Economic loss causes difficulties because the interest which it is alleged should be protected by delict is the economic sphere, and any change in the law of delict will affect the economic balance. The , Economic loss can be unlimited in amount where, for example, an electricity supply is cut off. If there is to be liability for such an event then electricity suppliers would have to find insurance cover for the contingency and pass the cost of it on to consumers (or, if still under state control, to the tax payer). There is the possibility that no insurance could be found.
But this is to anticipate. It is appropriate to begin with the view that the laws general approach is that loss wrongfully caused should attract reparation Indeed the law quite happily awards damages for what could be economic loss in many cases. It is possible to say that all damage to property is an economic loss. But that view is not taken in the law. What is regularly compensated is a person's loss of wages while he is injured, or the loss of use of an item while it is being repaired. These are economic loses but losses which are well recognized as beyond dispute.
The law has no difficulty with such claims because they are in the sense derivative-a person is injured or property damaged and other losses follow. Such consequential loss is quite easily and reasonably foreseeable and likely to be limited to an amount of money bearing some proportional relationship to the person or thing damaged. In an excellent historical and analytical review of the Scots law on this topic, Wilkinson and Forte distinguish between primary and secondary economic losses By primary or non-derivative loss is meant loss which is not associated with physical injury to person or property…..
By secondary, or derivative loss is meant loss which arises as a consequence of physical injury to the person or property of another (i. e. someone other than the pursuer) Although George may think he has a case of delict against Sir Hugh as his case meets the formula laid out by Donaghues speeches and a reasonable man should have seen the consequences of his advice, because,the fabric of the (western ) world is built upon an edifice of free market economics and to interfere with that in the course of awarding compensation to one individual might be to court possible disaster or, perhaps, retrospective legislation.
If of course, court decisions, in particular those of the House of Lords, did not completely bind lower courts then there would be more scope for experiment, but that is not the case, and decisions of the House allowing recovery will result in enterprises realigning their resources. So although a general floodgates fear exists and is not entirely unfounded there is this macro-economic concern underlying judicial thinking. George would have no case Deliberate or Fraudulent Misrepresentation The case of Derry v Peek produced the following definition of fraudulent misrepresentation.
There if fraudulent representation where a person makes a false statement of fact either; 1. Knowing it to be untrue; or 2. without belief in its truth; or 3. recklessly, not caring whether it is true or false. It does not matter that there was no intention to cheat or injure the person to whom the statement was made; there will be fraud if a statement is made without any belief in truth. As with innocent misrepresentation, the fraudulent statement must have been relied upon by the other party and must have been a deciding factor in his decision to proceed to enter a contract.
Where the error induced by fraud is an error in the substantials, the contract is void; where the error is error concomitans, the contract is voidable. Unlike innocent representation, fraud is a civil wrong and, accordingly, a pursuer may seek damages in addition to having the contract reduced. There is also authority to the effect that damages may be awarded even if the contract is not reduced. In Smith v Sim 1954 Smith bought a public house from Sim for i?? 21,600 as the turnover was represented as being very high.
Sim had stated the turnover as twice its true figure. Smith was held entitled to choose not to resile from the contract but to keep the pub and sue for damages of i?? 10,000 Some people might need further explanation as to the economic consequences of George being successful in suing Sir Hugh. When people buy shares there is no limit to the amount of money these shares can earn. They also know that there is a risk involved in buying shares and that they can go down as well as up. Had the shares doubled in value he would have been very happy.
The consequences of George winning this case could possibly leave the floodgates open for everyone who has lost money in share dealing to sue their advisers with the resulting catastrophic effects on the financial sector of the economy. I doubt if there is any authority to prove that the results (above) of a case such as this would be any different and stand by my initial findings (above). As you probably know the shareholder's in British Rail recently received compensation from the government owing to the fact that their shares, bought on privatization of British Rail had become worthless, due to the company facing huge losses.
At first the government refused to compensate shareholders due to the reasons (above) after a lengthy period they relented and paid them compensation. The reasons for this were many and complex (if you want me to explain the reasons I will) This is the nearest I can think of to a comparison to this case and I am still sure that one private individual would have no success in a case such as this Charlie Strachan/ (Ivor Notion) Vicarious ( in place of another) liability As the name suggests, this doctrine enables a person who has done no wrong to himself, to be held liable for a wrong done by another.
This type of liability is now clearly established and it satisfies a desire to transfer liability to pay damages to the person who has been gaining, in a general way, from the actings of the actual wrongdoer. Vicarious liability is an example of joint and several liability. Accordingly, if it applies the actual wrongdoer and the person who is vicariously liable for his actings, are both liable. The most common examples of vicarious liability are for agents and employees . Vicarious Liability For Agent The first point relates to the law of contracts.
There is a distinction between the contract of agency ( and mandate gratuitous agency) and employment ( locatio operarum). Because of the different nature of these contracts, the delictual consequences differ. The obligations of the agent depend upon the instruction given to the agent. In relation to third parties, the agent's ability to affect his principle depends upon his authority, express or implied, so therefore the principle's delectable liability is formulated by reference to this relationship
While the liability in respect of an agent and the liability in respect of an employer can be distinguished, it is quite possible for someone to be vicariously liable both as an employer of an employee and as the principle of an agent. This is particularly important for an act may be outside the scope of an employees employment but within the scope of his authority, express or implied, as an agent A principle will be liable for the acts of an agent where; 1. The acts complained of were expressly authorized For example, where a solicitor writes defamatory letters on the instructions of a client, the client will be vicariously liable
2. The principle ratifies the act after it has been done For example if a law lecturer in the college was doing private work when not actually doing what he/she was contracted to do, and this lecturer gave someone advice( while indulging in this private work) which led to them incurring some loss if his/her principle had told him/her it was ok to do this work or, the lecturer had come to him after giving the advice and he said it was ok to give this person this advice(very unlikely as the principle would be accepting liability for an act he hadn't instructed), the principle can be held vicariously liable
3. The act complained of is within actual or ostensible authority of the agent This requires an understanding of the contractual position because liability is established by reference to the scope of the agent's authority. However for the purpose of the law of delict it seems that the courts will often hold someone vicariously liable as a principle where they would perhaps not hold the "agent" able to bind the principle in contract. In the case of Launchbury v Morgans this area of the law was examined by the House of Lords. Mrs Morgans was the owner and registered keeper of a motor car.
There were five people in the car. Mr. Morgans, Mr Cawfield and three passengers( who were the plaintiffs in the case). Mr Morgans had gone out drinking and passed the keys to Mr Caufield. They picked up three plaintiffs. Mr Morgans fell asleep in the back seat. Mr Caufield driving without due care crashed the car at 90 m. p. h. Mr and Mrs Morgans considered the car as "our car" The issue before the House of Lords was whether Mrs Morgans could be held vicariously liable for the actions of Mr Caufield. The court rejected this argument.
Lord Wilbourforce said, " I regard it as clear that in order to fix vicarious liability on the owner of a car in such a case as the present, it must be shown that the driver was using it for the owner, purposes, under delegation of a task or duty. " The argument that the car should be treated as a matrimonial car, making the owner liable for it's use was also rejected Liabilities of an Independent Contractor Generally a person is not vicariously liable for the delicts committed by an independent contractor hired to do a job as opposed to an employee under a contract locatio operarum
The Law of Agency The Law of Agency is based on Common Law The Agency Relationship It is hard to envisage any kind of business organization that could function without either employees or agents. Te distinction is that an employee performs certain services for his employer in return for a wage or salary, while an agent, representing his principle, again usually In return for payment, enters into transactions with third parties. If the agent is acting with the authority of his principal, this will result in the principle being in a legally binding contract with a third party.
When the task has been properly completed, the agent incurs no obligation or rights under that contract with the third party. An agent can be an employee of his principle or he can be performing services for him in the capacity of an independent contractor, or the agent could even be a partnership or a company representing another organization For example, if you go into a large store like Marks & Spencer to purchase a shirt, you will negotiate the contract of sale with a shop assistant. This assistant is both an employee and an agent of Marks & Spencer.
She is an agent because she is authorized by her employer to sell goods to the general public. She will have no authority to reduce the price of anything that she is selling. Provided she acts within the authority given by her employer/principal, your contract will be with the principal, Marks and Spencer, and the assistant incurs no liability under the contract. It follows that the relationship of agency involves two contracts. The primary contract is between the agent and the principal and, under this contract the agent is given authority to represent the principal in transactions with other parties.
Provided the agent carries out these instructions properly a second contract is formed between the principal and the third party. This relationship is illustrated below: CONTRACTUAL CAPACITY The agent and the principal must have contractual capacity to enter into the agency agreement. Regarding the validity of the second contract, which is between the principal and the third party, it is the contractual capacity of the principal that is important and not that of the agent. For example, if the agent is a child under 16 years old, he may still bind a principal in the contract with the third party.
On the other hand, if the principal is under 16, he can not extend his contractual capacity by using an agent, with full contractual capacity, to enter into contracts with third parties. The child's contract with the third party remains void. CONSTITUTION OF AGENCY It is important to recognize the different ways in which agency nay be constituted. Proof that the relationship was agency can be vital to the liability of the principal/employer if there is a dispute as to whether someone was carrying out orders and transactions, in the capacity of agent, or as an independent contractor. Agency may be constituted in five ways.
1 By an express contract This contract between the principal and the agent can be agreed verbally or in writing. Obviously, a written agreement is desirable as it will define the agent's powers and duties clearly. A formal deed of factory and commission, or power of attorney, may be drawn up. 2 Implied by law or by the actions and conduct of the parties Under the Partnership Act 1890 s 5, every partner is to be regarded as on agent of the firm, and of the other partners, in carrying on the firm's business. Also, a director of an incorporated company is impliedly an agent for the company in all matters usually entrusted to directors.
Agency can be implied from the employment of a person to a particular job, for example a manager. If that position normally involves entering into transactions with customers or the general public, then it is implied that he is an agent with the usual authority customarily conferred on such employees in oreder to carry out that job. 3 By holding out Where a course of conduct has indicated that one party has been acting intentionally for the other with the latter's consent, the latter is said to have held out the person as his agent and is barred from denying that the relationship of agency exists.
This can happen quit easily in business where an employer has limited, or has withdrawn, his authority form an agent. If the third party (the customer or supplier) has not been informed, by the principal, about this change then the agency relationship continues and the principal will be bound by the actions of his employee. 4 Ratification The relationship of agency can be constituted by the principal subsequently ratifying, or endorsing, the unauthorized actions of the agent. It is not necessary for a relationship to have existed at the time of the agent's action but, usually, there is some kind of existing relationship.
The agent in these circumstances is often an employee who has entered into a contract without any authority at all or possibly he may have exceeded the limited authority which had been conferred on him. The ratification may be express or inferred form the conduct of the principal. Certain conditions are necessary for ratification: (a) The agent must have been acting as an agent with an identifiable principal in mind. He must not have entered the contract taking a chance that later he would find someone interested in adopting the transaction.
(b) When ratifying, the principal must have full knowledge of the actions of the agent. The principal can only subsequently ratify what he himself had legal power, and capacity, to do at the date of the agent's contract. Therefore, a company cannot ratify contracts made by its promoters prior to its incorporation, although, in those circumstances, it can enter into a new contract on the same terms as the old. 5 By necessity In certain circumstances where an emergency arises, a person is deemed by law to have the authority to act as agent for another party.
For this to happen, it must be impossible for the person acting as agent to contact the principal. For example, in an emergency, the master of a ship has power to put into harbour and order repairs to his ship, or sell the cargo, if it is in danger of perishing or being spoilt. He can take these steps if he cannot contact the owners to ask for authority to proceed and the law recognises that he has not personally entered these contracts but has acted as an agent of necessity. Such a way of constituting agency is justified in Scotland on the principle of negotiorum gestio.
This is the management of the affairs of a person who is absent, or not capable of taking care of his own affairs, and in an emergency they are undertaken for him, without his knowledge, by another party acting from altruistic motives. The negotiorum gestor must have acted for the benefit of the absent party and not for himself and he must take reasonable care of the other's property. He is not entitled to be paid for what he does but he is entitled to be reimbursed for all reasonable expenses even if it turns out that his actions have not benefited the absent party.
Authority of an Agent It has already been explained that a principle can find himself contractually bound to a third party as a result of his agents actions. Whether the principle is bound depends on what the agent has done and what "authority" he had at the time. In this context, authority can be actual or ostensible and the distinction between the two is explained below If the agent acts within his actual authority, his principle is bound by the contract with the third party and the agent incurs no liability under that contract.
If the agent acts outwith his actual authority, but within his ostensible authority, the principle is bound by the contract with the third party. However, as he has acted beyond his actual authority and disobeyed his principle, he will be in breach of their agency agreement and, consequently, the principle could sue him or terminate the agreement If the agent acts outwith his actual and his ostensible authority, the principal will not be bound by the contract with the third party( although he might choose to ratify the contract).
The agent will be personably liable to the third party who could sue him for breach of warranty of authority if the contract is not carried out An agent may be a general agent, that is an agent acting for his principle in all his affairs, or acting for him in all his affairs of a particular kind. A solicitor is a general agent. A general agent may have actual and ostensible authority. A special agent has only the powers actually given to him to carry out one particular task and he can never have ostensible authority The difference between actual and ostensible authority
Actual authority is the authority which the principle has expressly or impliedly conferred on the agent. The agent can be given express instructions as to the kind of transactions and tasks which he can perform for his principle. These instructions can be given verbally or in writing. The agent can also have actual authority conferred impliedly. This implied authority will be to do anything necessary for, and incidental to, what is usual in his business, trade or profession, for the purpose of carrying out his function.
The exercise of the usual or customary authority in these circumstances will be regarded as actual authority and the principal will be bound unless he has expressly limited the agents authority Ostensible authority which has not been actually conferred on the agent by the principal but which the third party dealing with the agent is entitled to believe existed. The third party is thus entitled to rely on the agents authority because, in the past, the principle, by words or conduct, has represented, or held out, the agent as having authority to act for him.
Consequently, the principle is barred from denying that the agent has authority and will be bound by the contract with the third party Examples of ostensible authority are as follows 1. In the past, the agent had no authority from the principal or he only had limited authority. Since then, the agent has exceeded his authority in his transactions with a third party and the principal has permitted it to happen without protest 2. In the past, the agent did have actual authority to carry out transactions with third parties.
Since then, the principle has removed, or limited, his agents authority without notifying the changes to these third parties. In these circumstances, the third parties are entitled to assume that the agent still has his principles full authority 3. In the past, the agent has carried out transactions acting within his implied authority, the usual authority of agents in his business, trade or profession. Since then the principle has instructed the agent and has either removed or limited the agents authority without notifying the changes to third parties.
As the third parties do not know, they are entitled to assume that agent can still act within his implied authority In International Sponge Importers v Watt 1911 International Sponge Importers had a traveler called Cohen. Cohen called on the customers and took orders, but also carried with him bags of sponges which he could sell "on the spot". He was authorized by his employers only to accept payment by cheque payable to the company. In the past, Watt and Sons had given Cohen cheques, made out to him personally, in spite of the fact that the company sent out invoices with directions for payment on them.
The company, in the past, had accepted payment this way and had not contacted Watt and Sons to object. One day, Watt and Sons paid Cohen in cash which he embezzled. He then disappeared. The principles sued Watt and Sons for the missing payment. The court held that they were not entitled to be paid again by Watt and Sons as the customer was entitled to assume from their prior dealings with the agent, Cohen, that he had authority to receive payments in this way.