Pure Economic Loss

Overview

Recall questions on what pure economic loss is, whether a duty is owed for it, the distinction drawn in Spartan Steel and the policy behind the rule.

What you need to know

Answer each one before you reveal it.

Questions from this subtopic

Each one with the model answer underneath.

1. 1

   What is pure economic loss?

   Model answer

   Financial loss suffered by the claimant that is not consequent upon any physical injury to the claimant or damage to their property.

2. 2

   Is there generally a duty of care for pure economic loss caused by negligent acts?

   Model answer

   No, the general rule is that there is no duty of care for pure economic loss caused by negligent acts.

3. 3

   In Spartan Steel v Martin, what distinction did the court draw when the defendant's negligence cut power to the claimant's factory?

   Model answer

   The court distinguished between consequential economic loss (which is recoverable) and pure economic loss (which is not recoverable).

4. 4

   What is the main policy reason for denying recovery for pure economic loss arising from negligent acts?

   Model answer

   The fear of indeterminate liability to an indeterminate class.

5. 5

   Under what circumstances may a duty of care arise for pure economic loss caused by negligent misstatements?

   Model answer

   Where there is a special relationship between the parties.

6. 6

   What principle did Hedley Byrne v Heller establish regarding negligent misstatements?

   Model answer

   That a duty of care can exist for negligent misstatements causing pure economic loss where there is a special relationship between the parties.

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