Tort 2: Pure Economic Loss

Question 1

What are 4 situations of PEL?

Answer 1

1. Economic loss caused by acquiring a defective item of property
2. D negligently damages property belonging to a TP and causes C loss
3. Economic loss caused by negligent actions and there is no physical damage
4. Economic loss caused by negligent statements and there is no physical damage or special relationship

Question 2

What are the situations where it is not PEL, there is a doc and loss is recoverable?

Answer 2

1. PI/property damage to C caused by defective item of property + lost profits on C prop damage (C cant recover for the defective item)
2. D negligently damages C’s prop + causes C loss
3. Economic loss caused by neg statements, no physical damage BUT special relationship between C and D (this is acc considered PEL)

Question 3

Can a claimant recover for economic loss caused by acquiring a defective item of property?

Answer 3

No, a claimant cannot recover for economic loss caused by acquiring a defective item of property. This is considered pure economic loss and is unrecoverable.

Question 4

What happens if personal injury or property damage is caused by a defective product?

Answer 4

If personal injury or property damage is caused by a defective product, the claimant can recover for the damages and any lost profits from the property damage, but they cannot recover the cost of the defective product itself. This is not considered PEL.

Question 5

Define PEL

Answer 5

Economic loss not resulting directly from PI/ property damage to the C- this is not recoverable

Question 6

Define CEL

Answer 6

Economic loss that is a direct result of PI/property damage caused in negligence to C- this is recoverable

Question 7

When is pure economic loss recoverable in tort?

Answer 7

If it is pure economic loss caused by a neg misstatement + a special relationship exists

Special relationship if:
1. Advice is required for a purpose known to D
2. D knows advice will be communicated to C in order to be used for that purpose
3. D knows C is likely to rely on the advice without independent enquiry
4. C must actually have relied on the advice to their detriment
5. It must have been reasonable for C rely on the advice

Rest of Claim
1. must still show breach of duty
2. causation
3. defences

Question 8

How might you be be able to claim damages for pure economic loss other than win tort?

Answer 8

Breach of contract may be available

Question 9

What are examples of PEL?

Answer 9

• Made bad investment 📉
• Loss arising from damage to property from another 🏚️
• Defective items 🪆

Question 10

What is a case on PEL from damage to another?

Answer 10

cattle auction tried to sue farmer for releasing foot and mouth causing animal auctions to dry up. Claim unsuccessful as PEL.

Question 11

What is a case on PEL from defective item?

Answer 11

C bought a defective house which had been approved as fit by the council and had to sell at a reduced price as a result. No claim as PEL as house had always been defective.

Question 12

What case demonstrates the difference between PEL, Consequential loss and Damage?

Answer 12

D damaged cable powering a metal forge causing it to lose power:
- Ruined metal in forge = damage 🧑‍🍳⭐️🔥
- Loss of profit on damaged metal = consequential loss ⭐️💷
- Loss of profit due to downtime = PEL 🕰️📉❌

Question 13

In what case did the court find a duty of care for a negligent statement made to a third party, causing economic harm to the claimant?

Answer 13

Spring v Guardian, a former employer was found to have a duty of care when providing a reference. The negligent statement made to TP directly caused economic harm to the claimant, and the court held the employer owed a duty of care.

Question 14

How did the court extend the special relationship regarding a solicitor’s duty of care to a third party?

Answer 14

In White v Jones, a solicitor was held to owe a duty of care to potential beneficiaries, despite the beneficiaries not relying on the solicitor directly.

There was a sufficiently close relationship as it was foreseeable that the solicitor’s negligence in drafting a will could prevent the beneficiaries from claiming their inheritance.

Question 15

Can a claimant pursue a claim in tort for professional services, even if they have a contract with the defendant?

Answer 15

Henderson v Merrett, the court held that a claimant could bring a tort claim for negligent services, even if a contract exists, as long as the duties under both tort and contract are consistent.

Question 16

What are the key elements required to establish a claim for pure economic loss (PEL) due to negligence?

Answer 16

1. A duty of care not to cause PEL.
2. Proof of breach of duty and causation (using the “but for” test).
3. Potential defences such as exclusion notices.

Question 17

Can economic loss caused by negligent statements be recovered?

Answer 17

As a general rule, no duty of care is owed for economic loss caused by negligent statements.

However, it may be recoverable if a special relationship exists between the parties, as established by the Caparo & Hedley Byrne principles.

Question 18

What factors are considered in the Special Relationship Test for negligent statements?

Answer 18

1. D’s assumption of responsibility.
2. D knew the purpose of the advice.
3. D knew advice would be communicated to C.
4. D knew C would rely on the advice without further independent inquiry.
5. The advice was acted on to C’s detriment.
6. It was reasonable for C to rely on D advice

Question 19

Can a claimant recover for economic loss caused by negligence without any physical damage to themselves or their property?

Answer 19

No, generally, a claimant cannot recover for economic loss if there is no physical injury or damage to their property. This is considered pure economic loss and is unrecoverable.

Question 20

What are the requirements for an exclusion notice to be valid as a defence in tort?

Answer 20

1. Reasonable steps must have been taken to bring the exclusion notice to the claimant’s attention before the tort occurred.
2. The wording of the notice must cover the type of loss suffered by the claimant.

Question 21

What statutory controls govern exclusion notices under the UCTA 1977 for business-to-business (B2B) contracts?

Answer 21

S2(1): A defendant cannot exclude liability for death or personal injury caused by negligence.

S2(2): For other types of loss or damage, the exclusion is valid only if it meets the reasonableness test.

Question 22

What statutory controls govern exclusion notices under the Consumer Rights Act 2015 for consumer-to-business (C2B) contracts?

Answer 22

S65(1): A defendant cannot exclude liability for death or personal injury caused by negligence.

S62: Any exclusion for other losses must meet the fairness standard, which takes into account good faith and a balance in the parties’ rights and obligations.

Question 23

What factors are considered when assessing the reasonableness or fairness of an exclusion notice?

Answer 23

A: Were the parties of equal bargaining power?

B: Could the claimant have obtained advice from an alternative source, considering cost and time?

C: How difficult was the task for which liability is being excluded?

D: The practical consequences, including the sums of money involved and the ability of the parties to bear the loss, especially in light of insurance