Pure economic loss refers to financial loss that is not accompanied by any physical damage or personal injury. In other words, it is an economic loss that is suffered by a person or business as a result of another party's negligence, but where there is no accompanying physical harm or damage to property.
In the context of negligence law, it is generally more difficult for a claimant to recover pure economic loss than it is to recover for losses arising from personal injury or physical damage to property. This is because courts are hesitant to impose liability for pure economic loss to avoid indeterminate liability because it is difficult to define the boundaries of liability and assess the damages. Allowing claim for pure economic loss would likely lead to exorbitant and uninsurable compensation claims, out of all proportion to the magnitude of the negligent conduct.
In the case of Spartan Steel v Martin [1973], the court held that pure economic loss resulting from the negligent performance of a contract is generally not recoverable in tort. The court reasoned that a duty of care in tort only arises where there is a relationship of proximity between the parties, and that such a relationship is not generally present in a contractual context.
You can learn more about this topic and relevant case law with our Tort Law notes.
