Negligent misstatement Flashcards
(22 cards)
What is a negligent misstatement?
A negligent misstatement is when someone suffers pure economic loss due to relying on inaccurate advice given negligently.
Which case established the principle of negligent misstatement?
Hedley Byrne v Heller
What key legal principle was established in Hedley Byrne v Heller?
A duty of care in giving advice may arise if there’s a special relationship and it is reasonable for the claimant to rely on the advice.
What prevented liability in Hedley Byrne v Heller despite the existence of a duty?
A disclaimer was used which excluded liability.
What are the key requirements to establish negligent misstatement liability?
- Special relationship between the parties
- Voluntary assumption of responsibility by the adviser
- Reasonable reliance by the claimant and the adviser knows or ought to know their advice will be relied upon
What does “special skill or expertise” mean in this context?
The defendant must have or claim to have knowledge or expertise relevant to the advice given.
Which case illustrates liability from assumed expertise in a casual setting?
Chaudhry v Prabhakar – A friend with car knowledge gave negligent advice.
What is required for reliance to be considered reasonable?
The claimant must rely on the advice for the specific purpose it was given, and the defendant must know this.
What case shows that reliance on advice for a different purpose can defeat a claim?
Caparo v Dickman – The financial statements were not prepared for the claimant’s purpose.
What legal concepts failed in Caparo v Dickman?
Lack of proximity, no specific reliance, and the advice was not intended for the claimant.
What does the “voluntary assumption of responsibility” mean?
The defendant willingly takes on the duty to provide accurate advice for a known purpose.
How can a disclaimer affect liability for negligent misstatement?
It can exclude or limit liability if reasonable and clearly communicated.
Which case illustrates the limits of disclaimers?
Smith v Eric S Bush – The disclaimer was held unreasonable under UCTA 1977.
What type of loss is usually recoverable in negligent misstatement cases?
Pure economic loss.
Why are courts cautious about allowing claims for economic loss?
To avoid opening the floodgates to unlimited liability.
Can economic loss be claimed without physical damage or injury?
Yes, but only under narrow conditions where Hedley Byrne criteria are satisfied.
Is the duty of care in negligent misstatement unlimited?
No, it’s limited to the purpose for which the advice was given.
What happens if the claimant uses advice for a broader purpose than intended?
The claim may fail, as in Caparo v Dickman.
What does a “special relationship” mean in negligent misstatement cases?
A relationship where the adviser has skill or expertise and the claimant relies on them in a context where such reliance is expected.
What is meant by “voluntary assumption of responsibility”?
The defendant accepts responsibility for the accuracy of their advice, explicitly or implicitly, knowing the claimant will rely on it.
What is the main defence to a claim of negligent misstatement?
Disclaimers — if the adviser has clearly disclaimed responsibility, they may not be liable.
Can contributory negligence apply in negligent misstatement cases? (other defence)
Yes — if the claimant acted unreasonably or failed to verify advice, their damages may be reduced.
