NEGLIGENCE AND ECONOMIC LOSS

Negligence and Economic Loss

Negligence and Economic Loss

Introduction

The tort of negligence refers to a state of being careless in breach of a duty to take care. The distinction to be made is between the act or omission itself, which is not enough to create legal liability: for this. There must be a breach of pre-existing duty of care. Such a duty can exist on the basis of precedent for example, a doctor to a patient or a carrier to a passenger or can arise through the proximity or relationship of the parties (Posner, 2003). The categories of negligence are never closed and have been extended to cover liability for negligent misstatements or foreseeable mental harm. For the tort to be established, the breach of duty by the act or omission must also have caused a loss, although if the loss is a pure economic loss there are difficulties.

The search for proximity or a suitable relationship between the parties is aided by the notion of reasonable foreseeability of harm of the kind that occurs. However, this is not enough on its own to establish liability in every case, although, in cases of physical injury or damage to the plaintiff's property, it is likely to carry the plaintiff a long way. Negligence in the non-technical sense may well trigger liability under a statute that demands a certain degree of care to be taken.

The Case

The case illustrates that Ben is a builder, who has been building a new house. Ben had an agreement with Mark that the house would get ready before February 1st, and Mark would be able to move into the house. Mark also agreed to buy the house for £200,000 if Mark would move in on the agreed time. The house is built, and Ben is finishing off the inside. He has laid a very expensive wooden floor in the hall and living room. The kitchen units have been delivered, and Ben engages Peter, a self-employed, professional kitchen fitter, to fit the kitchen. Peter drills some holes in the floor boards without checking where the water pipes are, and he drills through one of the water pipes.

The ground floor of the house is flooded and the water damages the kitchen units and ruins the wooden floors in the hall and living room. This is due to the negligence of Peter. Because of the damage, Ben needs to replace the wooden floors, buy new kitchen units and get another kitchen fitter to fit these. This means that the house is not ready by 1 February and Mark is no longer interested in buying the house. When the house is finally ready, it takes Ben some time to find a new buyer. Finally, he sells the house to Amy, but, because house prices have been falling, Amy only pays £190.000.

Doctrine of Economic Loss

The development of the principle of economic loss is adopted by most of the legal jurisdiction in the United Kingdom. Traditionally, the doctrine of economic loss prevents from ...