Examination Timing: 00H03M17S
An events promoter named Oliver requested a reference from a bank about the creditworthiness of a production company called Star Productions, which was a customer of the bank. Star Productions was seeking credit to finance a major show. The bank provided a reference attesting to the sound financial status of Star Productions. Relying on the bank's reference, Oliver booked a suitable venue and invested in an advertising campaign. However, Star Productions soon went into insolvency, leaving Oliver out-of-pocket.
Which option best states the parties' legal position?
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The law will imply a duty of care when a party seeking information from a party possessed of a special skill trusts it to exercise due care, and that party knew or ought to have known that reliance was being placed on its skill and judgment. This principle was established in the landmark case of Hedley Byrne v Heller [1964], where the House of Lords held that a duty of care arises in situations where a special relationship exists between the parties. In Hedley Byrne, the court determined that professionals, including those giving financial advice, can be liable for negligent misstatements if it was reasonable for the claimant to rely on the advice and the advisor knew or should have known of this reliance. In this case, the bank provided a reference knowing it would be relied upon by Oliver, thereby establishing a special relationship and a duty of care.
Key Point: The Hedley Byrne v Heller case is crucial for understanding the concept of negligent misstatements in tort law. The ruling extends liability to professionals who provide advice or information upon which others rely to their detriment. It highlights the importance of a 'special relationship,' which can arise outside of contractual or fiduciary relationships, focusing instead on the foreseeability of reliance and the reasonableness of that reliance. This case underscores the responsibility of professionals to ensure the accuracy and reliability of their statements, particularly when they know or ought to know that others will act upon them.
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