Tort Law II – Negligent Misstatement & Vicarious Liability –
Law Lecture 2 – 2026 – Study Guide and Lecture Notes
What is pure economic loss? - correct answer ✔✔ Financial loss that does not directly result
from personal injury or damage to property
Spartan Steel v Martin (1972): claimed damages under three heads: - correct answer ✔✔ 1.
Damage to the metal that was in the furnace at the time of the power cut (physical damage to
property)
2. Loss of profit that would have been made on the sale of that metal (economic loss arising
from damage to property)
3. Loss of profit on metal which would have been processed during the time the factory was
closed due to the power cut (pure economic loss).
Pure economic loss and professional negligence - correct answer ✔✔ The law makes a
distinction between economic loss which is caused by negligent acts (this is not recoverable)
and
- Economic loss which is caused by negligent statements or advice (which is recoverable under
certain conditions under a tort of negligence action)
Negligent statements or advice and claims for pure economic loss
Hedley Byrne v Heller (1964) - correct answer ✔✔ An advertising agency Hedley Byrne (Party A)
has been asked by a firm called Easipower Ltd (Party B) to buy substantial amounts of
advertising space on their behalf. To make sure that party B is creditworthy, party A contacts
Easipower's Ltd bankers called Heller (Party C) to enquire about Easipower's Ltd
creditworthiness.
Party C negligently states to Party A that Party B is 'a respectable company, considered good for
its ordinary business engagements'.
Relying on that advice, Party A enters into a CONTRACT with Easipower Ltd (Party B). However,
two weeks later, Party B enters into liquidation, leaving Party A to pay £17,000 to businesses
from which they bought the advertising space.
, Party C may be liable for their negligent advice as they owed a duty of care to Party A not to
provide negligent information.
Negligent statements or advice and claims for pure economic loss - correct answer ✔✔
Consider the following hypothetical (* facts are similar with real cases*)
Company ABC Ltd wants to acquire another company named GetReady Ltd. In deciding on
whether to make that acquisition, they rely on financial report of an accountancy firm called
ABC Ltd that states that GetReady Ltd is 'financially viable and an investment with good
prospects'.
A couple of months later, ABC Ltd found out that GetReady Ltd was insolvent and that BCL LLP
had prepared the report negligently and that the figures were wrong.
ABC Ltd could bring a claim for their financial loss (pure economic loss from their lost
investment) against BCL LLP.
The Hedley Byrne principles
There is a duty of care not to cause economic loss where: - correct answer ✔✔ a) There is a
special relationship between the parties
b) The defendant voluntarily assumed a responsibility to the claimant
c) The claimant relied on the defendant's advice
d) It must have been reasonable for that party to have relied on the advice
Before Hedley Byrne v Heller - correct answer ✔✔ • A recipient could only recover damages for
economic loss resulting from a negligent misstatement through the following actions:
• An action for breach of a contract - This would not be possible without a valid contract
• An action in the tort of deceit, which required the recipient to prove fraud or dishonesty on
the part of a defendant
When may an action for negligent misstatement arise? - correct answer ✔✔ • A professional
gives advice/ provides information/ makes a statement
• There is no contractual relationship with the recipient
Law Lecture 2 – 2026 – Study Guide and Lecture Notes
What is pure economic loss? - correct answer ✔✔ Financial loss that does not directly result
from personal injury or damage to property
Spartan Steel v Martin (1972): claimed damages under three heads: - correct answer ✔✔ 1.
Damage to the metal that was in the furnace at the time of the power cut (physical damage to
property)
2. Loss of profit that would have been made on the sale of that metal (economic loss arising
from damage to property)
3. Loss of profit on metal which would have been processed during the time the factory was
closed due to the power cut (pure economic loss).
Pure economic loss and professional negligence - correct answer ✔✔ The law makes a
distinction between economic loss which is caused by negligent acts (this is not recoverable)
and
- Economic loss which is caused by negligent statements or advice (which is recoverable under
certain conditions under a tort of negligence action)
Negligent statements or advice and claims for pure economic loss
Hedley Byrne v Heller (1964) - correct answer ✔✔ An advertising agency Hedley Byrne (Party A)
has been asked by a firm called Easipower Ltd (Party B) to buy substantial amounts of
advertising space on their behalf. To make sure that party B is creditworthy, party A contacts
Easipower's Ltd bankers called Heller (Party C) to enquire about Easipower's Ltd
creditworthiness.
Party C negligently states to Party A that Party B is 'a respectable company, considered good for
its ordinary business engagements'.
Relying on that advice, Party A enters into a CONTRACT with Easipower Ltd (Party B). However,
two weeks later, Party B enters into liquidation, leaving Party A to pay £17,000 to businesses
from which they bought the advertising space.
, Party C may be liable for their negligent advice as they owed a duty of care to Party A not to
provide negligent information.
Negligent statements or advice and claims for pure economic loss - correct answer ✔✔
Consider the following hypothetical (* facts are similar with real cases*)
Company ABC Ltd wants to acquire another company named GetReady Ltd. In deciding on
whether to make that acquisition, they rely on financial report of an accountancy firm called
ABC Ltd that states that GetReady Ltd is 'financially viable and an investment with good
prospects'.
A couple of months later, ABC Ltd found out that GetReady Ltd was insolvent and that BCL LLP
had prepared the report negligently and that the figures were wrong.
ABC Ltd could bring a claim for their financial loss (pure economic loss from their lost
investment) against BCL LLP.
The Hedley Byrne principles
There is a duty of care not to cause economic loss where: - correct answer ✔✔ a) There is a
special relationship between the parties
b) The defendant voluntarily assumed a responsibility to the claimant
c) The claimant relied on the defendant's advice
d) It must have been reasonable for that party to have relied on the advice
Before Hedley Byrne v Heller - correct answer ✔✔ • A recipient could only recover damages for
economic loss resulting from a negligent misstatement through the following actions:
• An action for breach of a contract - This would not be possible without a valid contract
• An action in the tort of deceit, which required the recipient to prove fraud or dishonesty on
the part of a defendant
When may an action for negligent misstatement arise? - correct answer ✔✔ • A professional
gives advice/ provides information/ makes a statement
• There is no contractual relationship with the recipient
