Pure economic loss and negligent misstatement

Question 1

What is consequential economic loss?

Answer 1

An economic loss that is the consequence of physical damage and is recoverable

Question 2

What is pure economic loss?

Answer 2

Economic loss that is independent of physical damage and is not recoverable

Question 3

What case shows that pure economic loss cannot usually be claimed for in tort?

Answer 3

Weller v Foot and Mouth Disease Research Institute - the defendant negligently let the disease escape so restrictions were placed on the movements of cattle to prevent the spread of disease which meant that the claimant lost money as an auctioneer but couldn’t claim

Question 4

When can a claim be brought for pure economic loss?

Answer 4

As a result of negligent misstatement

Question 5

Which case established that a claim can be brought by those who suffer financial loss as a result of a negligent misstatement and in the presence of a special relationship?

Answer 5

Hedley Bryne v Heller and Partners - although in this case there was an effective disclaimer

Question 6

Which case sets out the requirements for a special relationship establishing a duty of care?

Answer 6

Caparo v Dickman

Question 7

What must be present to establish a special relationship?

Answer 7

1) the person giving the advice must have skill or expertise
2) the claimant must rely on the advice
3) the advice is communicated directly and not through a third party
4) the person giving the advice knows the purpose and what it will be used for
5) there is no disclaimer as a defence

Question 8

Which case shows that a special relationship can exist in a social setting or during a relationship?

Answer 8

Chaudry v Prabhakar - claimant relied on a friend’s recommendation when buying a car that was not road safe

Question 9

How do you show that the defendant has breached their duty?

Answer 9

If there is a special relationship established, the defendant has a duty of care which would be breached if they did not act as a reasonable and prudent person in their position and then apply the rules of causation

Question 10

Why are there restrictions for pure economic loss?

Answer 10

1) floodgates argument
2) to prevent claimants circumventing contract law
3) it is difficult to calculate potential future loss
4) to prevent overwhelming the court systems