Previous: Negligent misstatement

There are three types of financial loss: consequential financial loss, such as claims from personal injury; relational financial loss, which is the loss caused to a dependency of a physical victim, which is generally not recoverable, and pure economic loss which is the most difficult to quantify. Loss caused by negligent misstatement is often a type of pure economic loss.

Consequential financial loss

Although generally recoverable, limits must be set to this type of liability. If you are physically injured, a consequential financial loss claim would be for losses resulting from the injury, such as medical expenses or a loss of earnings. Though consequential financial loss does not just deal with personal injury.

A prime example of the limits of consequential financial loss can be found in Spartan Steel & Alloys Ltd v Martin & Co [1973]. The defendant negligently cut power to the claimant’s steel factory. The claimants could recover from immediate consequential financial loss, such as for the loss of a melt in the furnace and the profit which would have been made on it. However, recovery was not permitted for the loss of profit on 4 further melts which would have gone in the furnace should power not have been cut. This was because the recoverable loss was either physical damage or directly consequential upon that damage. If such a strict approach was not taken, indeterminate liability could result though a domino-like effect.

Historically though, the rules were even stricter...

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