Economic Loss

Topics: Tort, Caparo Industries plc v Dickman, Negligence Pages: 17 (6042 words) Published: January 12, 2012
Economic Loss
Economic loss suffered by the C will be regarded as pure if they do not flow from any personal injury to the C nor form any physical damage to their property. The boundaries between pure economic loss and loss which is consequential upon physical damage to the C’s property were investigated by the CoA in Spartan Steel v Martin (1973) QB 27

Like psychiatric injury, pure economic loss is often described as a problematic form of damage. Although floodgates arguments are sometimes encountered in this area, there are other reasons why a duty to take care not to cause foreseeable economic loss to the claimant is not always appropriate. Hale J, McLoughlin v Jones (2002) Psychiatric injury is different in kind from economic loss. It has restricted its scope of any duty to avoid causing purely economic loss.

It is not always appropriate to impose a duty of care to avoid causing foreseeable economic loss through negligence. Even proximity is unlikely to supply the necessary additional factors. It is an argument that cases of economic loss do not always require a remedy. Cases involving economic loss frequently share certain other features. The damage is often caused indirectly; the relationship between C and the D is sometimes remote, and the number of potential parties is sometimes large.

Categories of Economic Loss

The hallmarks of the Caparo approach included the reinstatement of proximity as a separate criterion which would restrict the operation of foreseeability; and the adoption of an incremental technique in which courts will turn to established categories of case rather than to broad universal principles in order to reach their decisions.

There is a distinction between ‘losses caused by words’ and losses caused by acts’ is not a reliable way to divide the case law. It is now clear that Hedley Byrne v Heller extends beyond losses caused by statements. Certainly, it extends to professional services more broadly. This is in itself a good enough reason for abandoning the acts/words distinction. But it would also be beneficial to go further and to recognize that there is no general exclusionary rule applying to economic losses caused by acts, nor to economic losses generally. Rather than a general exclusionary rule, in English law there are two specific areas where exclusionary rules apply. These categories are relational economic loss and economic loss through defective products.

The following categories are used to explain the law in this section (Relational Economic Loss) 1. Economic loss caused by damage to the property of another party 2. Economic loss caused by acquiring a product that turns out to be defective 3. Economic loss is caused by reliance on negligent statements 4. Extended Hedley Byrne principle

1. Economic loss caused by damage to the property of another party (RELATIONAL ECONOMIC LOSS). This is not recoverable in English Law, with one exception (Greystoke Castle). One reason against liability is the prospect of actions by an indeterminate number of claimants (Spartan steel). If physical harm is done to the property (or person) if one party, this may have a ripple effect on the financial interests of the many others. But this reason for the exclusionary rule is not always valid. Supplementary reasons include reluctance to interfere with contractual allocations of risk, and desire to encourage their means of protecting the claimant’s interests. This general rule against liability has no application in Australasia, and Canada recognizes a number of exceptions to it. More recently the question has arisen of cases of damages to the property of others – and indeed whether the same exclusionary rule might incorporate indirect physical damage of some sorts. But these are outside the clear rule as it stands.

2. Economic loss caused by acquiring a product that turns out to be defective. This sort of loss is also not recoverable in English law. In Murphy v Brentwood, it...
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