Negligence: Pure Economic Loss Flashcards

Comprehensive practice flashcards covering the core principles of tort law regarding negligence and pure economic loss, including key cases and statutory authorities.

What is the general rule regarding the duty of care for pure economic loss in tort?

As a general rule, a defendant does not owe any duty of care to a claimant not to cause pure economic loss.

What is the policy reason for the general lack of a sufficiently proximate relationship in cases of pure economic loss?

The courts place limits upon the duty of care because the defendant's potential liability could be boundless, to an indeterminate number of claimants.

How is 'consequential economic loss' defined in relation to physical damage?

It is a money loss that follows on from physical damage to the claimant's property or physical injury to the claimant.

If a defendant negligently destroys a shed and the owner pays $500.00$ for a replacement, is this classified as pure economic loss?

No, this is consequential economic loss following on from physical damage to property.

Why can James not sue a retailer in negligence for the repair costs of a faulty compact disc player gifted to him by his mother?

The loss is classified as economic loss caused by acquiring a defective item of property, which is pure economic loss and thus not recoverable in negligence.

What was the key outcome of Murphy v Brentwood DC [1990] regarding dangerous foundations?

The House of Lords held that the $£35,000.00$ reduction in market value due to subsiding foundations was pure economic loss and therefore not recoverable.

According to the transcript, when does the cost of a defective product become recoverable?

When the defective item of property causes personal injury or physical damage to property other than the defective item itself.

In Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973], which losses were recoverable after an electricity cable was damaged?

The physical damage to the 'melts' in the furnace and the loss of profit on those specific products (consequential economic loss) were recoverable.

In Spartan Steel, why was the loss of profit on four future melts during the power cut not recoverable?

Because it was pure economic loss caused by damage to property belonging to a third party (the electricity supplier's cable) rather than the claimant's property.

What are the two sub-divisions of economic loss where no physical damage has occurred?

Loss caused by negligent actions and loss caused by negligent statements.

What was the ruling in Weller & Co v Foot and Mouth Disease Research Institute [1966] regarding the closure of cattle markets?

The loss of business was classified as pure economic loss caused by a negligent action and was not recoverable because it was not caused by physical damage.

What landmark case established that there could be liability for a negligent statement if an especially close relationship exists?

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964].

What are the two core elements required for a 'special relationship' under Hedley Byrne?

(a) An assumption of responsibility by the defendant; and (b) reasonable reliance by the claimant.

What are the four criteria laid down in Caparo Industries v Dickman [1990] to determine if a defendant has assumed responsibility for advice?

1. The defendant knew the purpose for advice; 2. The defendant knew the advice would be communicated to the claimant; 3. The defendant knew the claimant was likely to act without independent inquiry; 4. The advice was acted on to the claimant's detriment.

In Chaudhry v Prabhakar [1989], why was a duty of care owed for advice given in a social situation?

The defendant had more experience and knowledge about cars, and the claimant made it clear she was relying on his skill and judgment, meaning he assumed a responsibility.

To what situation did Spring v Guardian Assurance plc [1994] extend the Hedley Byrne principle?

It extended the principle to negligent statements made to a third party (a prospective employer) rather than directly to the claimant, through a negligent reference.

In White v Jones [1995], what negligent provision of professional services led to a duty of care being owed?

A solicitor negligently delayed drafting a will, causing potential beneficiaries to lose their prospective inheritance.

What did Henderson v Merrett Syndicates Ltd [1994] establish regarding concurrent claims?

A claimant can rely on a claim in tort even if they have a contract with the defendant for professional services, provided the duty in tort is consistent with the contract.

What two requirements must a defendant satisfy to rely on an exclusion notice for a tort?

1. Reasonable steps must be taken to bring the notice to the claimant's attention before the tort; 2. The notice's wording must cover the loss suffered.

Under UCTA 1977 and CRA 2015, what can a defendant never exclude liability for?

Death or personal injury resulting from negligence.

What standard must an exclusion notice meet for losses other than death or personal injury under s 2(2) of UCTA 1977?

The requirement of reasonableness.

Which case provided factors for 'reasonableness', such as equal bargaining power and the availability of alternative advice sources?

Smith v Eric S Bush; Harris v Wyre Forest District Council [1989].