Essay on Business Law-Historical Development of the Tests

1026 Words Nov 10th, 2005 5 Pages
We live in a legal system in which we all have a duty to protect other persons from harm. The question the court must examine is what degree of duty exists under what specific circumstances. Although there were some attempts in the late 19th century to develop a general test, there was no accepted test until 1932.

Ø The neighbour test
The classic formulation of the ¡®neighbour¡¯ test of Lord Atkin in Donoghue v Stevenson [1932] AC 562 is the most frequently cited attempt to rationalize the duty of care: ¡°You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. ¡± Who then in law is my neighbour? He defined the neighbour as ¡°persons who are so closely
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In this case, the D mixed and laid a factory floor for P¡¯s factory under contract. But the floor started cracking over its surface two years later, then the P replaced the floor and made a claim for ¡ê200,000 against the D for damages for physical and consequential economic loss. Although there was no physical injury to the P beyond the defective product, judges held in favor of the P because of the sufficient relationship of proximity between P and D, and the lack of any considerations limiting the scope of the duty of care.

This case made new law in England because of the absence of any physical injury to the plaintiff or the likelihood of any. And the House of Lords apparently extend liability for economic loss to encompass traditional contract liability.

Ø Retraction of negligence
From about 1983 the courts started to rein back the development they had unleashed. The case in point is Caparo Industries Pty. Ltd. v Dickman [1990] 1 All ER 568. In this case, the court held that the company¡¯s auditors didn¡¯t owe a duty of care to the respondents who purchased shares in reliance on the audited accounts they had negligently prepared. Although it is foreseeable that persons use the audited accounts to determine whether to purchase shares, and may suffer economic loss if the accounts are inaccurate, it was insufficient to establish a duty of care. The court found that the

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