Contract Law and Tort Law

This assessment will indicate and will analysis in the most suitable potential way how the work of Pure Economic Loss effects both the decisions in Contract Law and Tort Law. It will induct surveys on how Pure Economic loss should remain either on behalf of contract law or tort law, and argue whether this theory should remain the same. I shall now give a brief definition of what purpose pure economic loss holds in tort and contract law.

In Tort law economic loss comes under as in the present context, is not a specific kind of damage which can differentiate forms of harm. It constitutes a normal pecuniary to damage, to be assessed according to the usual economic tests. Its peculiarity is rather the way of its occurrence, the circumstances of its happening are, the absence of physical harm. It has been suggested that fire, partly overlapping, categories of situations giving rise to the problem of economic loss be distinguished:

1. Negligent misstatement, such as the negligent preparation of a balance sheet, which causes financial loss to a third party investor. 2. An otherwise negligently perfumed service adversely affecting a third party, such as the case. In contract law, the normal approach to contract damages is to try to put the claimant in the position he would have been in if the had been performed. The claimant may in some situations elect to claim instead the reliance measure of damages (i. e.

to return him to the position he was in before the contract), for example when it is impossible to prove his expectancy, but he will not be able to use this to escape a bargain which the defendant can show would have been a bad one even if the contract had been performed. 1 Contract and Tort are the 2 main areas of the English law of obligations. Contractual duties are based on an agreement whereby one person is to provide benefits for another in return for some form of benefit, whether in money or otherwise.

Tort duties are imposed by operation of law and maybe owed to a wide range of persons who maybe affected by actions. The 2 areas of law compliment each other and at times overlap. Some Torts, such as intentional interference with trade, play the role of supporting contractual relations by providing an additional remedy for there breach. A question is commonly asked in this context is whether a plaintiff who is in a contractual relationship with the defendant can invoke tort in order to benefit his case when there has been a breach of contract.

There a number of reasons relating to damages and limitations of actions which may make it advantageous to switch a claim out contract and into tort. The precise border line between the two areas, particularly in respect of negligently inflicted economic losses, has changed over the years, as fashions have changed. In the early 1980s, it was widely believed that tort of negligence was expanding into territory of contract and had the capacity to take over a substantial parts of contracts role. However, there has been a retreat from this idea in recent years.  

The differences between the particular aims of damages in contract and tort follows from the different natures of the obligations concerned rather than from any fundamental difference in the purpose of damages since in both cases the damages are designed to put the claimant in the position he would have been in if the obligation had not been broken – in tort it is the obligation not to do a wrong and thereby not to make someone worse off (including not to deprive him of existing expectations such as his existing earning potential), whereas in contract it is an obligation to fulfil a promise and to fulfil the expectations generated by that promise.  

The traditional view of pure economic loss in tort law comes from the case of Hedley v Byrne (1964) case says introduced the concept that a claimant could recover for economic loss arising from negligently made statements. However, the courts have always distinguished such an action from 'pure economic loss' arising out of negligent acts. The position here was traditionally very clear: there was no liability for a 'pure economic loss'. In the past this was based on policy and the idea that 'economic loss' (for instance, a loss of profit) was a concept applicable to contract law rather than tort. The principle has been quite clearly stated and illustrated.

In Spartan Steel v Martin & Co (contractors) Ltd (1973), there appears to be an artificial distinction here created for policy reasons purely for the purpose of restricting any extension of liability the distinction has the obvious potential to create unfair anomalies in the law. For instance, it might mean that an architect giving negligent advice leading to the construction of a defective building could be liable, where as the builder whose negligence leads to a defect in a building may not be. Nevertheless, other cases have confirmed the principle that a pure economic loss arising from a negligent act is unrecoverable. In Weller & Co v Foot & Mouth Disease Research Institute (1966), it was some what different as, there have also been situations where an economic loss was recovered, although in less clear – cut situations where the difference between a negligent statements and a negligent act was less obvious.