LIABILITY LOSS

Liability Loss

Liability Loss

Question 1

Part 1

The outcome of the research about the underlying notion of 'pure economic loss' can be shortly stated as follows. What is made clear by the national reports is twofold: the negative cast and the patrimonial character of that loss. In countries where the term is well recognized, its meaning is essentially explained in a negative way. It is loss without antecedent harm to plaintiff's person or property. Here the word 'pure' plays a central role, for if there is economic loss that is connected to the slightest damage to person or property of the plaintiff (provided that all other conditions of liability are met) then the latter is called consequential economic loss and the whole set of damages may be recovered without question.

Consequential economic loss (sometimes also termed parasitic loss8) is recoverable because it presupposes the existence of physical injuries, whereas pure economic loss strikes the victim's wallet and nothing else. In Sweden, where the legislator says that only victims of crimes may recover for pure economic loss, the Tort Liability Act 1972, §2, defines the notion exactly in these terms: 'In the present act, ''pure economic loss” means such economic loss as arises without connection to personal injury or property damage to anyone (Lunney & Oliphant 2003 339-423).' A similar definition seems to prevail in England and Germany. 

A second technical aspect is that, although all countries following the exclusionary rule may be in 'acoustical' agreement on the proposition that 'consequential loss' is recoverable, they actually do not agree in concrete instances how it will be applied. Since consequential loss is a causal construct influenced (in its ultimate results) by policy considerations, it is perhaps unsurprising to find divergent interpretation at the national level. Some national courts have developed rules that require a more stringent connection between antecedent physical loss and the economic harm which results from it (Sabapathy 2009 84-102).

Yet judges in other systems, employing less exigent notions, may deem the same loss 'consequential' and thereby permit its recovery.13 Despite the foregoing caveats about the artificial and technical aspects of this concept, we must not lose sight of the fact that consequential economic loss (and for the purpose of this generalization we apply this term even to systems which do not actually use it) is in principle recoverable in every European system within this study - whether the source of the loss is intentional or negligent conduct, or an activity subject to strict liability. Ignoring for the moment divergent European views toward the recoverability of 'pure' economic loss, here at least is an area of common ground that is worth noting. 

Part 2

A similar chain of loss may arise when C negligently allows infected cattle to escape from his premises, and the government must order all cattle and meat markets to close (Bishop 2002 1-29). As a result broad classes of plaintiffs will suffer pure economic loss, including cattle breeders who are unable to sell their stock and butchers who are unable to obtain supplies.33 As we note below, the 'floodgates' argument acquires great force in such contexts. 

This is the most important of the three arguments we will discuss. It is not only pervasive but has proved ...