Pure economic loss
Economic loss refers to financial loss and damage suffered by a person such as can be seen only on a balance sheet rather than as physical injury to the person or destruction of property. There is a fundamental distinction between “pure economic loss” and “consequential economic loss” - Pure economic loss occurs independent of, or in the absence of, any physical damage to the person or property of the victim. Usually, "pure economic loss" in tort, particularly in negligence, is not recoverable as damages or otherwise.[1]
Recovery at law for pure economic loss is restricted under some circumstances in some jurisdictions, in particular in tort in common law jurisdictions, for fear that it is potentially unlimited and could represent a "crushing liability" against which parties would find it impossible to insure.[2][3] In the United States, Chief Judge Benjamin N. Cardozo of the New York Court of Appeals famously described it as, "liability in an indeterminate amount, for an indeterminate time, to an indeterminate class."[4]
Examples of pure economic loss include:
- Loss of income suffered by a family whose principal earner dies in an accident. The physical injury is caused to the deceased, not the family.[5]
- Loss of market value of a property owing to the inadequate specifications of foundations by an architect.[6][7][8]
- Loss of production suffered by an enterprise whose electricity supply is interrupted by a contractor excavating a public utility.
The latter case is exemplified by the English case of Spartan Steel and Alloys Ltd v. Martin & Co. Ltd[9] Similar losses are also restricted in German law[10] though not in French law beyond the normal requirements that a claimant's asserted loss must be certain and directly caused.[11]
In Australia it is very difficult to recover pure economic loss in negligence if it is not consequent to property damage.
A few state supreme courts in the United States have departed from the majority rule and authorized recovery for pure economic loss through tort causes of action (usually negligence). The first was California in 1979,[12] followed later by New Jersey[13] and Alaska.[14]
[edit] By jurisdiction
[edit] References
- ^ Pure Economic Loss pp115 (Springer, 2004)
- ^ Canadian National Railway Co. v. Norsk Pacific Steamship Co. [1992] 1 SCR 1021 (Canada), per McLachlan J
- ^ Bishop (1982)
- ^ Ultramares Corporation v. Touche, 174 N.E 441, 444 (N.Y. 1931).
- ^ Baker v. Bolton (1808) 1 Camp 493 (England and Wales)
- ^ Murphy v. Brentwood District Council [1991] 1 AC 398 (England and Wales)
- ^ Sutherland Shire Council v. Heyman (1985) 60 ALR 1, at 60-61 (Australia)
- ^ Winnipeg Condominium Corporation No.36 v. Bird Construction Co. [1995] 1 SCR 85 (Canada)
- ^ [1973] QB 27
- ^ van Gerven (2001) pp187-188
- ^ van Gerven (2001) pp198-199
- ^ J'Aire Corp. v. Gregory, 24 Cal. 3d 799, 598 P.2d 60, 157 Cal. Rptr. 407 (1979).
- ^ People Express Airlines, Inc. v. Consol. Rail. Corp., 495 A.2d 107, 109 (N.J. 1985).
- ^ Mattingly v. Sheldon Jackson Coll., 743 P.2d 356, 359–61 (Alaska 1987).
[edit] Bibliography
- W. H. van Boom, Helmut Koziol, Christian A. Witting (2004). Pure economic loss. p. 115. ISBN 3211005145, 9783211005149.
- Bishop, W. (1982). "Economic loss in tort". Oxford Journal of Legal Studies 2 (1): 1–29. doi:10.1093/ojls/2.1.1.
- Giliker, P. (2005). "Revisiting pure economic loss: lessons to be learnt from the Supreme Court of Canada?". Legal Studies 25 (1): 49–71. doi:10.1111/j.1748-121X.2005.tb00270.x.
- Lunney, M. & Oliphant, K. (2003). Tort Law: Text and Materials (2nd ed.). Oxford: Oxford University Press. pp. pp 339–423. ISBN 0-19-926055-9.
- Stapleton, J. (1991). "Duty of care and economic loss: a wider agenda". Law Quarterly Review 107: 249.
- — (2002). "Pure economic loss: lessons from case-law-focused 'middle theory'". UCLA Law Review 50: 531.
- van Gerven, W. et al. (eds) (2001). Cases, Materials and Text on National, Supranational and International Tort Law. Oxford: Hart Publishing. ISBN 1841131393.
- Weinrib, E. J. (2005) "The disintegration of duty", in Madden, M. S. Exploring Tort Law, London: Cambridge University Press, pp143-272 ISBN 052185136X
