Tort Law - Pure economic loss Flashcards
What is pure economic loss? (1)
Economic loss not flowing from damage to the claimant’s person or property; loss flowing from damage to the property of another; and the costs of repairing / replacing defective items.
What is the general rule in regards to pure economic loss? (1)
It is not recoverable, but there are exceptions.
What is meant by economic loss not flowing from damage to the claimant’s person or property? (2)
If the claimant has not suffered physical damage to their person or property then their claim will be pure economic loss, such as a bad investment, lost inheritance or a missed contractual opportunity.
What is meant by loss arising from damage to the property of another and the key case? (2)
Loss arising from damage to the property of another in which they have no proprietary interest, the loss will be categorised as pure economic loss, Weller & co V Foot & mouth disease research institute 1965.
What is meant by costs of repairing / replacing defective items and the key case? (2)
It is not possible to claim for the cost of repairing an inherently defective item which has been categorised as pure economic loss, Murphy V Brentwood district council 1990.
What is the key case for the general rule for pure economic loss? (1)
Spartan Steel & Alloys Ltd V Martin & Co 1973.
What distinction have the courts made for pure economic loss and the general rule? (2)
Between pure economic loss caused by a negligent act and pure economic loss caused by a negligent statement. Where the loss is caused by a negligent act, the general rule remains that the courts will not recognise a duty of care.
What are the exceptions to the general rule for pure economic loss? (3)
Pure economic loss caused by negligent statement, a negligently drafted will or a negligently drafted reference.
Are wills and references negligent statements? (1)
Yes but are listed as separate exceptions as case law can be used as clear precedent for duty of care.
What is the key case for negligent statement? (1)
Hedley Byrne V Heller 1964.
Who owes duty of care in regards to wills and the key case? (2)
There is a relationship between the solicitor and testator but if there is negligence in relation to the will, the solicitor owes a duty to the beneficiary in order to achieve practical justice, White V Jones 1995.
What is the key case in regards to negligently drafted references? (1)
Spring V Guardian Assurance PLC & Others.
What must the claimant satisfy for an exception to the general rule for pure economic loss? (5)
Hedley Byrne V Heller Criteria, which has three tests:
1. Reasonable reliance
2. Assumption of responsibility
3. Special relationship of trust and confidence between the parties.
These tests often overlap so claimant need only satisfy one in order for a duty of care to be owed.
What is another key case for pure economic loss caused by negligent statement and disclaimers? (1)
Smith V Eric S Bush.
What was the decision of Smith V Eric S Bush? (3)
Disclaimer was unreasonable since the parties were not of equal bargaining power, it was also not reasonable for the claimant to obtain an independent structural survey due to expense. The defendant was in a better position to bear the financial loss. This area of law is now subject to CRA 2015.
