Self-test questions: Economic Loss

. What is the definition of consequential economic loss?

Financial loss that stems directly from the harm caused by negligence.

Financial loss that occurs as a result of another harm (personal injury/property damage) caused by negligence.

Non-pecuniary loss which can't be accurately assessed.

Pecuniary loss which can be calculated on the basis of evidence.

Financial loss that occurs in the future.

. The Defendant builder cut through an electricity mains cable due to their negligence which cuts the power to the Claimant's factory for 12 hours. As a result, the products the Claimant was making at the time were damaged on the production line. The Claimant lost the profit on selling those products. The Claimant also would have made further profit if they had been able to keep the production line running for those 12 hours. What is the Claimant able to successfully claim damages for?

Physical damage, loss of profit and anticipated lost profit while the factory was closed.

Physical damage and anticipated lost profit while the factory was closed.

Physical damage and loss of profit.

Loss of profit and anticipated lost profit while the factory was closed.

Physical damage only.

. Livvy is a baker. She bakes bespoke wedding cakes from her home kitchen which make her profit of £500 a time, and she usually bakes 4 cakes a day. Ron is an electrician working on Livvy's garage and he negligently cuts through Livvy's cables which supply electricity to her kitchen, cutting the power for 24 hours. Livvy is halfway through cooking a cake which is ruined in the oven. Livvy would like to claim for the wasted ingredients, the £500 profit from that wasted cake and the lost profit from the other 3 cakes she would have baked that day but was unable to. What can Livvy successfully claim from Ron?

Cost of cable & wasted ingredients, £500 loss of profit and £1500 anticipated lost profit while her kitchen was closed.

Cost of cable & wasted ingredients and £1500 anticipated lost profit while her kitchen was closed.

Cost of cable & wasted ingredients and £500 loss of profit.

£500 loss of profit and £1500 anticipated lost profit while her kitchen was closed.

Cost of cable & wasted ingredients.

. In negligent misstatement cases, which of the following are NOT classed as "statements"?

Advice

References

Provision of information

Services

Acts

. Zane buys a new house. Several years later large cracks appear in the walls caused by a defect in the foundations which make the house structurally unsound. As a result Zane's house is worth £50,000 less than he paid for it. Zane would like to bring a claim against the building inspector who was responsible for checking the foundations and did so negligently, for the loss of value of his property; is Zane likely to be successful in this claim?

Yes, the £50,000 lost value is consequential economic loss and recoverable.

Yes, the £50,000 is lost profit so is a future pecuniary loss and recoverable.

Yes, the £50,000 represents physical damage so is recoverable.

No, the £50,000 is pure economic loss and not recoverable.

No, the £50,000 loss is too remote and not recoverable.

. What is the leading case which establishes a duty of care for careless words distinct from careless acts, namely for negligent misstatements?

Junior Books Ltd v Veitchi Co Ltd [1983]

Hedley Byrne v Heller [1964]

D&F Estates Ltd v Church Commissioners for England [1989]

Murphy v Brentwood DC [1991]

Caparo Industries plc v Dickman [1990]

. Which of the following principles is NOT a requirement for a Hedley Byrne v Heller [1964] "special relationship"?

The Defendant possesses a special skill.

The Defendant voluntarily assumes risk (either express or implied).

The Defendant falls below the standard of the reasonable person possessing a special skill.

The Claimant must rely on the statement to his detriment.

The Claimant's reliance must be reasonable.

. Harvey works for DairyKing who own an ice cream business. Harvey's job is assessing the potential of ice cream shops. Ross is considering leasing an ice cream shop and is told by Harvey that this shop would sell 100,000 ice creams a year. Relying upon that information Ross leases the ice cream shop, but only sells 50,000 ice creams in the first 2 years. Does Harvey (and DairyKing who would be vicariously liable for Harvey) owe a duty of care to Ross in relation to the pure economic loss he suffered?

Yes, a duty of care is owed because Harvey and Ross were in a relationship of proximity.

Yes, a duty of care is owed because there was a special relationship between Harvey and Ross where Ross relied upon Harvey's expertise.

Yes, a duty of care is owed because there was a special relationship between Harvey and Ross as they were in reasonable proximity.

No, the special relationship between Harvey and Ross is insufficient to create a duty of care.

No, there is no duty of care as there was insufficient reliance by Ross on Harvey's advice.

. Mariah's partner Wilf underwent a vasectomy operation with the Defendant clinic before they met. The clinic advised Mariah that the vasectomy operation had been successful and she relied upon this, stopping the use of contraception as a result. Mariah subsequently became pregnant and gave birth to a child. Mariah wishes to claim the costs of bringing up her child from the clinic, will she be successful?

Yes, the clinic voluntarily assumed risk in their statement to Mariah so are liable in negligent misstatement for pure economic loss.

Yes, the clinic owes a duty of care to both Wilf and Mariah and their negligent misstatement means that the costs can be recovered.

Yes, the clinic owes a duty of care to both Wilf and Mariah and this is consequential economic loss, so easily recoverable in negligence.

No, the clinic owes a duty of care to Wilf, but not Mariah, so the costs are not recoverable in the absence of duty.

No, there is no voluntarily assumed risk towards Mariah so there can be no duty of care or recovery of pure economic loss.

. In the course of a property sale Jane (a solicitor) negligently sends an email with an inaccurate statement to the opposing party, who relies upon it and suffers significant financial losses. The party relying on Jane's statement wishes to bring a claim for negligent misstatement in relation to these financial losses, will they be successful?

Yes, the solicitor has voluntarily assumed responsibility in their statement so is liable for pure economic loss.

Yes, the solicitor is in a special relationship with the opposing party so there will be liability for pure economic loss.

Yes, there is a relationship of proximity between the parties, giving rise to liability for pure economic loss.

No, it was not reasonable for the Claimant to have relied on what Jane said and it would not have been reasonably foreseeable that they would rely on it, so no responsibility is assumed.

No, while there is a duty of care, it does not extend to pure economic loss.

. Caparo v Dickman [1990] restricted the Hedley Byrne criteria for a special relationship; what did this restriction require the Claimant to prove?

The Defendant knew the Claimant's identity, the Defendant's statement relates to an identifiable transaction or type of transaction & the Claimant reasonably relied on the statement.

The Defendant knew the Claimant's identity & the Claimant reasonably relied on the statement.

The Defendant knew the Claimant's identity and the Defendant's statement relates to an identifiable transaction or type of transaction.

The Defendant's statement relates to an identifiable transaction or type of transaction & the Claimant reasonably relied on the statement.

The Defendant anticipates that the Claimant will reasonably rely on the statement and the Claimant does so.

. Don is a surveyor and carries out a property survey on Windmill Cottage for the BigBank Building Society, as Hillary wishes to buy the property and take out a mortgage with them to pay for it. Don values the property at £250,000 whereas there were a number of issues with Windmill Cottage which should have been noticed by Don, and as a result its actual value is £150,000. Hillary relies upon the survey and purchases the property for £250,000. Can Hillary successfully sue Don in relation to his negligent survey and recover her financial losses.

Yes, there is proximity between the surveyor and purchaser therefore they can recover for the losses.

Yes, it would be reasonable for Hillary to rely upon Don's statements as he would have known that she would see them and rely upon them, therefore she can recover her financial losses.

No, whilst Don would have expected Hillary to see the survey, it would not have been reasonable for her to rely upon it without seeking further independent advice, therefore there is no duty of care and she cannot recover her financial losses.

No, Don prepared the survey for BigBank and could not have expected Hillary to rely upon it.

No, there is privity of contract between BigBank and Don, and Hillary is not party to the contract so no duty arises.

. Jocelyn is asked to write a reference for Orion who is leaving her company after being made redundant. The reference is requested by BigShop. Jocelyn had muddled up Orion with another employee and made fundamental errors in the reference, suggesting inaccurately that Orion was dishonest and a poor employee. As a result of the reference, Orion does not get the job and wishes to bring a claim against Jocelyn, will she be successful?

Yes, there is clear assumption of responsibility and reasonable reliance in this situation and so a duty of care arises, and Orion can recover her financial losses.

Yes, Jocelyn owes a duty of care to Orion as a former employee and is therefore liable for any negligent acts.

No, there would only be a duty of care if Jocelyn had shared the reference with Orion and Orion had passed it to BigShop, not if Jocelyn had written the reference and shared it directly with BigShop.

No, whilst there may be an assumption of responsibility, Orion does not rely on the statement so no duty of care arises.

No, there is no assumption of responsibility to Orion, the responsibility is to the recipient of the reference BigShop, so no duty of care arises.

. Richard has fallen out with his daughters and he ensures that they are not included within his will. The family later reconcile and Richard instructs his solicitor Dorothy to redraft the will including an inheritance for both daughters. Richard dies a few months later, and the daughters discover that the will was never changed. The women wish to bring a claim against Dorothy for the financial losses they suffer as a result of Dorothy's negligence - will they be successful?

Yes, as the relatives of Dorothy's client Richard, there was proximity and so a duty of care could exist for consequential losses.

Yes, as beneficiaries the daughters were clearly in Dorothy's contemplation so would be owed a duty of care enabling them to recover their economic losses.

No, the relationship between Dorothy and the daughters as beneficiaries would be too remote to give rise to a duty of care.

No, there is no assumption of responsibility towards the daughters, the responsibility is purely to Richard, so no duty of care arises.

No, there was no contract between the daughters and Dorothy so no duty of care arises.

. Which of the following types of Defendant is NOT likely face Hedley Byrne style liability?

Accountants.

Surveyors.

Legal services.

Investment advisors.

Journalist writing investment advice tips.

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