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'Judges have been reluctant to allow economic losses to be claimed for in negligence, and have been careful to restrict the circumstances where such claims will be permitted' - Critically assess this statement.

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Lancaster University BA (Hons) Accounting & Finance Year 2- 2002/2003 Law 231 Assignment Assignment Title 'Judges have been reluctant to allow economic losses to be claimed for in negligence, and have been careful to restrict the circumstances where such claims will be permitted' Critically assess this statement with reference to the development of liability for economic loss in negligence. Support and illustrate your answer with reference to relevant case law and academic opinion. Introduction In this essay, I am going to discuss whether economic loss in negligence should constitute a cause of action. I will discuss this in three sections. First of all, I will explain briefly what the tort of negligence is and the development of the related law. Second of all, I will explain what the law relating to the recovery of economic losses is and what types of economic loss might be claimed under negligence. Final, I will bring forward my points of view on whether there is a duty to avoid causing foreseeable economic loss. The tort of negligence is where someone's carelessness, therefore, failure to exercise the degree of care considered reasonable under their circumstances, resulting in an unintended injury to another party. In a normal tort case involving a claim of negligence, the claimant must prove three things. ...read more.


2. Physical injury. Damages for economic loss may be awarded if there is foreseeable physical injury to the claimant or his property. In Spartan Steel and Alloys Ltd v Martin & Co Ltd [1972] 3 ALL ER 557, while digging up a road, the defendants' employees damaged a cable which the defendants knew supplied the claimants' factory. The cable belonged to the local electricity board and the resulting electrical power failure meant that the claimants' factory was deprived of electricity. The temperature of their furnace dropped and so metal that was in melt had to be poured away. Furthermore, while the cable was being repaired the factory received no electricity so it was unable to function for 14 hours. The Count of Appeal allowed only the claimants' damages for the spoilt metal and the loss of profit on one 'melt', due to the fact that the loss of profit on this 'melt' had closed relationship with damages of the spoilt metal. On the other hand, the Court of Appeal refused to allow the claimants to recover their loss of profit which resulted from the factory being unable to function during the period when there was no electricity because it was too remote to be a head of damage, not because there was no duty owed to claimant or because the loss suffered in this case was not caused by the negligence of defendants. ...read more.


i.e. an economic loss which is only connected with physical damage to the claimants' persons or property can be recovered (It has the different situation with Negligent misstatements). If the answer is no, it will cause that an unfair situation to take place. A lot of claimants will ask why only Junior Books can recover the economic loss. Conclusion In my points of view, I totally agree that there must be a duty to avoid causing foreseeable economic loss; judges should allow economic losses to be claimed for in negligence. However, we must carefully restrict the circumstances where such claims for economic loss. First, the courts could only award damages for pure economic loss in the area of careless or negligent misstatement. Second, in other situations, the claimants can only recover economic loss when the economic loss is connected with physical damage to the claimants' persons or property. The courts should restrict the application of Junior Books as precedent because judges do not limit the award of damages to this kind of circumstance. It is possible to use the law of contract to deal with the third-party claims under the Contract Act 1999. There is no problem about recovering economic loss in contract claims. Although my opinion may be criticised for its rigidity and its restrictions for the proper development of law in this area, I do believe that it can ensure the consistency of the law of torts. ...read more.

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