This is an extract of our Pure Economic Loss document, which we sell as part of our GDL Tort Law Notes collection written by the top tier of Cambridge/Bpp/College Of Law students.
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PURE ECONOMIC LOSS
Three categories of economic lass:
o Actual: e.g. the cost of a new car when involved in a crash
Consequential: e.g. the lost earning while recovering from a crash
Pure: e.g. lost employment for those caught in the tailback resulting from a crash.
Generally not recoverable.
Cattle v Stockton Waterworks Co (1875) - plaintiff contracted with owner of land to build tunnel under road. Defective waterpipe leaked onto road obstructing the works reducing contractor's profit. Held could not claim in PEL.
Spartan Steel v Martin  - Defendants negligently cut a power cable that supplied power to the claimant's factory. The factory shut down. Metal that was being processed at the time of the power cut was damaged (£368), and there was a loss of profit on it of £400. The Claimants couldn't process any more metal while the power was off which they claim led to a loss of £1,700.
Held they could claim the first £768 as actual/consequential loss, but not the £1,700 as
Murphy v Brentwood District Council  - Lord
Oliver: There is a duty of care to avoid harm to person or property but not for pure economic loss.
Courts unwilling to impose liability for PEL as there is no duty of care:
o NB there is such a duty of care in Canadian law.
o Potential floodgates opening, imposing crushing liability on the defendant
Lord Denning in Spartan Steel highlights the possibility of fraudulent claims.
o In addition, some judges are reluctant to interfere with the rules of contract, particularly the rule of privity (a contract cannot confer rights or impose obligations upon any person who is not a party to the contract), by imposing liability in tort instead.
o Matthews, Morgan and O'Cinneide see three strands:
1) 'floodgates' argument - the fear of 'liability for an indeterminate amount to an indeterminate class'
2) necessary to maintain the doctrinal integrity of private law (e.g. the view that negligence law should not circumvent the rule in contract law that third party beneficiaries may not sue on a contract).
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