)?

Answer 11

The House of Lords said the bankers owed C a duty of care but escaped liability because of a disclaimer in their statement, denying legal responsibility for its accuracy.

Question 12

Due to the fear that because of the negligent misstatement exception the courts said that a duty of care will only be given to people claiming for negligent misstatement if what?

Answer 12

There is a special relationship between the D and the C.

Question 13

What four requirements need to be met for there to be a special relationship between D and C when considering negligent misstatement?

Answer 13

Defendant possesses a skill or expertise
Defendant voluntarily assumes responsibility for his statements
Known user and known purpose
Reasonable reliance

Question 14

Courts can waive some special skill or expertise for negligent misstatement as they did in what case?

Answer 14

Lennon v MPC (2004)
Got damages from a clerical officer who gave wrong advice about house allowances.

Question 15

The skill and expertise test is even met (negligent misstatement) if advice is given in a social setting . What case established this?

Answer 15

Chaudhry v Prabhakar (1988),
Advice given by a friend

Question 16

The second test for negligent misstatement is not met if there is a what?

Answer 16

Disclaimer

Question 17

What case establishes that if there is a disclaimer you cannot receive compensation for negligent misstatement?

Answer 17

Patchett v Swimming Pool and Allied Trades Association (2009)

Question 18

What is the minimum the D had to do to voluntarily take responsibility for a negligent misstatement?

Answer 18

The fact that the D made the statement is good evidence in itself that he takes responsibility for it.

Question 19

How can a D be liable under negligent misstatement for the test, known user and purpose?

Answer 19

D normally only liable if he knows, or should know, the user and purposes for which his statement will be used

Question 20

What case established that this test is met even if the D knows if a third party will use the advice and for what they will use it for?

Answer 20

Law Society v KPMG Peat Marwick (2000)

Question 21

What does the reasonable reliance test for negligent misstatement say?

Answer 21

The C must prove that he actually relied on the misstatement and it was reasonable or him to do so.

Question 22

Give two examples where following advice would be reasonable and unreasonable.

Answer 22

Relying on advice given in a business meeting (reasonable)
Relying on advice given at a dinner party by someone who has had several drinks (unreasonable)

Question 23

What case is used to explain what the liability for a misstatement relied on by a third party? (not necessary to learn-good to know)

Answer 23

Spring v Guardian Assurance (1994).

Question 24

What principle derives from Spring v Guardian Assurance (1994)?

Answer 24

The House of Lords held that an employer who provides a reference in respect of an employee, past or present, ordinarily owes a duty of care to the employee in respect of its preparation, and will be liable for any economic loss suffered by the employee as a result of negligence.

Question 25

Facts of Spartan Steel and Alloys Ltd v Martin and Co (Contractors) Ltd (1972).

Answer 25

While digging a trench, D negligently cut off the electricity supply to P’s steelworks.

Question 26

Facts of White and Jones (1995)

Answer 26

Mr White asked his solicitor, Jones, to change his will to benefit his 2 daughters.
Jones took long to respond and White died.
Daughter did not benefit from will.

Question 27

Why were HoL willing to impose liability for White despite it being pure economic loss?

Answer 27

Amount of money involved was known so no danger of ‘opening the floodgate’

Question 28

Facts of Hedley Byrne v Heller (1964).

Answer 28

C were advertising agents who booked TV time on behalf of a company.
The company’s bankers gave the company a positive reference.
The company went into liquidation; C lost money on its bookings and sued the bankers.

Question 29

Facts of Lennon v MPC (2004)

Answer 29

the C got damages after receiving wrong information about housing allowances from a clerical officer

Question 30

Facts of Chaudhry v Prabhakar (1988).

Answer 30

D liable for errors made when advising his friend buying a second hand car

Question 31

Facts of Patchett v Swimming Pool and Allied Trades Association (2009).

Answer 31

C decided on a company to build his swimming pool based on the fact it was listed on the D’s website.
D not liable as the website said that people should find out more about companies listed on their website

Question 32

Principle from Law Society v KPMG Peat Marwick (2000)

Answer 32

liability for negligent misstatement can exist when the D should know that his statement will be passed to a third party and for what purpose that party will use it