Commercial Law: Liability for Negligence of Economic Loss

Running head: COMMERCIAL LAW
Commercial Law
Name of the Student
Name of the University
Author note

1COMMERCIAL LAW
Issue
The issue in this scenario is whether Wollongong Council will be liable for
negligence of economic loss as claimed by Peter.
Rule
When the scenario deals with the concept of negligence, the case of Donoghue v
Stevenson [1932] will be applied. In this case, it was determined and the Court held that if
due to the behavior of one person affects the welfare of another person, the aggrieved
individual will be considered to be the neighbor. On the hand, the individual whose conduct
or acts affect is said to owe a duty of care to the neighbor. Therefore, the tort of negligence
defines the situation when an individual fails to exercise the duty of care towards the
aggrieved person according to the principle of neighbor in this case. The duty of care can be
breached in the situation when the defendant will have the authority to overlook the injury
that was caused due to the activities of the defendant. However, there are a few essential
components of negligence that should be proved when the scenario is regarding the claims of
negligence. Firstly, the element of duty of care must be present. In this situation the defendant
should owe a duty of care towards the plaintiff. Thereafter, he must also make sure that the
care provided is consistent. It can be implied later that the defendant should undertake the
probable ways to prohibit the injury that has been caused to the plaintiff because of his
activities. Secondly, another component involved in the concept of negligence is breach of
duty to take care. This element states that if the defendant has breached the first element of
duty to take care and have caused harm to the plaintiff, will be held negligent. Thirdly, the
component related to negligence is causation. This element explains that the plaintiff has
been harmed and injured because of the actions of the defendant. The case of Cook v Cook
[1986] explained that the Court has set out the test of but for that established if the cause of

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the injury was a direct outcome of the actions of the defendant. However, for the acts of
negligence, the loss was suffered by the plaintiff. If it did not occur in the first place then it
would not have sustained the damages or have gone through any kind of losses. Lastly, the
element involved with it is remoteness. The injury that was an indirect consequence of the
activities of the defendant. However, it should not be too distant and the injury caused was
determined in the case of Clyde Bergemann v Varley Power. Thus, economic loss can be
caused due to negligence and economic loss can also be caused because of negligent words.
The theory of negligent words causing economic loss arises in the case of Hedley Byrne &
Co Ltd v Heller & Partners Ltd [1964]. In this particular case the rule was overturned and
the Court had allowed for the upturn of pure loss that resulted in the use of negligent words.
Therefore, in this specific case, the Courts had held that there was a chance of revival from
the economic loss that was allowed only if the plaintiff proves that a duty of care existed
between the defendant and the plaintiff.
For establishing if, the concept of duty of care exists or not, some of the factors
should be followed. Firstly, vulnerability should be looked after if the plaintiff is not being
able to pursue any kind of reasonable steps for averting the negligence that the defendant had
committed, the defendant shall owe a duty of care. Thereafter, the Court can take into account
the practical possibilities that are accessible to the plaintiff for prohibiting negligence.
Control can be applied in a situation where the defendant is in a position for controlling the
happening of the negligence, it will be treated as an owe of duty of care. Assumption of
reliance refers to a situation where the defendant had knowledge that the plaintiff had relied
on the responsibility of the defendant, he will be owing a duty of care.
As per the Australia Law, such situation arises where there is negligence claims for
economic loss. In this scenario, it is usually observed that the plaintiff has suffered monetary
loss but has not been injured physically. Generally, the Courts do not allow such scenario.