Recovery of economic loss in negligence - Essay Example

ity to make use of the defective products. It is “habitually awarded in personal injury case ,e.g. for future loss of earnings. It has also been awarded in commercial cases , but there is no clear principle to determine when such losses are recoverable and when it is not.” 5 Pure economic loss, which is negligently caused to a party to a contract by acts or omission of a defendant, cannot give rise to any good cause of action.6 Economic loss in this sense is not recoverable under negligence or strict liability in tort.

The claimant suffered only financial injury. Recovery of pure economic loss in negligence is a complex and difficult area of law. . This principle is based on the necessity to limit the potentially unlimited liability, which can theoretically flow from negligence; otherwise, permitting recovery purely of economic nature will paralyze the judicial system and the society in general. 8 It was anchored on the belief that a single event may lead to any number of claims, which are so uncertain and so indeterminate it would make it intricate and very expensive for people to insure against this claim.

The courts have categorized pure economic loss into 4. These are negligent statements, negligent performance of services, relational economic losses, and economic losses caused by defective products or buildings. Negligent statement involves reliance on representation and comments that were negligently given. Negligent Performance refers to failure to take responsible care to execute gratuitous service undertaken. Relational economic loss is a claim based on the injury of one person that may easily impair the financial position of the other.

And lastly, Economic losses caused by defective product or building is a claim founded on the belief that a duty of care in torts arises between the builder and the subsequent user.9 QUESTION #2 In the case of Hedley Byrne v Heller [1963] the accountant was adjudged negligent in giving statement which statement was relied upon by Hedley in granting additional order of advertisement to the client Easipower that soon become bankrupt. The Court held the accountant liable for the pure economic loss incurred by Hedley although there was no contractual relationship arising from the negligent statement.

It has ruled that a negligent although honest misrepresentation, may give rise to an action for damages for financial loss even if there was no contract between