Understanding Negligence and Pure Economic Loss in Enterprise Law

Running Head: ENTERPRISE LAW
ENTERPRISE LAW
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Author Note

1ENTERPRISE LAW
Issue:
The issue that has been identified in the given scenario is whether Kimberley and Charles can
sue Elle for Negligence.
Rule
The law of Negligence ad been established in the remarkable case of Donoghue v
Stevenson [1932] AC 562. In this case Lord Atkin held that a person is required to take
reasonable care to avoid acts or omissions which are likely to cause any harm to the
neighbour of such person. This decision became a remarkable one and made provisions for
claiming damages for injuries or economic losses sustained by either of the parties due to the
breach of duty of care of the other party. Negligence can be described as a legal wrong in
which one of the parties sustains physical or economic damages at the hands of the other
party, due to the failure of the latter party to take due care so as to avoid what may be
perceived as a potential risk to a reasonable person. The judgment of this case enlisted the
elements that are essential to prove negligence. Such elements are:
 Duty of care of the defendant towards the claimant
 Breach of such duty of care
 Causation of damage sustained by the plaintiff
 Remoteness of such damage
Duty of care
This can be regarded as the first and the foremost element in proving Negligence. For
a party claiming damages due to the Negligent actions of the Other party he must first
establish that the defendant had a duty of care to him. Such Duty of care is assessed by the
Caparo test as established in the remarkable Caparo Industries PLC v Dickman [1990]

2ENTERPRISE LAW
UKHL 2. The Caparo test can be described as a threefold test in which the following are
taken into consideration:
 Whether the harm that was caused by the Negligent actions of the defendant was
reasonably foreseeable
 If a reasonable relationship of proximity existed between the parties
 Is it reasonable and fair to impose the duty of care on the defendant.
Further it has been provided in the case Hackinshaw v. Shaw. (1984) 56 A.L.R. 417;that an
affirmative duty would be imposed on the person who is the occupier of the premises that to
take reasonable care for the purpose of ensuring that the premises is safe to those who enter
them.
Breach of Duty of care
Breach of the duty of care is the second important essential for establishing Negligence on
the part of the Defendant. The Objective test as established in the case Vaughan v
Menlove (1837) 3 Bing. N.C. 467 is applied for the purpose of assessing whether the
defendant breached his duty of care. The objective test takes into consideration the following
factors:
 Seriousness of the harm
 How likely was the harm to be caused
 Cost to be incurred by the Defendant to prevent the Harm
 Utility of the Defendant’s conduct
Causation
It I to be mentioned that a claimant is only entitled to claim damages from the
defendant if it is established that that the harm caused to the defendant was a direct cause of