LIABILITY FOR ECONOMIC
LOSS AND PSYCHIATRIC INJURY
QUESTIONS AND THEIR CORRECT
SOLUTIONS
If claimant proves negligent act from defendant they
can claim....
Any physical injury suffered
Damages to their property
Loss caused by negligent acts
No liability for pure economic loss
More of a problem to contract law not tort
States in
Spartan Steel v Martin (1973)
An electric power cable outside the C's factory was cut
negligently by D's workers. This caused the factory to be
closed for several hours. A 'melt' in the furnace at the time
had to be destroyed to stop it from solidifying and
wrecking the furnace. There were three parts to the claim:
1.) For the damage to the melts - this could be claimed as
it was physical damage.
2.) For loss of profit on those melts - this could be claimed
as it amounted to consequential economic loss
3.) For loss of profit while the factory was out of action -
This claim amounted to pure economic loss. The CoA held
that this type of loss didn't result from physical damage
and therefore a claim for this loss could not be made.
, Loss caused by negligence misstatement
Two party liability and three party liability
Two party liability
This is when A gives advice or makes a statement to B
and B suffers loss in relying on it. In this case, if there is a
contract between A and B such as professional advice
given for a fee, if the advice is negligent and B suffers
financial loss on relying on it, then B can claim damages
for breach of contract.
If there is no contract between A and B the B cannot rely
on a claim under contract law. The question is whether B
can bring a claim against A in negligence, does A owe a
duty of care regarding the advice?
Three party liability
This is where A makes a statement to B, and B
communicates it to C. C then suffers loss on relying on the
statement. In this case there is no contractual relationship
between A and C. Will A owe a duty of care to C in the tort
of negligence for a negligent misstatement?
Hedley Byrne v Heller (1964)
A banker gave faulty advice to a creditor, the creditor sued
for negligence.
Court distinguished this case from Donoghue v.
Stevenson because the banker had made a disclaimer
saying that they were not responsible for their advice.
Creditor was unsuccessful.
LOSS AND PSYCHIATRIC INJURY
QUESTIONS AND THEIR CORRECT
SOLUTIONS
If claimant proves negligent act from defendant they
can claim....
Any physical injury suffered
Damages to their property
Loss caused by negligent acts
No liability for pure economic loss
More of a problem to contract law not tort
States in
Spartan Steel v Martin (1973)
An electric power cable outside the C's factory was cut
negligently by D's workers. This caused the factory to be
closed for several hours. A 'melt' in the furnace at the time
had to be destroyed to stop it from solidifying and
wrecking the furnace. There were three parts to the claim:
1.) For the damage to the melts - this could be claimed as
it was physical damage.
2.) For loss of profit on those melts - this could be claimed
as it amounted to consequential economic loss
3.) For loss of profit while the factory was out of action -
This claim amounted to pure economic loss. The CoA held
that this type of loss didn't result from physical damage
and therefore a claim for this loss could not be made.
, Loss caused by negligence misstatement
Two party liability and three party liability
Two party liability
This is when A gives advice or makes a statement to B
and B suffers loss in relying on it. In this case, if there is a
contract between A and B such as professional advice
given for a fee, if the advice is negligent and B suffers
financial loss on relying on it, then B can claim damages
for breach of contract.
If there is no contract between A and B the B cannot rely
on a claim under contract law. The question is whether B
can bring a claim against A in negligence, does A owe a
duty of care regarding the advice?
Three party liability
This is where A makes a statement to B, and B
communicates it to C. C then suffers loss on relying on the
statement. In this case there is no contractual relationship
between A and C. Will A owe a duty of care to C in the tort
of negligence for a negligent misstatement?
Hedley Byrne v Heller (1964)
A banker gave faulty advice to a creditor, the creditor sued
for negligence.
Court distinguished this case from Donoghue v.
Stevenson because the banker had made a disclaimer
saying that they were not responsible for their advice.
Creditor was unsuccessful.
