Chaudry v Prabhakar 1988: Free advice can cost you.
Areas of applicable law: Tort law – Duty of care – pure economic loss
Main arguments in this case: A duty of care can arise if the advice given by a person causes financial loss to another person even if there was not any damage or the advice was given in a social context.
The fact of the case:The defendant and the claimant knew each other as friends. The claimant was looking to buy a second hand car and the defendant supposedly was knowledgeable in this area. The claimant asked the defendant to buy one for her but specifically asked that the car should have not been involved in an accident. The defendant recommended a car which had signs of visible damage on it but he did not enquire the cause of damage. The car in fact had previously been involved in an accident, and was not roadworthy. The claimant bought the car on the defendant’s recommendation and when she found out the car was worthless, brought civil proceedings against him.
The court of appeal held that the defendant had a duty of care towards the claimant as she was relying upon his knowledge about cars and had acted upon it.
The case has been heavily criticised as it contradicts the decision in Hedlye Byrne that a duty of care could only arise where the advice and reliance on it were made in a business context. The case also does not conform to the principle that advice given in a social context does not create a legal liability. And thirdly, the decision also seems to have overlooked the principle of pure economic loss under which a financial loss without damage cannot be recovered.