Recognised harm and economic loss
Most losses that occur from tort can be categorised as an economic loss.
An example being if someone was to negligently crash and destroy someone else’s car in a road traffic accident, then the owner of the car destroyed is said to have suffered an economic loss.
The car would have inevitably cost some form of payment to purchase, and will therefore cost something to replace, whether this be monetary value or some form of part exchange scheme.
If a person is injured in an accident that results in them being unable to work due to their injuries or possibly has to take a lower paid job, or a role with far less benefits or bonus schemes, then these people would also be said to have suffered a form of economic loss.
In both the above examples, the economic loss has been suffered as a result of a physical impact and injury, whether to property or themselves.
The courts are far stricter when a claim occurs regarding ‘pure economic loss’, which is economic loss that has not been suffered from physical harm or damage.
Examples of pure economic loss
Let us take a manufacturing company as an example. If an electrical contractor negligently cuts through electric cables in the factory, resulting in the factory being ‘unusable’ for the purpose it is required , then a claim of pure economic loss would be for the potential earnings the company could have gained if the electric capable were not damaged and the factory was usable.
The courts are very restrictive in their approach to claims of pure economic loss, given that claims regarding, for example, potential earnings could be catastrophically unrealistic in line with the actual damage caused.
The courts would be faced with ridiculous claims and no proof to support the argument.
The development of claims for pure economic loss
In 1963 the House of Lords held that a claim for pure economic loss could be permitted if the loss was a result from things the defendant had said or information the defendant had provided.
The House of Lords furthered this by saying a person can make a claim for pure economic loss as a result of negligent misstatements providing there is a special relationship between the parties involved.
For a person to succeed in a claim for pure economic loss as a result of a negligent misstatement the following needs to be proven:
For more information on:
- A special relationship
- Voluntary assumption of responsibility
- Reasonable reliance
- Recovery for economic loss in ‘wills’ cases