A more recent version of these Pure Economic Loss notes – written by Oxford students – is available here.
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Pure Economic Loss
PEL - loss which isn't consequential to any personal injury to C or property damage to C's property Exclusionary rule- economic loss isn't actionable w/out more, whether deliberately or carelessly inflicted (but no blanket rule denying liability altogether) NB: no problem if C can frame is action in contract - most claims for breach of contract are claims of EL Rationale 1) Carries the risk of floodgates 5) Don't always need a remedy- the object of economic activity is mostly to succeed while others fail &so EL is caused intentionally. Only where unlawful means are used can begin imposing liability. By definition, it's not always appropriate to impose a duty to avoid causing foreseeable economic loss through negligence - even proximity won't provide necessary additional factors. Limitations rooted in morality of market economy + would deter competition which is beneficial in capitalist economy. 2) The fact that EL, whether inflicted intentionally or not, isn't actionable w/out more, is hard to explain on the "loss based" model of tort law(Stevens) (i) loss based model - overall object of tort law is to define cases in which law may justly hold one party liable to compensate another & role of duty of care here is as control device, so that damage is the gist of the law of negligence - primarily concerned w/ diverse reasons why particular D has immunity from being liable for carelessly causing loss. (ii) rights based model - tort is a species of wrong which in turn is a breach of duty owed to someone, which is an infringement of a right they have against tortfeasor. Before D is characterised as tortfeasor, the anterior question of whether C had a right against him must be answered. Law of torts is thus concerned w/secondary obligations generated by infringement of primary rights, so that infringement of rights, not the infliction of loss, is the gist of the law of torts (distinguish right of C and liberty of D in this context). 3) EL generally gives rise to a problem of indeterminate liability which justifies a "bright line" exclusionary rule (F. James)
? Stevens: on its own, this is unsatisfactory a. it's not always the case that recovery of EL would give rise to indeterminate number of Cs. E.g. Murphy - the only possible C is the purchaser whose EL is determined by value of what he bough b. there may be indeterminacy problems in other contexts but that isn't normally seen as sufficient reason to exclude liability
? Stapleton- principal advantages of complete rule of "no recovery" would be: a. certainty - it would provide a much sharper edged approach than a regime which allows recovery in some circs defined in terms of "soft" concepts, such as skill, reliance, proximity, on application of which reasonable minds may disagree b. clear message to Parl. & Law Commission that victims couldn't look towards common law & its future developments for redress in such cases & that it would require action on their part instead Recognition of Hedley Byrne meant little attention was paid to "no recovery" option. Current orthodoxy accepts that to draw a line b/w physical & economic damage can't be justified on any intelligible principle. It concedes to existence of floodgates problem but recognises it as a controllable threat by recognizing recovery in carefully defined cases. But the outcome of litigation is complex, uncertain & anomalous pattern of decisions - "pockets of case law" to which analysis by courts has been confined. 6) Central flaw of HL approach to EL is the assumption that difficult issues of duty should be analysed by analogy to "pockets" of relevant case law - this can preclude consideration of factors capable of providing a more coherent overall process of
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