Unit 3a: Negligence - Pure Economic Loss

Question 1

Economic loss caused by defective item

Answer 1

• the damage they have suffered is economic loss caused by acquiring a defective item of property;
• this damage is classed as pure economic loss;
• no duty of care is owed in respect of pure economic loss.

Question 2

Liability of third parties for dangerous defects/defects of quality

Answer 2

Murphy v Brentwood DC [1990], no liability.

Question 3

Economic loss caused by damage to the property of a third party

Answer 3

Cannot claim damages for this. Key case: Spartan Steel v Martin. Damaged cable belonging to the electricity supplier, not the claimants. They could claim for damage to the melt in the furnace (physical property damage) and the profit lost on that melt (consequential economic loss). Could not claim for the loss of profit during the hours the electricity was cut off. If you negligently damage property belonging to a third party and cause me loss, there is not a sufficiently close relationship between us.

Question 4

Economic loss caused where there is no personal injury or physical damage to property

Answer 4

Caused by negligent actions: Weller & Co v Foot and Mouth Disease Research Institute [1966]. Cannot recover damages, no duty of care was owed.
Caused by negligent statements: no duty of care except for special relationships.

Question 5

Special relationships

Answer 5

Hedley Byrne:
a) an assumption of responsibility by the defendant;
b) reasonable reliance by the claimant.
So when these elements are present there is a duty of care in a case of negligent statements causing pure economic loss.

Question 6

A defendant assuming responsibility towards a claimant

Answer 6

From Caparo, there are four criteria:
- the adviser knew the purpose for which the advice was required
- the adviser knew that the advice would be communicated to the advisee
- the adviser knew that the advisee was likely to act on the advice without independent inquiry
- the advice was acted on by the advisee to its detriment.
Always also ask the question: was it reasonable for the claimant to rely on the defendant for advice?

Question 7

Duty of care in a social situation, negligent statements

Answer 7

Usually no duty of care will be owed with advice in a social situation, Chaudhry v Prabhakar [1989]. In Chaudhry this general rule is set out, but in the case the defendant did actually owe a duty of care.

Question 8

Extension of the special relationship (Spring)

Answer 8

Spring v Guardian Assurance plc [1994]. There was a special relationship but there was negligence and this negligent statement was made to a third party who relied on it to the detriment of the claimant. Specifically a case of writing a reference to new employers.

Question 9

Unfair Contract Terms Act 1977

Answer 9

Applies to claims in Negligence, section 1, applies to ‘any common law duty to take reasonable care or exercise reasonable skill’. Section 2 is relevant to the defendant’s ability to exclude liability for negligent acts or omissions. Liability cannot be excluded for death or personal injury. Only applicable if the defendant is acting in the course of business.

Question 10

Consumer Rights Act 2015

Answer 10

Same exclusion of liability as Unfair Contract Terms Act 1977. To be applicable the defendant must be acting as a trader and the claimant must be acting as a consumer.

Question 11

Tort of deciet

Answer 11

Intentional economic loss, no longer as important, likely easier to prove a lack of reasonable care rather than intentional wrongdoing.