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Law- Negligence

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A negligent misstatement or careless statement causing physical damage is actionable in negligence, as is a fraudulent statement causing economic loss in the tort of deceit. It was only in Hedley Byrne v Heller [1963] where the defendant bank falsely and negligently gave its opinion that a company was financially sound that a careless statement causing pure economic loss was held actionable by the House of Lords. The courts system develops incrementally as new cases are heard. Hence, this essay will focus on one aspect of tort law- the claim for economic loss, which was first demonstrated in the Hedley Byrne case and how it has led to other decisions of the courts in subsequent cases. The facts of the Hedley Byrne case are that the claimant was an advertising company that was offered work by a small company with whom they had no previous dealings. It sought a reference from the company's bank which was prepared without any checks being made into the current state of finances. In reliance upon the bank's reference, the claimant carried out work for the company which then went into liquidation before any payment was made. ...read more.


Lord Bridge said that "the defendant giving advice was fully aware of the nature of the transaction which the plaintiff had in contemplation, knew that the advice would be communicated to him directly or indirectly and knew that it was very likely that the plaintiff would rely on that advice in deciding whether or not to engage in the transaction in contemplation" The House of Lords held that no duty of care was owed by the defendant, since the primary purpose of the account was not for guidance of personal investment. The "Caparo test" was introduced included the three principles of * Reasonable foresight of harm * Sufficient proximity of relationship, which was established in the earlier 1964 Hedley Byrne case * That is fair, just and reasonable to impose a duty It stated that a duty of care in misstatement would only arise when the person making the statement is fully aware of the purpose of it; that acting on the advice given in the statement without further independent research is reasonable in the circumstances; and that this is to the advisee's detriment. The test was applied in Morgan Crucible Co, Plc v. ...read more.


It must be clear that the answer is important and relevant enough for the plaintiff to rely on. For example, in Chaudhry v Prabhker [1988], a knowledgeable friend was held to owe a duty of care in relation to negligent advice about a car given to the claimant, who knew nothing about cars. In conclusion, the development of negligent misstatement derives from the case Hedley Byrne v Heller that sets out the rule that the claimant can succeed if a special relationship exists between claimant and defendant. Also, actionable negligent misstatement occurs when the claimant relied on defendant's advice or information. The courts will decide if a special relationship exists by asking a few questions, in the Caparo case, it is "Did the defendant know or ought defendant to have known why the claimant required advice or information?" thus setting out the three principle tests to establish if a duty of care was present and further developed negligent misstatement. The other question the courts will ask is "Did the defendant assume responsibility to give advice or information". This was founded in Henderson v Merrett Syndicates. Therefore, it is not easy to bring an action against someone who carelessly says something as precedence takes place evidently in the UK courts. ...read more.

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