Negligent misstatement and pure economic loss

• What is pure economic loss ?

  Is a loss of profit or income
• Basic rule of pure economic loss


  You cannot claim for pure economic loss. this is something that claimants should take out buisness interruption insurance for
• PEL - Spartan steel v Martin

  • electric cable being negligently outside the claimants factory forced closure of a steel factory
  • Factory had to close for a period + steel not made
  • Claims were successful for damage to the property not for the loss of profit - LP
• PEL - Weller v Foot and Mouth research institute

  • The virus escaped from lab negligently - animals had to be destroyed + quarantined + not sold until later
  • Damages awarded for the cattle killed not the delayed sales
• Negligent misstatement

  badly advised
• Negligent m

  • possession of a skill or expertise regarding the advice
  • Reliance on a claim
  • direct communication
  • knowledge of the purpose
  • no disclaimer
• Abbreviation for negligent M

  Silly Reynolds cannot kill Davies (SRCKD)
• Hedley Byrne v Heller

  • Ad agency accepted a new client
  • Asked for reference from bank - provided
  • Bank made it clear that they did not have access to all financial info of company + so reference was only to the best of their knowledge - firm went bust + leaving ad agency with considerable expenses - valid relationship between parties - court ruled it possible to sue for pure economic loss as a result of the negligent misstatement if 5 criteria is met
• NM - Caparo v Dickman

  • company purchased - previous owners not new buyers
  • relied on negligently statutory accounts
  • No relationship or direct communication
• Chaudry v Prabhakar

  • Chaudry sought advice from the friend regarding purchase of a second - hand car - friend was experienced with cars
  • assured it had not been involved in any accidents and good condition although previously had been in one - not so trustworthy
• Reasons for restrictions on pure economic loss

  • floodgates argument : claims for pure economic overwhelming number of claims
  • Economic losses can be harder to quantify and foresee making it difficult for defendants to know the scope of potential liability
  • limiting recovery for pure economic loss promotes certainty in legal relationships and allows businesses and individuals to predict their liabilities more accurately