Tort 2 - Pure Economic Loss Flashcards
What are the challenges courts face regarding claims for pure economic loss?
Courts limit claimants’ ability to recover pure economic loss due to concerns about:
* Overwhelming liability for defendants
* Encouraging fraudulent claims
* Interfering with contract law by imposing tort-based liabilities
What are the types of loss in negligence?
Types of loss in negligence include:
* Personal injury/property damage (physical damage)
* Consequential economic loss
* Pure economic loss
* Psychiatric damage
Define pure economic loss.
Financial loss without any physical damage or property.
Give examples of pure economic loss.
Examples include:
* Bad investment
* Missed contractual opportunity
* Loss of inheritance
* Economic loss from damage to others’ property
What is the general rule for pure economic loss?
No duty of care is owed in respect of pure economic loss.
What is the key case associated with pure economic loss?
Murphy v Brentwood District Council [1990] 2 All ER 908
In Spartan Steel & Alloys Ltd v Martin & Co, what type of loss was recoverable?
The loss of profit on damaged metal was recoverable as it was consequential economic loss.
What are the three main exceptions to the general rule for pure economic loss?
Exceptions include:
* Negligent statement
* Wills
* References
What established the liability for negligent misstatements?
Hedley Byrne v Heller [1964] established liability in cases of reliance on negligent misstatements.
In White v Jones, who suffers a loss due to negligence in relation to a will?
The beneficiary suffers a loss, not the testator.
What is the significance of Spring v Guardian Assurance plc?
Employers owe a duty to provide accurate references for employees.
What are the three key concepts/tests discussed in Hedley Byrne regarding duty of care?
The concepts/tests are:
* Reasonable reliance
* Assumption of responsibility
* Special relationship of trust and confidence
What is required for reasonable reliance to establish duty of care?
Requirements include:
* Claimant relied on the advice
* It was reasonable to rely on the advice
* Defendant knew or ought to have known of the reliance
What does special skill or knowledge held by the defendant imply?
If the defendant has expertise, a special relationship may exist, establishing duty of care.
In Stevenson v Nationwide Building Society, why did the claimant’s action fail?
The claimant was an expert and should have obtained an independent structural survey.
What is the general rule regarding advice given in social situations?
Generally, no duty of care is owed in social situations.
What is the significance of Chaudhry v Prabhakar?
It established that a duty of care could exist even in social situations if the defendant assumed responsibility.
What is the concept of voluntary assumption of responsibility?
It refers to the defendant voluntarily taking on responsibility for the correctness of their statement.
What criteria were established in Caparo Industries plc. v Dickman for assuming responsibility?
Criteria include:
* Communication of advice to the claimant
* Knowledge of the purpose for which the advice is used
* Knowledge that the claimant will rely on the advice
* The claimant acted on the advice to their detriment
What was the outcome of Caparo Industries plc. v Dickman regarding duty of care?
No duty was owed by the defendants to the claimants in their capacity as investors.
What was the main issue in the case regarding the auditors and shareholders of Fidelity?
Whether the auditors owed a duty of care to the shareholders and potential investors
What was the House of Lords’ decision regarding the duty of care owed by the auditors?
No duty was owed to the claimants in their capacity as investors
What was the main reason for the House of Lords’ decision on the duty of care?
It was not reasonable for Caparo to have relied on the accounts for the purpose to invest
What was the purpose of the audit according to the House of Lords?
To assist the shareholders in exercising their rights of control over the company
What does Hedley Byrne state about a special relationship of trust and confidence?
It arises when the party seeking advice trusts the other to exercise care, where it is reasonable to do so
What can defendants do to limit their liability?
Disclaim responsibility
What acts govern the reliance on disclaimers in business?
Unfair Contract Terms Act 1977 (UCTA) and Consumer Rights Act 2015 (CRA)
In the case of Smith v Eric S. Bush, what key factors determined the duty owed by the defendant surveyor?
- The claimant was a first-time buyer
- The claimant was purchasing a house of modest value
- The defendant should have known the claimant would rely on their survey
- The reliance was reasonable and foreseeable
What was the outcome regarding the disclaimer in Smith v Eric S. Bush?
The disclaimer was invalid as it was unreasonable under s 2(2) of UCTA 1977
What factors are considered to determine if a disclaimer is reasonable?
- Were the parties of equal bargaining power?
- Was it practicable to obtain advice from an alternative source?
- How difficult was the task undertaken by the defendant?
- What are the practical consequences regarding loss and insurance?
True or False: A disclaimer can exclude liability for economic loss or property damage if it is fair and reasonable.
True
