REG 4: Legal Duties & Responsibilities

Question 1

What are the three Common Law Principles?

Answer 1

1. Breach of contract
2. Negligence
3. Fraud

Question 2

To prevail in a breach of contract lawsuit, a plaintiff must prove (4):

Answer 2

COBD
1. A contract must exist
2. One party fulfilled their obligation
3. Breach of contract occurred
4. Damages were caused

No punitive damages are recoverable in breach of contract claims

Question 3

To prevail in a Negligence lawsuit, a plaintiff must prove (4):

Answer 3

OBID
1. Obligation of duty of care
2. Breach of the standard of care
3. Injury caused by the breach
4. Damaged were caused

No punitive damages are recoverable in negligence claims

Question 4

To prevail in a fraud lawsuit, a plaintiff must prove (5):

Answer 4

FMKID
1. False representation of fact
2. Misrepresented fact (or omission) was material
3. Accountant knew or recklessly disregarded the falsity
4. Accountant intended to induce the plaintiff to rely on the misstatement/omission
5. Damages were proximately caused by the false statement

The burden of proof in fraud cases is “clear and convincing evidence”

Question 5

What are the two types of fraud?

Answer 5

1. Actual fraud - The CPA makes statements knowing they are false (scienter)
2. Gross negligence (constructive fraud) - The CPA makes false statements with a reckless regard for the truth, not knowing if the statements are true or false. Usually occurs when CPA recklessly departs from the standard of due care.

Question 6

What is the Ultramares rule?

Answer 6

ie, Minority rule in some states - foreseen parties lack privity and cannot sue for common law negligence. Clients & intended third parties can still sue.

Question 7

What is the burden of proof in a fraud case?

Answer 7

Clear and convincing evidence.