Study On The Compensation For Pure Economic Loss

Pure economic loss compensation has become one of the main problems in the expansion of modern tort law. In some countries, it is linked together with the uncontrollable, unforeseeable and endless litigation flood. And in some other countries, the problem seems to have be ignored, for pure economic loss is treated the same with other treats loss. The disparity itself justifies the composition of the protection of the pure economic interest comparison. Protection of pure economic interests touches upon the most difficult topics in tort laws, such as evaluation and comparison of pure economic interests and other interest, the uncertainty of loss of range, and the overlapping and difference of regulating functions of the tort law and the contract law. Admittedly, it is outdated not to fully protect pure economic interests, but its full protection leads to the unfair result, so we will focus on what choice to make in this research.This dissertation is divided into five chapters. Starting from the definition of pure economic loss, it clarifies the difference between the pure economic loss and indirect economic loss, characterized pure economic intereses as legal interests. Then it examines the attitudes of British, German, French to pure economic loss as well as their compensation methods. And figures out what policy underlies the exclusionary rules. On the basis of analyzing why some of economic interests are universally protected, it puts forward nine factors in establishing pure economic loss compensation liabilities, and tried to limit the pure economic loss compensation liabilities existing tort liability constitutions. Given these nine factors and strict constitutions, it analyzes whether some specific pure economic loss if types should be protected. Finally, with China’s concrete practice, its attempts to set up specific legislation for pure economic loss compensation.The preface mainly introduces the reasons and the significance of the research, and expounds on the research status and trend of pure economic loss compensation as well as the research methods.The first chapter is "concept of pure economic loss concepts". Firstly this chapter defines the pure economic loss, and then it analyses the characteristics and qualities of pure economic loss, then it compares pure economic loss with indirect economic loss. Finally it characterized pure economic intereses as legal interests.This pure economic loss will be defined as:the victim suffers direct economic interest or loss of money, rather than economic loss resulting from the damage to a victim’s personal or visible property. The pure economic loss has three characteristics:(1) Purity, namely, independence. It refers to the loss that has nothing to do with property damages in any respect. (2) Economy, namely, that money the party suffers from loss of money or wealth. (3) Loss, namely, the victim is infringed due to the economic benefit and suffers the loss of the total assets. In this dissertation, the consequential economic losses mean economic losses which are connected to any infringement of the person or property, namely "immediately" or "directly" follows substantial injury, and can obtain compensate. The main difference between the pure economic loss and the consequential economic loss is whether the losses are associated with the plaintiff’s physical property or damage to the persons. However, the difference between the two is highly technical, or even man-made, its the responsibility of the exlusionary rule from the two technical features:first, the consequential economic losses only describe the collection of the same property within the causal relationship; Second, the consequential economic losses are a final results were affected by policy considerations affect the concept of cause and effect.The difference between the rights and interests of any specific particular, the purely economic nature of that interest recognized as a legal interest, the law has not expressly provided for the interest, is not the rights of interests, as they meet the legal interests of the features:difficult to specify a specific.Chapter two is "comparison of pure economic loss compensation and analysis in foreign countries—the British, Germany, France ". This chapter investigated pure economic loss compensation mode of Britain, Germany and France, analyzed the typical practical system-British law on pure economic loss compensation; representative of conservative system-pure economic loss compensation system in Germany, representatives of the indulgent system-the pure economic loss compensation in France. At last it compares and analysies the three countries’processing modes.The British common law tradition is no compensation for pure economic loss. Later in the judicial practice, Hedley Byrne case broke the exclusionary rule, setting up many theories explaining the existence of duty of care:the theory of voluntary assumption of ’responsibility, theory, the reasonable reliance theory and theory on money interests. However, in the case of Hedley Byrne, the rule was broken in misstatements without completely subverting the traditional rules. Then there are many types of pure economic loss cases, judges dealt with them with variables and uncertainty. On the basis the inspection standards for three stages of the duty of care were put forward:predictability of loss, the proximity of parties and policy factors.German tort law regulations adopted three levels of regulating mode, pure economic loss can be compensated which results from violation of "the laws for the purpose of protecting others" or "intentional violation of the good custom". Therefore it excluded the possibility that pure economic loss was compensated in tort law. Then, the German court conducted a series of trying, such as creating "business", "the use case model and create", but the effect is not ideal. German court began to expand contract law relief, using culpa in contrahendo, "the effect of the third attached to protect the contract" theory and the theory of liquidation damage to third parties on pure economic loss to expand the protection.Terms No.1382 and No.1383 in the French civil code do not restrict in advance the cope and quality of protected rights and interests, the scope of protection groups is not limited beforehand. So in legislation there is no difference between pure economic loss and the non-pure economic loss, but the same protection is given. In judicial practice, there two kinds of ways to protect economic benefits:protection of intentional tort e.g. tort liability resulting from intervention of contractual relationship, and protection of negligence of economic benefit. The loose legislation leads to heavy liability to pay compensation. Thus the French judges use as a tool to control compensation for pure economic loss, such as determinacy and directness of damage.Due to the institence of consideration in English contract law, so the protection of pure economic loss is mainly applicable to negligence tort law, and mainly based on identification of the duty of care, but deep behind is the policy considerations, embodies the charatersitics of pragmatism. Therefore, the British law can be summarized as follows:the tradition of no compensation in the common law, judicial twists relief preferences of the tort law. Germany because of its Civil Code to take "absolute rights" list, so tort of pure economic loss relief is extremely limited, thereby expanding the law of contract remedies way. Therefore, the German law can be summarized as follows:the legislation for refusal of compensation, loose judicial system and contract law relief preference, and embodies the characteristics of conservatism. French Civil Code adopted the most broad general terms, does not exclude liability for pure economic loss, in practice the cases of pure economic loss treatment, although the policy choice, but did not explicitly stated, but rather by means of cause and effect relationship or the loss of direct uncertainty to deny compensation for pure economic loss. Therefore, the French law can be summarized as:loose legislation, heavy liability for compensation and tort relief preference, and embodies the characteristics of laissesfaire. The main difference between three models are:the British and French used tort relief, while the German mainly use contract law to relief; Britain’s most important feature is the careful analysis of the case, the German use of contract law and other statutory law mechanisms to receive compensation, France through the general provisions of the general elements, especially the causal relationship element to skillfully deal with cases of pure economic loss in the policy considerations; In the France, the concept of contract and tort is non-overlapping, while the English and Germany to allow tort liability and contractual liability of the competing.The third chapter is "the exclusion、establishment and restriction of pure economic loss compensation ". This chapter analyzes why pure economic loss, the physical damage and personal injury are protected differently, and describe the scope of protected economic interests. At last it put forwards nine factors which should be taken into account when pure economic loss compensation is established, and then attempt to limit liability for pure economic loss by stict constituents of tort liability. The dissertation thinks that pure economic loss, the physical damage and personal injury should be protected differently for the following reasons:floodgate risk, maintaining the people’s basic freedom of behavior, superior arguments, insurance and the economic analysis angle.The universally-acknowledged scope of protection of economic benefits includes: (1)contract liability:the reason why pure economic loss contract shall be extensively protected is mainly that there is no floodgate; there is no restriction to people’s basic freedom of behavior; the loss suffered from by the party who has not violated the contract; the party’s interest depends on the other party’s caution, especially the pure economic interests; the parties are in pursuit of their commercial interests. (2) Near-contractual relationship:mainly including culpa in contrahendo. (3) Pure economic loss caused by Intentional tort:mainly including the third party infringement claims, deliberate untrue statement (fraud), conspires third party’s interests, breach of contract, malicious slander, abusing the monopoly advantage and unlawful interference with trading. All theses are protected by legal system. (4) The indirect losses:the indirect losses are protected in any country on the premise that the victim really suffers from actual damage. (5) The exception to the relational loss:namely spouses and children will receive some special form of compensation for losses in death and personal injury cases. (6) Transferred loss:most countries have admitted this exception.Through the above analysis, this paper argues that the following nine factors should be taken into consideration in deciding whether to set up the responsibility for compensating the pure economic loss. whether it is intentional tort, the number of potential plaintiff is unlimited, both parties have proximity, whether to impose on the defendant responsibility will lead to additional duty of care, whether the reasonable trust relationship exists between both parties, whether the potential has other means to protect their interests in, the defendant can reasonably foresee the plaintiff’s losses, whether economic losses holds a special significance for the plaintiff, if both parties have some money relationship. And then attempt to constitute the elements of the existing tort liability to reasonable limitation of liability for pure economic loss, namely, strict composition requirements:for damages with the legitimacy and seriousness; finds fault of the plaintiff when the defendant for the loss of a certain degree of predictability, specifically consider the following factors:the special relationship between the parties or the proximate cause of the extra duty of care, reasonable reliance, the potential protection of the plaintiffs money is at stake; with "predictability" to define the causal relationship between and the proof of causal relationship between activities to reasonable limitation of liability for pure economic loss.The fourth chapter is "type of pure economic loss". This chapter first categorizes pure economic loss, and then analyzes it according to the concrete types.The classification of pure economic loss in《The pure economic loss in European law》is the most influential classification, which is also the common classification in Europe. In this book, the pure economic loss is divided into ricochet losses, the transfer losses, public market, the closure of transport channels and public facility, trust in error messages, advice and professional services. But in practice the common types are as follows:cable cases, invalidation of wills cases, untrue statement, damages to public facilities case, employee and family member casualties’case and the third party’s infringement cases.A typical "ricochet loss" arising from a party by the actual damage to property or person, which in turn caused damage to the right plaintiff, the case of damage, usually include two types: the personal against the person (death or injury), for the other and the Victims have relatives or contractual relations were affected by the loss of Property; against a person things, for the other person (especially creditors) suffered property losses, such losses typical of a "cable case." In the case of employee and family member casualties, compensation is not obtained in both Britain and Germany except for the claim for "maintenance loss". French law grants claim for personal reflection loss resulting from personal injuries or death. According to our consideration such loss are usually not compensated. The reasons are:litigation gate, proximity and unpredictability. According to the tort liability constitutions, the second victims may be a number, the defendand can not foresee the possibility, so there is no fault. But most of the legal system support some kind of compensation for spouses and children who have lost upbringing fees for there does not exist litigation gate. There is no additional duty of care, and living expenses are predictable and has special significance. According to the tort liability constitutions, spouse and child maintenance with the severity of the loss, the defendants can foress the possibility of lost maintenance by spouse and children, so determined that the existence of fault, and the causal link between the two. Therefore, perpetrators should be compensation for the spouse and children for loss of maintenance.Cable case is typical of pure economic loss case and is of the most common type, digging the cable with negligence leads to the economic losses of the relevant person. This case is so typical a representative that it is conventionally called cable case in modern law. In such cases, the British law usually adopts elimination rules due to the consideration of policy, not granting compensation. In Germany, if the plaintiff suffers from other substantial injuries, he can obtain compensation for not being able to work. If there are only shutdown losses, he can not obtain compensation. Theoretically speaking, France grants compensation for such losses, but the judge will lay emphasis on investigating whether the loss is direct enough and whether the cause and effect relationship is sufficient. According to our consideration, the author thinks such losses shall not be compensated. The reasons are as follows:indeliberateness, litigation gate, both parties have no proximity, the plaintiff has other means to protect his interests, the defendant cannot foresee the plaintiffs economic losses, such economic losses has less importance to the plaintiff. Though no extra attention obligation is added on the defendant, but obviously negative factors are more than approval factors. According to the tort liability constitutions, the plaintiffs loss will not have the seriousness and the defendant for more than a fault, because he could not foresee the possibility of the plaintiff’s loss, in addition to the plaintiff can bring their own generators to reduce the damage and therefore, also have their own fault, so can be applied with the contributory negligence theory.With the advantages and disadvantages taken into consideration, such loss are not granted compensation. In The Chongqing cable case is analyzed at last and the author thinks that court verdict result is correct and its reasons are general right. Transterred loss is of the case, C caused B actual damage to property or person, but the contract of A and B (or the law itself) would normally be transferred the loss B to A. There are two types:contract occurred due to the transfer, and occurred due to the transfer law. From the perspective of tort liability, the transfer of security to its neutral loss, and the difficulties it may bring more of a technical problem rather than a policy or equity issues, when necessary, to introduce the method Subrogation, and therefore can avoid uncertain liability concerns. Support the decision to make compersaion to some other reasons:Although some of the rules applicable to the accident by acceident eccludes his responsibility, but obvilusly responsible for the original victioms of the violations shoule not benefit form it. According to Von Bars argument, the purpose is to transfer the concept of loss "to avoid some people turn to those who intended not to protect him, but the protection of other people’s rules."In the public markets, transportation routes and public facilities closed categories, the economic losses are not generated in the previous property of any person or personal injury. Perhaps there is actual damage, but it is in the public domain "does not belong to individuals of all resources" damage.Public facilities damage cases, like cable cases are compensated neither in British nor in Germany. But the French law still deals it arbitrarily. According to our consideration, in the case of traffic jams the compensation for the third party’s pure economic loss is not necessary. The reasons are that:indeliberateness, Floodgate, no proximity between the parties, the defendant’s inability to foresee the plaintiffs economic losses and such economic losses has less importance to the plaintiff. According to the tort liability constitutions can we also get the same result, because the plaintiffs loss will not have the seriousness and the defendant for more than a fault, because he could not foresee the possibility of the plaintiff’s loss, and the causal relationship between the two is difficult to establish.On the error information, advice and trust in professional services, usually including two typical cases:service and non-negligent misrepresentation.In the case of invalid will, Britain law thinks that the lawyer violates attention obligation, and assumes the compensation responsibility. In Germany, the plaintiff may receive compensation in accordance with the "attached contract of protecting the third party". In France, the plaintiff may win compensation according to term No.1382 prescribed in the French civil code. According to our consideration, the author thinks this loss can obtain compensation. The reasons are: litigation gate can not stand, the two parties have some kind of proximity, no additional duty of care for the surveyor or the lawyer, the plaintiffs loss can be predicted by the surveyor or the lawyer, heritage has some significance for expected beneficiary, the surveyor or the lawyer received remuneration. According to the tort liability constitutions can we also get the same result, because the plaintiff has the legitimacy and seriousness of the damage, the defendant can completety foresee the possibility of the plaintiff’s loss, so have a fault, and the fault of the defendant led to the plaintiff’s loss, has a causal relationship between the two. At last Chinese WangBaoFu’s suing SanXin law firm for property damages dispute is analyzed, and a collusion is made that the verdict is correct, but sufficient reasons are not given for judgment.Untrue statement type of cases is discussed heatedly in every country. British law states with the theory of a duty of care. Through acknowledging professionals’duty of care for the third party in a given scope, it admits a professional tort liability for the third party, make the third party obtain compensation for the damage through the tort law relief. In Germany, the professional’s responsibility has come so far from implied contract created by German court or is based on the "attached contract of protecting the third party", and now it is based on liability to the third party of the experts who have made the contract wrongly. While the French law doesn’t distinguish between pure economic loss and materialist loss, and therefore the compensation can be obtained. With the elastic tools in use, decision is not predictable. According to our consideration, the author thinks that due to the opposing reasons such as, litigation gate, no immediate proximity and unpredictability, the account should no responsibility for the third party with the exception of intention. But if in special circumstances, the loss is obviously predictable for the accountant, compensation can be established. And if the third party is a small investor, the liability can be established. If the third party is a bank or other party who has the ability to protect its own economic interests, the third party liability usually can not established. Chinese Lantian shares fraud case is analyzed in the end. Obligatory rights as a legal interest, third party infringement claims arising from loss of pure economic loss, the English, Germany and France will limit the responsibility to deliberate of case, while Germany’s more demanding for the more deliberate, calling for "breach gute Sitten." According to considerations and elements to analyze the composition, willful clearly established responsibilities and negligence cases, because of the existence of a third party unknown to the claims, did not foresee the possibility of mistakes can not be established, and the realization of creditor’s claim is dependent on many factors could not be considered a direct causal link between the relationship. The final analysis of the foreignservice companies in Taiyuan v. "Shanxi Evening News" huge compensation case that the court’s decision is not correct, because they can not identify the defendant with the intentional, can only identify the fault.The fifth chapter is "review of relevant legislation in china". This chapter firstly analyzes the contract liability in China civil law, the relevant provisions of the tort liability law and the special legislation protecting the pure economic interests. It then analyzes the general terms mode of tort law in France and Germany. In comparison with the general provisions in China’s tort law, it tries to propose specific legislations for the pure economic loss compensation.Article 111 to 116 of Civil law specifies the contract responsibility. The contract law stipulated for the expansion of the power of contract law. It stipulated all-roundly the collateral obligation, established misfeasance liability, but its protection for the interests of third parties is not enough. The tort liability law established the general clause patterns similar to the civil law. It defines the protection objective as protection as "the civil rights and interests". In addition large number of legislations and judicial interpretations involves pure economic loss compensation.In the mode of general terms of tort law, France adopts the subtraction mode, namely, at the logic starting point, any damage can obtain compensation, unless there is a defense. German adopted the addition mode, namely, at the logic starting point, for only it admits that the right infringement should be protected, and the interests deserving protection can be included in the compensation plan according to other regulations. China’s liability law adopts the French mode, however, under the coordination of the existing law and the prevailing doctrine, legal practice and other specific circumstances, that although the scope of tort law, including the protection of the rights and interests, but the degree of protection of the interests of the right to be less than absolute. Finally, according to the basic principles of European tort law and the Austrian damage compensation draft, combining the preceding section, the author thinks pure economic loss compensation problem can be specified as: "Deliberate result of pure economic loss should bear the liability. Pure economic loss caused by negligence, should give special consideration to the following factors:the possibility of an unlimited number of potential plaintiffs, the proximateness between the plaintiff and the defendant, the extra duty of care restrictions on the freedom of conduct, the plaintiffs reasonable reliance, potential plaintiffs’ ability to protect themselves in other ways, the plaintiff loss of predictability, the importance of the plaintiff suffered economic losses, whether there is money at stake between both parties. Therefore, pure economic loss caused by negligence, the plaintiff must prove the legitimacy and seriousness of damage, the predictability by defendant to the plaintiffs loss, the plaintiffs loss is a direct result of the defendant’s fault."...