3rd party duty (cases)

Question 1

Ultramares v. Touche highlights**

Answer 1

• Should have performed more than minimum standards to find the $706,000
• fraud includes:
• –certifying something with no belief
• –Certifying without testing if true
• –Closed eyes to obvious
• –**gave pretense of knowledge when had none.

Question 2

Rusch Factors v. Levin highlights**

Answer 2

• 1st to extend liability to foreseen third parties
• The question: is privity of contract a defense against foreseen and limited class of 3rd parties
• If told purpose for loan is for a certain bank then that bank is foreseen. If told it is for loan then banks are seen as limited group that is foreseen. Liable to foreseen bank or group.

Question 3

Weiner Article highlights**

Answer 3

-Foreseeability should be sole determinant for liability

• This would help societal interests of
• –1- compensating the injured party
• –2- financial disincentive for socially unreasonable conduct

-The cost should be born by those most able to do so, or by those who bargain for the risk = accounting firm

Question 4

—Rosenblum vs. Adler

Answer 4

• Follows Weiner’s opinion. Liable to foreseeable parties. (weird since foreseen would have worked)
• Accounting profession can spread risk over clients who then spread over public.
• Makes accountants more careful
• Probably lead to insurance crisis, since it said most companies could get malpractice insurance.

Question 5

Citizens v. Timm Schmitt

Answer 5

-Shifting away from breach of duty element, and more towards proximate cause element.

Question 6

International Mortgage v. Butler

Answer 6

-Professor Lewis Analysis: like a 3rd party beneficiary contract where 3rd party has enforceable rights.

-Accountants can be held liable to 3rd parties if:
1- accountants aware of purpose of statements
2- known party was intended to rely AND
3- Accountant communicates directly with 3rd party

Question 7

Ultramares vs Restatement 2nd

Answer 7

Ultramares favors foreseeability

Restatement 2nd favors foreseen