Chapter 5

Question 1

What do professionals do? Should one expect that a professional will deliver ideal results 100% of the time? Why or why not?

Answer 1

They assist clients about making good and well-founded business decisions to try and reduce business risk (though not guaranteed; making professionals responsible for outcomes of all their advice makes it less likely they will continue).

Question 2

The duties of professionals, as well as their respective obligations and liabilities, fall into the following four categories:

Answer 2

Contractual, fiduciary, tort, statutory.

Question 3

Contractual duty

Answer 3

A agreement promising to provide professional services in a competent manner.

Question 4

Fiduciary duty:

Answer 4

Duty imposed on person in special relationship of trust and loyalty to another when one party is in a vulnerable position.

Question 5

What three criteria satisfies having fiduciary duty.

Answer 5

• The beneficiary is at the mercy of the fiduciary’s control or discretion
• Fiduciary acting in honestly, in good faith, and in best interest of the beneficiary
• A legal or … interest of the beneficiary may be harmed.

Question 6

Is every professional rx. a fiduciary one.

Answer 6

No, must fit the criteria.

Question 7

Conflict of interest:

Answer 7

One way breach of fiduciary duty may occur w/o negligence. A situation where duty is owed to a client whose interests conflict with those of the professional, another client, or another person to whom the duty is owed (case 5.1-5.3).

Question 8

Fidelity:

Answer 8

Quality of faithfulness or loyalty (as to a single clt.)

Question 9

Third-party liability:

Answer 9

Liability to someone else outside of a contractual rx.

Question 10

Duty to account:

Answer 10

If the duty of a person who commits a breach of trust is to hand over all profits derived from the breach.

Question 11

Misrepresentation

Answer 11

Knowingly untrue statement (or disregard of it being untrue) leading another party to detriment.

Question 12

Two kinds of misrepresentation:

Answer 12

Negligent or fraudulent (deceit).

Question 13

Deceit or fraudulent misrepresentation

Answer 13

Intentional tort imposing liability when damages caused by a false statement made with the intention of misleading another person.

Question 14

Negligent misrepresentation

Answer 14

Does not require knowledge of falseness, but negligence in its creation and injury is caused (reliance).

Question 15

Elements of deceit:

Answer 15

• false statement made by defendant
• defendant has some knowledge of falseness
• false rep. caused plaintiff to act
• plaintiff’s act resulted in loss

Question 16

Under the Hedley Bryne Principle (case 5.6 and ques., see checklist on page 109-110) , who is duty to be careful owed to when the possibility for negligent misrepresentation can exist?

Answer 16

Anyone the maker of the statement could reasonably foresee relying on it.

Question 17

Disclaimer:

Answer 17

An expressed statement that the person making it takes no responsibility for its accuracy

Question 18

Reqs. to prove negligent rep.

Answer 18

1. Duty of care must exist
2. Rep. must be untrue or misleading
3. Standard of care must be below expectations.
4. Representee must have reasonably relied on the false statement
5. Reliance must have resulted in damages,

Question 19

Two parts of extent-of-liability test

Answer 19

1. Was it reasonably foreseeable that defendant’s act would harm the plaintiff?
2. If number of plaintiff or extent of losses is indeterminable, policy reasons may be used to limit scope of duty owed i.e. limiting duty to only those for whom the information was prepared (see case Hercules Mgmt. vs Ernst and Young).

Question 20

Indeterminate liability is not a concern for ___ duty of care (policy reasons cannot be applied).

Answer 20

Statutory.

Question 21

On what basis are the accuracy of statements assessed upon? Why? (read case 5.9).

Answer 21

The accuracy of Information is assessed as of the time information is given. We cannot expect professionals to be infallible, not can we hold them to account for information they did could not know was untrue.