Economic Loss / Negligent Misstatement Flashcards
(14 cards)
Economic Loss – How to Apply
Loss of money due to negligence.
C (name) may be able to claim for economic loss.
Consequential Economic Loss
Consequential economic loss is a loss in money, which is a direct consequence of physical damage caused by negligent acts.
This loss IS recoverable – Spartan Steel v Martin.
Pure Economic Loss
Pure economic loss is loss, which is not consequential of any physical injury or damage to the claimant.
You CANNOT claim for this in tort – Spartan Steel v Martin.
Application of Economic Loss Types
Apply the relevant one to the scenario – which type of loss has the C suffered, and can this be recovered?
Negligent Misstatement – How to Apply
Loss caused by relying on a negligently made statement.
The D (name) may be liable for economic loss due to their negligently made statement.
Negligent Misstatement – Key Legal Test
Hedley Byrne v Heller set out the conditions for a special relationship between the parties.
Clarified in Caparo v Dickman.
STAGE 1: Special Skill
- Does the D possess any special skill relating to the advice given? This is based on the skill and judgement of the D and the reliance placed upon it by the C.
SIDE RULE: Social Situations (Stage 1)
The general rule: no liability for statements made informally or in a social situation.
However, Chaudhry v Prabhaker stated that advice given in a social setting may give rise to a duty of care, provided the D possesses relevant expertise.
STAGE 2: Knowledge of Likely Reliance
2) D knows it is highly likely the C will rely on the advice.
In Mutual Life v Evatt, a duty arises when: D is in the business of giving that advice, or D has professed special skill in the field. D must know the C will rely on it.
STAGE 3: Actual Reliance
3) Relies: The C does rely on the D’s advice and suffers financial loss.
STAGE 4: Reasonableness of Reliance
4) It must be reasonable for C to rely on the advice.
The test is whether there is sufficient proximity between the parties (Caparo v Dickman). If yes, then reliance is more reasonable.
Position of Authority – Reasonableness of Reliance
If the D is in a position of authority or responsibility, it is more reasonable to rely on their advice.
White v Jones.
SIDE RULE: Voluntary Assumption of Duty
This means D gives advice without being asked.
In Hedley Byrne v Heller, it stated that if the D voluntarily assumes responsibility by giving advice instead of remaining silent, it supports the existence of a duty of care.
Conclusion of Negligent Misstatement
Summarise findings and conclude on whether the D owes a duty and whether economic loss is recoverable.
