Economic Loss & Negligent Misstatements questions and answers

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Seminar 8 (Week 10): Economic Loss & Negligent Misstatements

Sven, an accountant, is asked by Erik to value shares in Bell Enterprises Ltd to discover whether they are likely to prove a good investment.  Sven and Erik are old friends and Sven states that he will value the shares for ‘old times’ sake’ but that any statement which he makes as to the investment value of the shares is to be treated as a statement of opinion and that no reliance is to be placed thereon.  

Sven’s report states that the shares are certain to be a good investment. Erik leaks the report to the Morning Star, which duly publishes it. Sven also informs Matius, over a drink in the pub that shares in Bell Enterprises Ltd are bound to prove a sound investment. Erik, Matius and Annika, a reader of the Morning Star, purchase shares in Bell Enterprise Ltd and lose a substantial sum of money when the shares in the company drop in value.  

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Advise Sven as to his potential liability.

  • Negligent misstatement - (when a duty of care is imposed upon a defendant for negligent words which cause loss to the claimant)
  • Sven would not be held liable for Erik, Matius or Annika losing money, because the report and advice he gave to Erik was just of a friend, and should not have been taken seriously
  • Friends - Chaudhry v Prabhakar [1988] – there will be no duty in respect of advice requested on a purely social occasion but liability was imposed upon a friend assessing a used ...

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