Economic loss and negligent misstatement

• What is the definition of economic loss?

  Economic loss is defined as financial loss.
• What are the two types of economic loss?

  • Consequential economic loss: Loss due to a physical loss (personal injury/property damage).
  • Pure economic loss: A standalone loss of money.
• What is an example of consequential economic loss?


  Loss of money due to personal injury or property damage.
• What is pure economic loss?

  Pure economic loss is a standalone loss of money without any accompanying physical loss.
• Why can't pure economic loss be recovered?


  Because allowing claims for pure economic loss could lead to an endless number of claims, many of which may be inflated or false.
• What case established the principle regarding pure economic loss?


  Lord Denning's statement regarding pure economic loss established the principle.
• What were the claims in Spartan Steel v Martin (1973)?


  1. Damage to the melts on the production line at the time of power cut.
  2. Loss of profit on those damaged melts.
  3. Loss of profit while the factory was out of action.
• Which claim failed in Spartan Steel v Martin and why?


  Claim 3 failed because it was considered pure economic loss.
• What was the outcome of Weller v Foot & Mouth Disease Research Institute (1965)?


  C's claim failed because it was pure economic loss.
• What must be explained when answering a problem scenario about economic loss?

  The different types of economic loss and how the claimant suffered the loss due to D's breach.
• What case acknowledged an exception to the rule on pure economic loss?

  Hedley Byrne v Heller and Partners (1964).
• What is the term used for a false statement made carelessly that leads to economic loss?

  Negligent misstatement
• What is the sole exception to non-recovery in negligent misstatement?


  PE2
• Which case established the principle of negligent misstatement?

  Hedley Byrne v Heller
• What are the key elements that must be established for a claim of negligent misstatement?


  1. D possesses skill/expertise (Lennon HPC / Chaudhry v Prabhaker)
  2. D voluntarily assumes responsibility (Chaudhry v Prabhaker / Patchett v SPATA)
  3. D is a known expert (Caparo v Dickman / Goodall v BPAS)
  4. There is a known purpose (Law Society & PHC / Caparo v Dickman)
  5. There is reasonable reliance (Smith v Eric Bush)
• In which case was it established that the defendant possesses skill/expertise?

  Lennon HPC / Chaudhry v Prabhaker
• What does it mean for a defendant to voluntarily assume responsibility in negligent misstatement cases?


  It means the defendant acknowledges their duty to provide accurate information
• Which cases illustrate the principle of a defendant voluntarily assuming responsibility?


  Chaudhry v Prabhaker / Patchett v SPATA
• Which case established that the Claimant is a known user?

  Caparo v Dickman / Goodall v BPAS
• What is meant by a "known purpose" in the context of negligent misstatement?


  It refers to the specific reason for which the information is provided
• Which cases illustrate the principle of known purpose in negligent misstatement?

  Law Society v KPMG / Caparo v Dickman
• What does "reasonable reliance" mean in the context of negligent misstatement?


  It means the claimant relied on the information in a way that was justified
• Which case is associated with the principle of reasonable reliance?


  Smith v Eric Bush