Breach of Contract Tort Action BREACH OF CONTRACT by mikeholy


									                 Damages and Remedies
                            Malpractice (Tort)

Liability                  Statutory Violations
for                         Breach of Contract

                        Anyone in Privity of Contract

                                 Beneficiaries of Statutory
Liability to                      (Section 11-1933 Act
                                  Section 10b-1034 Act)


                                  Foreseeable User

                         Varies According to Court

  Liability to                     Interloper

                              - Differing Decisions
                         Chapter 21                           1
      Malpractice: Choice of Remedy
           Breach of Contract             Tort Action

                         Plaintiff must show
                           that defendant’s      Malpractice claim
Without malpractice     breach was negligent     brought by third
                               or willful             person

                                                    Can Be Greater Than
  Limited by Contract                               Contract Law Damages

Runs from Date When           Statue of
                                                    Runs from Date When
Contract Was Broken                                 Harm Was Discovered

                                  Chapter 21                               2
         Chapter 21 Summary

When a contract requires a party to perform services,
the party must perform with the care exercised by
persons performing similar services within the same
community. If the party negligently fails to observe
those standards, there is both a breach of contract
and a tort. This tort of negligent breach of contract
constitutes malpractice, and the other party to the
contract can sue the wrongdoer either for breach of
contract or for the negligence involved.
                       Chapter 21                   3
    Chapter 21 Summary (cont.)
       In the modern view, third persons may also sue
the wrongdoer for malpractice. However, when the
malpractice suit is brought against an accountant for
negligence, courts differ as to when a third person may
sue. Some courts refuse to let the third person sue;
these courts require privity between the parties. Most
courts allow suit by the third person against the
wrongdoer but differ over what the plaintiff must show in
order to bring such a suit. In New York, the plaintiff must
show as a minimum that there was a “contact” with the
                         Chapter 21                       4
   Chapter 21 Summary (cont.)

In some states, it is sufficient that the third
person was a known user of the accountant’s
information. Other courts go further and allow
the third person to sue if it was reasonable to
foresee that the third person would make use
of the accountant’s information. Some courts
limit suit to those nonprivity plaintiffs who
were intended to rely on the accounting work.
                    Chapter 21                5
   Chapter 21 Summary (cont.)

      When an accountant is guilty of fraud,
the intended victim of the fraud may sue the
accountant even though privity of contract is
      To a limited degree, an accountant is
protected from malpractice liability by a
disclaimer of liability or by the contributory
negligence of the plaintiff.
                     Chapter 21                  6

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