Pure Economic Loss Flashcards
Define pure economic loss
Loss that does not flow from damage to the claimant or the claimant’s property
What are the types of PEL
- Economic loss not flowing from damage to person or property e.g bad investment
- loss arising from damage to the property of another
- defective item
what is the general rule regarding the duty of care and PEL
No duty of care is owed in respect of pure economic loss (Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd)
What are the exceptions to the general rule caused by negligent statements?
- Wills: Solicitor owes a duty of care to the beneficiary rather than the testator to achieve practical justice (White v Jones [1995]).
- References: Previous employer has a duty of care to the subject and object of a reference to be accurate (Spring v Guardian Assurance plc & Others [1995]).
- Pure Economic Loss Caused by Negligent Misstatement where there is no precedent.
What is the test for negligent misstatement (Hedley Byrne v Heller and Partners)
- Was there reasonable reliance
- Was there an assumption of responsibility
- Was there a special relationship of trust and confidence between the parties
do NOT need all three!
Reasonable reliance test
- C relied on D’s advice (q of fact)
- Was it reasonable for the C to rely on D’s advice (special skill or knowledge of D, special skill or knowledge of C, general context (friends?), other relevant factors)
- The D knew/ought to have known that the C was relying on their advice - q of fact
Test for voluntary assumption of responsibility
Caparo v Dickman
- D must communicate the advice to the C or know that it will be communicated to them
- The D must know the purpose for which the C will rely on this
- The D must know or reasonably believe that the C will rely on this advice without independent inquiry
- The C must have acted upon that advice to their detriment
Same crtieria apply if a claim is made by a 3P who relies on advice.
Can Ds exclude themselves from liability?
Yes, but they must consider the impact of UCTA 1977 and CRA 2015.
Factors to consider for UCTA
Were the parties of equal bargaining power?
Would it have been reasonably practicable to obtain advice from an alternative?
How difficult was the task being undertaken by the defendant?
What are the practical consequences, taking into account the sums of money at stake and the ability of the parties to bear the loss involved, particularly in light of insurance?
