Pure Economic Loss Flashcards
(17 cards)
What is pure economic loss in negligence?
Pure economic loss is financial loss that is not consequent on any physical injury to the claimant or their property. It includes loss arising from defective items, missed opportunities, bad investments, or damage to third-party property.
What types of loss are recognised in negligence?
Personal injury/property damage
Consequential economic loss (e.g. lost income due to injury)
Pure economic loss
Psychiatric harm (covered elsewhere)
What is the general rule for pure economic loss?
As a rule, no duty of care is owed for pure economic loss
What are the three main categories of pure economic loss?
- Economic loss not caused by damage to person/property
- Loss arising from damage to another’s property
- Cost of repairing or replacing defective items
Three types of loss distinguished?
Physical damage: to metal → recoverable
Consequential economic loss: lost profit on damaged metal → recoverable
Pure economic loss: lost profit on future melts → not recoverable
What is the distinction between acts and statements in pure economic loss?
Negligent acts: No duty of care for pure economic loss
Negligent statements: May give rise to duty
What are the three exceptions to the general rule?
- Negligent misstatements
- Negligent will drafting
- Negligent references
Negligent Misstatements - Hedley Byrne v Heller?
Bank gave inaccurate financial info with a disclaimer. Held: a duty of care could exist where there is a special relationship, though no duty here due to disclaimer.
What are the three key Hedley Byrne criteria?
- Reasonable reliance
- Assumption of responsibility
- Special relationship of trust and confidence
Is it necessary to satisfy all three criteria?
No. A duty of care can be found if any one is satisfied.
What is the reasonable reliance test?
a) Claimant relied on the advice
b) It was reasonable to rely
c) Defendant knew or should have known of the reliance
What does voluntary assumption of responsibility mean?
Where the defendant accepts responsibility for advice, especially in relationships akin to contract.
What are the four Caparo principles for assumption of responsibility (Adapted for Misstatements)?
- Advice communicated to claimant or identifiable group
- Purpose known
- Reliance expected
- Claimant acted on advice to detriment
What is the special relationship test?
Duty exists where the claimant trusts the defendant to exercise reasonable care, and that trust is reasonable and known to the defendant.
Can a disclaimer negate a duty of care?
Yes, but only if it is valid for businesses) or for consumers).
What factors determine reasonableness for Businesses?
Bargaining power
Availability of alternatives
Task complexity
Parties’ ability to bear the loss (e.g. insurance)
What factors determine reasonableness for Businesses?
Bargaining power
Availability of alternatives
Task complexity
Parties’ ability to bear the loss (e.g. insurance)
Disclaimers only valid if fair and transparent.
