Pure economic loss

Economic loss is a term of art[1] which refers to financial loss and damage suffered by a person which is seen only on a balance sheet and not as physical injury to person or property. There is a fundamental distinction between pure economic loss and consequential economic loss, as pure economic loss occurs independent of any physical damage to the person or property of the victim. It has also been suggested that this tort should be called "commercial loss" as injuries to person or property can be regarded as "economic".[1]

Examples of pure economic loss include the following:

  • 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.[2]
  • Loss of market value of a property owing to the inadequate specifications of foundations by an architect.[3][4][5]
  • 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.[6] Similar losses are also restricted in German law,[7] though not in French law beyond the normal requirements that a claimant's asserted loss must be certain and directly caused.[8]

  1. ^ a b Cite error: The named reference Sorensonetal_2012 was invoked but never defined (see the help page).
  2. ^ Baker v Bolton [1808] EWHC J92 (KB), (1808) 1 Camp 493, High Court (England and Wales).
  3. ^ Murphy v Brentwood District Council [1991] UKHL 2, [1991] 1 AC 398, House of Lords (UK).
  4. ^ Sutherland Shire Council v Heyman [1985] HCA 41, (1985) 157 CLR 424, at 504-5, High Court (Australia).
  5. ^ Winnipeg Condominium Corporation No.36 v. Bird Construction Co. [1995] 1 SCR 85 (Canada)
  6. ^ Spartan Steel and Alloys Ltd v Martin & Co Ltd [1972] EWCA Civ 3, [1973] QB 27, Court of Appeal (England and Wales).
  7. ^ van Gerven (2001), pp. 187–188.
  8. ^ van Gerven (2001), pp. 198–199.