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LAW FOR BUSINESS Assignment - Essay Example

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LAW FOR BUSINESS Author Institute Q.1 The issue in respect of this question requires an analysis the difference between consequential economic loss and pure economic loss in the context of negligence and how the floodgates argument tends to restrain claims for damages for pure economic loss…
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LAW FOR BUSINESS Assignment
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Thus the law on tort has allowed and provided compensation in respect of economic losses that arise directly out of the physical loss, which has not been problematic, but there have been instances when a causal link with the injury and the economic loss could not be made. (Pritchard v. Cobden)1. The problem that lies is in the compensation for losses which are financial or pecuniary in nature, or in other words the loss cannot be in any attributed to or have no connection whatsoever with the personal or physical harm that has been caused to the claimant, this is what has been termed as pure economic loss.

These type of losses can include the financial loss or expenditure which resulted from the negligence of the defendant. Therefore for the majority of cases under this head there is an exclusionary rules which bars recovery in these cases and liability is the exception. (Deakin et al 2003) It has been argued that the courts in the instance of personal injury tend to compute loss of future earnings which are as difficult to calculate as would be pure economic loss. Furthermore in Canadian National Railway v. . ment that has been most often cited by the court is that the if the exclusionary rule is not present than the ‘floodgates’ in respect of such liability would open, whereby there would endless claims against the defendants.

This has been argued to be a weak argument because extensive liabilities can be found in respect of claims of physical damage for example large scale pollution. (Elliott et al 2007) A better argument in that respect would be the fact that if such an open ended duty of care is imposed in respect of economic loss then there remains the danger of indeterminate liability that is unpredictability in respect of the number of claimants as well as the size of claim. An important example that has been given in this respect is where due to an accident on the highway the motorist who was negligent is held to owe a duty to all those who were stuck in a traffic jam as a result of the accident in respect of their loss of earnings. (J.Stapleton, ‘Duty of Care and Economic Loss- A Wider Agenda’)3.

Therefore a line of exclusion has been drawn. There has been an argument from Professor Feldthusen that all cases in respect of pure economic loss should not be covered under one heading and therefore a disctinction in this respect should be made for each area. Question 2  In the case of Hedley Byrne v. Heller4 the courts did not find any negligence misstatement because of the fact that there had been a disclaimer in the remarks that is the term without responsibility whereby the possibility of a duty of care was extinguished.

The position in respect of accountant’s liability can be seen from the decision of House of Lords in Caparo v. Dickman5 whereby for the establishment of a duty of care a reformed three stage test was laid down. The first requirement was

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