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Law Notes Tort Law Notes

Pure Economic Loss Notes

Updated Pure Economic Loss Notes

Tort Law Notes

Tort Law

Approximately 1070 pages

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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

  1. 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.

  1. 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)

  1. 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.

  2. 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).

  1. 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

    1. 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

    2. 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:

  1. 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

  2. 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.

  1. 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 analysis, guided but not dictated by such “pockets”-consider factors such as:(Stapleton)

    1. Floodgates – it should be a necessary but not sufficient precondition of imposition of duty that case doesn’t raise the prospect of indeterminate volume of claims or a quantum of indeterminable loss

    2. Adequate alternative means of protection shouldn’t have been available elsewhere – the height of hurdle would depend on the level of protectionism court thinks appropriate but it should be consistent e.g. contrast b/w Smith v Eric Bush and D&F Estates is too big (just as buyers of modest dwellings rely on surveys so they do on competence of subcontractors in carrying out repairs of their home!)

    3. Imposition of duty shouldn’t invade an area which Parl. has dealt w/as exhaustive – approach w/caution (necessary, not sufficient!)

    4. Shouldn’t permit C to circumvent either a contractual bargain b/w C&D or even a non contr. but clear understanding b/w parties as to where the risk should lie

  • Overall priority should be an attempt @ consistency in factorsto consider & resultant overall level of protection adopted by courts, be it in the form of obl. in tort or implied terms. Not a question completely for common law; e.g. UCTA 1977

  1. EL is less important than other forms of loss – we have a hierarchy of interests to protect: at the summit is life and bodily safety, below is tangible property and only then economic interests

  • Stevens: don’t have to look for a single reason why we don’t have a right good against the rest of the world not to have EL inflicted upon us: could instead start w/assumption that we each have a right not to have loss inflicted upon us and it would then be necessary to carve out wide ranging exceptions. But this isn’t common law’s starting position & there is no exclusionary rule for EL: it is that infliction of EL doesn’t per se infringe any rights of C. Thus, on a rights based model, it is not the ocean of no liability which requires mapping but the isolated island of rights.

  1. Potential of conflict w/contract law – certain subclasses of economic loss are traditionally & appropriately the subclasses of contract though note Cartwright on remoteness

  • Categories of EL cases (sets...

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