Alex hires a consulting firm to provide strategic advice for expanding his retail business. The firm negligently provides flawed market analysis, leading Alex to make poor investment decisions that result in substantial financial losses. There is no physical damage to Alex’s property or person. Which of the following is the BEST basis for Alex to recover pure economic loss from the consulting firm?
Evidence that the consulting firm's negligence caused physical damage to Alex’s business property.
The existence of a professional relationship that creates a duty of care for the consulting firm's advice.
A contractual agreement between Alex and the consulting firm specifying liability for certain losses.
Demonstrating that the economic loss was foreseeable by the consulting firm at the time of the agreement.
The correct answer identifies that a special relationship, such as one involving professional advice, can create liability for pure economic loss. This falls under the exception to the general rule that pure economic loss is not recoverable. Other options incorrectly state the general rule without recognizing the special relationship exception.
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What is pure economic loss?
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What constitutes a professional relationship for duty of care?
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What is the significance of foreseeability in negligence claims?