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This is an extract of our What Is Pure Economic Loss document, which we sell as part of our Tort Law Notes collection written by the top tier of Oxford students.
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What is Pure Economic Loss?
Definition
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Giliker: where loss is purely financial Consequential losses are not pure economic loss
? e.g. X suffers a facial injury owing to D negligently running him over with a car
? X is a model
? X now loses contracts and future contracts
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This is not economic loss because it is a consequence extending from the personal injury Only when Z suffers purely financial loss is this pure economic loss in law:
? Suppose X is contracted the his agent Z
? Z can no longer get money from X's work, because X cannot work anymore
? Z has suffered no personal injury nor property damage
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She has suffered a purely financial loss o Her pocket has been hit
? But nothing else has Spartan Steel v Martin and Co [1973]: D was a construction company near to SS's factory, which was supplied by an electricity cable. D negligently severed that cable by not taking enough care, meaning the factory had to close.
? The melt already in the furnace suffered damage
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SS was allowed to claim for this loss AND the lost profits from the damaged melt
? BUT factory had had to close down for 14 hours
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Meaning 5 other melts could not be melted down
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Thus, SS suffered lost orders from those 5 melts they could not melt down during the "down time". Lord Denning: SS can recover lost melt, but not the 5 others that weren't damaged
? Should be no liability for lost profits and PEL because
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Nature of hazard o Loads of people suffer loss owing to things beyond their control - go and get on with it
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Floodgates - desire to avoid crushing liability o Used to stop loads of claims happening o If claims for economic loss allowed for power shutdown, would be no end of claims
? And no end of damages o Would be wasteful to investigate whether the claims were real or not
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Risk of economic loss should be borne by whole community
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Law provides for deserving cases where property damage occurred Problems with the Denning Approach:
? Hoyano:
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PEL can be just as devastating to people as property damage
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