Misstatement

Word document explaining the specific duty situation of misstatement

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NEGLIGENT MISTATEMENT
This tort is designed to allow C to recover for pure economic loss. This is when C suffers financial
damage but incurs no personal injury or property damage.
There is a difference between consequential economic loss for example loss of earnings from
negligent infliction of injury and pure economic loss and this difference is shown in the case SPARTAN
STEEL & ALLOYS v MARTIN &CO.
Originally D was not liable for a negligent misstatement as shown in DERRY v PEEK and confirmed in
CANDLER v CRANE CHRISTMAS however Lord Denning dissented in CANDLER as he thought there
should be a duty owed. This dissent was approved of by the House of Lords in HEDLEY BYRNE v
HELLER & PARTNERS and so D was liable but it was held liability for misstatement should be only if
there is a special relationship between C and D, if the representor has a special skill, the representee
must reasonable rely on the representation and representor must have knowledge of the type of
transaction that the reliance relates to.
The case of MUTUAL LIFE & CITIZENS ASSURANCE v EVATT restricted the special skill to being a
professional relationship but this was extended to a business relationship by ESSO PETROLEUM v
MARDON and this was then extended by the case of CHAUDHRY v PRABHAKER as the high point of
liability where the special skill was extended to a social situation, however this case has been
restricted to its own facts.
In LAMBERT v WEST DEVEON BC it was reasonable for C to rely on the advice. The case of GORHAM v
BT held that whether the reliance was reasonable will be a question of fact based on the
circumstances of the case but the points of C using the information for its purpose, it is unreasonable
to rely on a representation made on a special occasion and disclaimers must be reasonable can be
used as guidelines. The case of SMITH v ERIC S BUSH held D liable as their disclaimer was
unreasonable and so did not apply.
In SMITH v ERIC S BUSH it was shown that 90% of house buyers relied on the report of a surveyor and
so they knew what the information was used for. This was interpreted much more narrowly in
CAPARO v DICKMAN as it was held D must have actual knowledge of how the information will be
used, who will use it and they are not using any other advice.
Recently it has been held in HENDERSON v MERRETT SYNDICATES that although there was a contract
this does not exclude liability in tort law. The case of SPRING v GUARDIAN ASSURANCE held that in
certain circumstances an employer can be liable for a negligent reference. In WILLIAMS v NATURAL
LIFE HEALTH FOODS it was held that assumption of responsibility is a basis for liability. WHITE v JONES
has held that liability for pure economic loss caused by an omission can be allowed.

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